A proposed 16 per cent Value Added Tax (VAT) on solar equipment under Kenya’s 2025 Finance Bill could increase the cost of a typical off-grid solar home system by Sh2,000, according to GOGLA, the global association for the off-grid solar industry.
GOGLA warns that the tax could shrink Kenya’s off-grid solar market by 20 per cent within a year and reverse gains made in expanding electricity access, especially in underserved areas. The organisation also cautions that over 10,000 jobs are at risk if the VAT is implemented.
Patrick Tonui, GOGLA’s Head of Policy, noted that a similar move in 2020–2021 caused a 20 per cent market contraction. “Reintroducing VAT now risks repeating that experience—dampening demand, reducing tax revenues, and making solar less accessible,” he said.
The Finance Bill proposes to remove VAT exemptions reinstated in 2021, meaning a 16 per cent tax would apply to solar panels, inverters, and batteries.
Such a move could affect initiatives like the Kenya Off-Grid Solar Access Project (KOSAP), which targets underserved regions. According to World Bank data, as of December 2023, Kenya’s installed solar capacity stood at 410.4 MW, with off-grid solar accounting for 3.9 MW.
Kenya’s solar sector supported an estimated 30,000 jobs in 2024 and contributed over Sh4 billion in taxes. GOGLA warns the VAT could force companies to scale down, resulting in significant job losses and reduced access to solar solutions in rural communities.
The hardest hit would be off-grid households—one in three Kenyan homes rely on solar products to power daily life. With higher VAT, even basic solar kits could become unaffordable.
Both GOGLA and the Kenya Renewable Energy Association (KEREA) are urging lawmakers to retain VAT exemptions to protect clean energy progress, jobs, and inclusive development.
Solar success at risk
Kenya’s electricity access rose from 37 per cent in 2013 to 79 per cent in 2023, with off-grid solar contributing over 20 per cent of that growth. In 2023, Kenya accounted for nearly three-quarters of solar home system sales in East Africa.
“Electrification in some counties remains as low as 15 per cent,” said Cynthia Angweya-Muhati, CEO of KEREA. “Reintroducing VAT could stall progress where it’s needed most.”
Higher solar costs could also slow investment, raise electricity prices, and undermine grid reliability—impacting national efforts to expand clean energy access.
As Kenya faces economic challenges, the Finance Bill presents a crucial test. Lawmakers must weigh short-term tax gains against long-term energy, job, and development goals.
