What is better: buying solar or shares in a electricity company?


The Sunday Nation


12 November 2023


Is it wise to replace grid electricity with solar power? This question always tends to light a fierce fire but, in the end, the fire generates nothing but hot air! During a heated Internet debate on the subject, I walked into a solar dealership in Nairobi and asked for a quotation that replace my regular electricity consumption of 300kWh to 400kWh per month. Their quote came to Sh1.92 million.

Now, I have been paying under Sh10,000 for electricity, but, after the recent tariff review, it jumped to over Sh12,000. Consequently, I instituted some power-saving measures that have seen my consumption go down to about Sh10,000. If we work with an average of Sh11,000, it turns out that it would take me about 175 months to recoup the solar investment through saved electricity bills.

That is over 14 years! Is this a good idea financially? I don’t think so! When I shared the quotation on the Internet, many people said that it was exaggerated. I asked for alternative quotations but none was forthcoming – this is the hot air in the solar debate!

So, I started wondering: what else can one do with Sh1.92 million? If it is invested in a good money market unit trust, it can earn at least 10 per cent per annum for the foreseeable future. This works to about Sh190,000 per year, or Sh15,800 which is 50 per cent more than my electricity bill!

Alternatively, one can buy shares in the Kenya Electricity Generating Company (KenGen). This essentially makes you an electricity producer; only that you wouldn’t be producing it from my home. The shares are currently trading at about Sh2.30, so, Sh1.9 million gets 834,000of them.

Now, unlike its sister, the Kenya Power and Lighting Co. Ltd (KPLC), KenGen has been making decent profits for many years. In the last five years (since 2018), it has been paying between 20 cents and 40 cents per share annually in dividends. The payment for the 2022/23 financial year has been announced: 30 cents per share to be paid in February 2024.

For the 834,000 shares, the dividend payment would be about Sh250,000. This is a lot more than my annual electricity costs of about Sh120,000 (Sh10,000 per month). In other words, If I have Sh1.92 million and I invest it in KenGen, I will be generating more electricity than I need and selling the excess to KPLC! Is that better than buying a solar electricity system?

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