By:Allafrica

Nairobi — The prices of solar systems are set to increase by Sh2,000 if a proposal to include a 16 percent VAT on the products is passed under the 2025 Finance Bill.

According to GOGLA, the global association for the off-grid solar industry, the tax hike risks shrinking Kenya's off-grid solar market by 20 percent in the next 12 months, curtailing electricity expansion to remote and underserved communities.

The association adds that the plan also threatens over 10,000 jobs nationwide.

"When VAT exemptions were previously withdrawn in 2020 and 2021, the off-grid solar market contracted by 20%. Reintroducing VAT now risks repeating that experience -- dampening demand, reducing tax revenues, and making solar less accessible for the households and enterprises that need it most," said Patrick Tonui, Head of Policy and Regional Strategy at GOGLA.

"Kenya has made remarkable strides in expanding energy access. Preserving those gains requires policy choices that continue to prioritise affordability, job creation, and inclusive growth."

In 2024, Kenya's solar sector supported an estimated 30,000 jobs and contributed over Sh4 billion in taxes.

Consequently, GOGLA and the Kenya Renewable Energy Association (KEREA) are urging lawmakers to maintain VAT exemptions on solar equipment in the 2025 Finance Bill.

"Kenya has made strong progress in expanding energy access, especially in underserved regions through initiatives like the Kenya Off-Grid Solar Access Project (KOSAP)," said Cynthia Angweya-Muhati, CEO of the KEREA.

"Electrification in these regions remains well below the national average, with some counties as low as 15 percent. Reintroducing VAT could make solar unaffordable for those who need it most and risk slowing progress toward universal access."