Discussion Paper No. 231 of 2020 on Unlocking the Solar Photovoltaic Value Chain Potential for Enhanced Job Creation in Kenya

Abstract

Solar photovoltaic (PV) technologies are emerging as an important factor input in promoting inclusive and sustainable economic development. Particularly, the high job intensity nature of the solar PV industry makes it more feasible for low carbon technologies with a high potential for job creation. This study explores the employment potential of solar PV in Kenya by examining the current growth patterns of the industry, the constraints to growth, the prevailing jobs in the industry, and the skills demand versus the skills supply in the industry in Kenya. The study adopts a mixed method of analysis using value chain analysis methodology, employment elasticity, and employment factor models to estimate the solar PV job creation potential in Kenya. The study identifies that Kenya solar PV is characterized by a short value chain with only two firms engaging in the manufacturing of solar PV systems, while the majority of the firms actively engage in the distribution, installation, operation, and maintenance phases of the value chain. Using employment factor, the study estimates a compounded annual job growth rate of 51 per cent between 2012 and 2018 and 26 per cent between 2018 and 2024, with the jobs increasing to an estimated 48,306 jobs in 2024, which are distributed along the value chain: operation & maintenance (40%) and construction and installation (40%); manufacturing (12%); distribution (5%) and R&D (3%). The skills availability ratio for the certificate and diploma education levels are below the ideal ratio of 10, demonstrating inadequacy of skills. High capital, installation, and maintenance costs; limited financial schemes for solar PV investments; constraining policy and regulatory directions; limited transmission and distribution network in solar energy-rich areas; the low presence of local manufactures; and skills unavailability and inadequacy are the key constraints limiting the industry’s growth.