INTERNATIONAL BUSINESS - RESIDENTIAL SOLAR WATER HEATER PLANT

IN KENYA

Contents
1. Product description – Solar Water heater ...................................................................................... 2
2. Organisational context – New start up company ........................................................................... 3
Organisation – Dayliff solar water heaters ........................................................................................ 3
3. Description of host country - Kenya ............................................................................................... 4
4. Critical analysis of the product and it impact in the environment of Kenya .................................. 5
Product size, colour and brand name ................................................................................................. 6
Brief description of the goods and what the product does .................................................................. 7
Product fitness of Dayliff solar water heaters .................................................................................... 8
5. Risk analysis and market penetration in Kenya .............................................................................. 9
6. Conclusion ..................................................................................................................................... 11
7. References .................................................................................................................................... 11

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 1. Product description – Solar Water heater
In Kenya, Water heating accounts for more than 25% of the household energy consumption.
People use hot water for various purposes like bathing, drinking, washing infant’s clothes,
medical emergencies etc. However, they use traditional method of heating using liquid
petroleum gas, this increases the cost of household expenditures. Solar water heaters possess
the potential of reducing the overall energy consumption by more than 60%. Solar water
heater uses the energy from the sun which is freely available and will assist in decreasing the
energy usage and carbon dioxide emissions. Also, solar water heater helps the government in
reducing the dependency on the energy imports from other countries thereby saving millions
of dollars.

Solar water heater generally applies the solar radiation which is generated from the sun for
heating the water. This needs a large solar panel which is used as the main attribute in
absorbing the energy from the sun and then heat up the water which is stored in the water
tank. Solar energy is considered as the most efficient way of utilising the renewable energy
resources, many developed countries uses this resources as an efficient means of energy
reserves. Conventional energy system uses coal as the main source, by burning coal,
electricity is produced. This leads to emissions of greenhouse gases which affects the
environment. Therefore, various companies are now concentrating in creating products which
uses renewable source of energy. For example: Car manufacturers create cars which run
through solar energy. Lighting the street lamps are now uses through solar energy. Hydro
electric is used to generate electricity, Wind mills are used to generate electricity etc.

Consumption of electricity has been consistently increasing in Kenya, with little or no

dependence on the renewable energy sources. This increases the risk as the supply is
diminishing and the demand is increasing significantly. This causes the trouble for the
country to manage and secure future economic development. By conserving on energy
consumption the country can save more amount of money through imports on oil and other
gases.

The current product aims in creating solar water heating equipment mainly for residential
purposes. Solar water heaters will provide necessary hot water for drinking, bathing (which is
considered as the biggest need for individuals). However, the currently available products are
very costly due to the cost of manufacturing the product is very high and also it involves huge
amount of money in installation. Due to this reasons, customers are not willing to pay more
amount of money for the solar water heating products. The present product will be offered at
free of cost including the installation, the company will also install a meter in each of the
house hold which buys the product. The customers will pay base on the usage which is based
on the readings provided in the meter. By this process the company can increase the
penetration level of the product in many households as there is no purchase and installation
cost, the customers will pay based on the consumption. If the customers are not willing to
use the product, the company will remove the solar panel and the meter, and the caution
deposit which was paid at the beginning will be refunded to the customers.

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 2. Organisational context – New start up company

Organisation – Dayliff solar water heaters

Dayliff solar water heater is a pioneer in producing residential solar water heaters in
Tanzania. The company has more than 5 branch offices in Tanzania and is serving nearly
2,500 houses. Dayliff is planning to enter other African markets through its innovative and
dynamic product which is affordable and can be utilised by all the individuals, thereby saving
the money and enhancing the economy and also protecting the environment for the future
generations.

The company is a new start-up company with individuals who has varied experiences in
solar water heating companies. The company is named as Dayliff solar water, which is based
at Nairobi, the capital city of Kenya. The main objective of the organisation is to provide low
cost water heating services to the households thereby assisting them to reduce the electricity
bills and also to the country by reducing the dependency on the conventional mode of
electricity generation.

The organisation is comprised of 6 partners, each of the partner invest and share profits
equally. Each of the individual possesses variety of experience in various areas.

Partner 1 – Phd in engineering and has worked as Head R&D of top water heater company.

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Partner 2 – MBA in Marketing with rich experience in marketing industrial products (B2C)

Partner 3 – Top class HR manager in a leading pharmaceutical company

Partner 4 – Currently involves in creating new product development and strategy

implementation for solar water heater company

Partner 5 – CFA with good analytical skills and forecasting ability, PhD in Economics

Partner 6 – Production engineer for solar water heater company and also manages to procure
the needed materials for producing the product.

The company will employ individuals for producing the product, installation, marketing and
collecting the money from the customers. Depending upon the requirements the company
will recruit the individuals. The main motive of the company is to offer any time hot water at
a reduced price all the time. Dayliff solar heaters will install solar water heating panels in the
household at free of cost, it collects a small amount of money as security deposit, this will be
returned back to customers if they does not want to use the product. The company will install
meters which will state the consumption of solar water heater and the customers have to pay
based on the meters. This will help the individuals in reducing the overall energy
consumption and depending less on electricity.

The company will first starts its operations from the capital city of Kenya and later will
slowly move on to other cities depending upon the acceptance level and the penetration level
of the product. The company aim to keep the prices at a very less rate so that the customers
will try the product. If they are satisfied they can continue to use the product, if they do not
prefer then the solar panels will be removed at the security deposit will be refunded without
any delay.

3. Description of host country - Kenya

Republic of Kenya is a sovereign state, located in the Southeast Africa. The country has
around 40 million in population spanning over 500,000 Km2. The country huge depends on
the hydroelectric for electricity generation. It is estimated that the installed capacity of the
geothermal facility is around 1,100 megawatts. (Department of Energy, 2008). Kenya is
currently the largest producer of geothermal energy in the entire Africa. The country mainly
depends on Hydro electric power, however it is also devising many plans in shifting to other
renewable sources like solar system etc. The various sources of energy currently applied in
the country is described as follows:

Source Capacity (MW) Capacity %

Hydro 761 49.70%
Fossil Fuels 525 34.20%

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 Geothermal 198 12.90%
Bagasse
Cogeneration 26 2.40%
Wind 5.45 0.36%
Isolated Grid 18 1.15%
Total 1,533 100%

There is an increased need for energy consumption in the country and there is a shortage of
supply of energy fields. The following table shows the projected demand and supply of
energy consumption in Kenya

Year Demand Capacity

2013 1,191 MW 1,600 MW
2015 2,500 MW 3,000 MW
2030 15,000 MW 19,200 MW

In order to meet out the demand, the government is devising policies in which most of the
energy consumption should be made from renewable sources like solar, hydro electric etc.
This provides huge opportunities in installing solar water heating system in households.

4. Critical analysis of the product and it impact in the environment

of Kenya
Dayliff solar water heater system aims in including the following parts in the entire product
structure, it has a water inlet pipe, the water will be collected, there will a water outlet for the
hot water to come out and it also includes an insulated storage unit. The blueprint of the
proposed water heating system is shown is the below diagram.

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The solar water heating system works in the following manner: the normal water which is not
heated first flows in to the system with the application of pressure. The solar panel will be
installed at the roof of the house, the solar panel attracts heat which is generated from the sun
and will hit the surface. Due to intense heat, the temperature increases, this will in-turn heat
the water which is stored in the collector. After some time, the warm water will rise into the
tank and the same will be pour out of the outflow pipe.

Product size, colour and brand name

The name of the product is Dayliff solar water heaters. The company decides to have a red
colour solar water heater so that the product is visible and can be noticed by many people.
The red colour is also the colour of energy; it aims to save the money and energy of the
country by implementing solar water heating systems. The company aims to provide in
different sizes: 3 ft. x 7 ft. up to 4 ft. x 12 ft. The storage tanks normally greater and bigger
than the traditional heating components and holds more than 100 gallons of water.

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Impact of solar water heater to society and country

Solar water heating system is one of the biggest advantages to the mankind in order to save
electricity and the environment. The traditional model of electricity generation pollutes the
environment through the emission of greenhouse gases, however, using renewable source of
energy like solar heater will help in conserving the energy, environment and will also help in
saving the money. Kenya is noted for the use of solar water heaters, it is noted that there are
more than 60,000 solar water heaters being installed in households. However, the penetration
level is very small when compared with other countries. (NREL, 2007). Mr. Osawa, the
former director of Renewable energy at Kenya, states that the country’s progress in
implementing solar water heaters is very low due to huge investment and cost. He states that
the current price for a normal 100 litre solar water heating system for a household which is at
Kenyan Shillings Sh 125,000 to Sh 150,000 is too high and the people cannot afford to pay
for it. However, there is a huge potential for solar water heaters given the 44 million
population in the country. (Department of Energy, 2008).

Brief description of the goods and what the product does

With the given population of 44 million, lower penetration and huge demand for solar water
heater system, Dayliff is aiming to create and expand the market for solar water heaters at
very low cost. The company is aiming to offer the product at zero cost, the customers have to
pay a very less initial security deposit of Sh 50,000 which is refundable when the customer
returns the solar heating system. The customers will have to pay only for their usage /
consumption. The consumption is identified through a separate meter which is installed
during the time of fixing the solar panels. This will help the individuals in saving the cost on
heating the water, this accounts for more than 20% of the expenses in households at Kenya.

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(Source: Davis, 2009).

In Kenya, the domestic supply of electricity is constantly growing at a rapid pace, the average
rate is around 10% per annum in the last five years. The total generation of electricity is more
than 5,500 million Kilowatt Hours (kWh) in the last year. The country also uses hydropower
electricity source which accounts for more than 50% of the country’s energy demands. There
is an increased demand for energy in the households and industries; the government of Kenya
is taking various steps in meeting the daily energy demands of the individuals. (Jaglin, 2009).

Product fitness of Dayliff solar water heaters

Since the economy is performing very poorly due to recession and other external factors and
also on the increased cost of crude oil the country invest huge amount of money in importing
the necessary energy for meeting the local needs. With this purview, the government has
recently taken drastic steps in incorporating renewable energy sources mainly in solar energy.
In a recent policy framed by the government, it is noted that the existing residential and
commercial units in which the hot water consumption exceeds more than 100 litres per day
should install solar water heater within 2017. (Department of Energy, 2008). This provides
huge opportunities for Dayliff Water heaters as it is launching various models to suit the
growing need of water heaters in the households.

The energy which is generated from the sun is in abundance and is also available freely for
the human needs. It is noted that the sun radiates more amount of energy which is estimated
to be around one hundred billion watts. It is also stated that there is a growing need for
energy consumption in the world, also the energy which is supplied will be detoriating at a

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rapid pace. Therefore, companies and countries around the world are looking for alternative
source of power in order to meet the needs. Countries like Kenya where it receives more
sunshine throughout the year, the implementation of solar heaters will assist the government
and the citizens to save more energy and can improvise the society.

(Source: www.expertafrica.com)

Kenya enjoys a good position as an ideal location for solar water heating products mainly in
the households. The government of Kenya is framing various policies in implementing the
solar based water heaters in the country. In order to heat the water Kenyans generally
consume more than 800 GWh of electricity, this is creating a huge pressure on the
government in providing more energy to the households. The new regulation aims in
covering the annual hot water demand by more than 55% through solar system. This will help
the government to lessen its burden on energy costs and also for the individuals as generating
hot water through solar system is cheaper than the conventional system.

5. Risk analysis and market penetration in Kenya

Based on the published reports, it is noted that there is a huge opportunity for solar water
heater for residential purpose in Kenya. (Crane, 2008). In the recent years, the government
has introduced a huge market analysis for implementation of solar related energy system and
has identified that there are huge opportunities, some of them are:

 Kenya’s current population is more than 40 million and the country depends more on
hydroelectric for energy consumption
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  The country has recently identified huge oil reserves, however the country depends
more on imports for oil and other energy reserves.
 There is a huge gap between the demand and the supply of energy consumption and
the country is finding it very difficult to meet out through conventional energy
systems, therefore renewable energy sources need to be implemented by the
households
 Any household or commercial units which consume more than 100 litres of hot water
per day should implement solar water heaters, this should be done before 2017.

With these factors in mind, Dayliff water heaters will provide low cost (only refundable
deposit) water heating equipments to the households. The consumers will be charged a
nominal rate based on the usage pattern only. If the customers are not willing to use the
product, the company will remove the water heating system and the refundable deposit will
be paid immediately. This will provide more opportunity for the company, since the
customers usually find that they have to spend huge amount of money in procuring the water
heating equipments, and they have to additionally spend for installation charges and usage
charges. But the business model of Dayliff will enable the customers to use the heating
system and pay the firm based on the consumption pattern only.

Potential threats

Training to customers and service personnel: The firm needs to train the customers and the
service personnel in using the solar heating equipments. Any issues or faults needs to be
addressed immediately.

Competing with the existing firms: The company needs to compete with the existing firms in
order to tap and utilise the opportunities. Since many international firms are looking to enter
the region with solar water heating system, it would possess great threat to Dayliff to
implement the system.

Complaints and feedback: Many existing users of solar water heating equipments states that
the solar heater does not work properly or does not provide the required hot water
requirements. The consistency of water temperature is wavering and does not provide the
needed hot water facility.

High possibility of theft: There is a huge risk that the solar water heating equipments may be
stolen and the company would lose money because of that.

Failure in business model: The proposed business model can be adopted by existing or new
firms in the business and the company may be facing huge risk due to that.

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Company can change or manage the risk by adopting following points.

The company aims in providing plenty of time in training its employees who will be involved
in installing the solar water heating equipments. The company manufacture the best product
therefore the product will be free from any fault, Dayliff provide 5 years guaranty for water
heating system, and therefore there will be no fault or mistake in the product. The customers
will also be trained properly in using the system. Dayliff solar water Heater Company
believes in the product and the business model, therefore the company is willing to provide
the product at zero cost, it gets only the security deposit which will be refunded at the time of
surrendering the product back to the company. The company will insure the product,
therefore even the product is stolen or lost due to theft the company can reclaim the product
without any difficulty. Moreover, the company advises the customer to safeguard the water
heating system so that they can use it for long time. The company will also appoint a separate
officials who will be incharge of collecting the bills from the customer’s monthly.

6. Conclusion
With the given potential and opportunities the company is poised to improvise and enhance
the wellbeing of the individuals, society and the economy in Kenya. Solar water heating
system provides ample of growth and development for the company and also for the
individuals. The product is a win-win strategy whereby individuals, society and the company
can improvise and help the country to improve further.

7. References
Crane W., Swilling M (2008) Environment, Sustainable Resource Use and the Cape Town
Functional Region – an Overview. Urban Forum. 19 (3) 263-287.

Database of State Incentives for Renewables and Efficiency (DSIRE). (2010).

http://www.dsireusa.org/.

Davis J. (2009) Scaling up an Urban Upgrading. Where are the Bottlenecks? Liverpool
University Press. 26

Department of Energy (2008) Interventions to Address Electricity Shortages. National

Response to South Africa’s Electricity Shortage. South African Government Information.

Jaglin S. (2009) Between Electricity Crisis and “Green Hub” Marketing. Changes in Urban
Energy Policies and Governance in Cape Town. Cities and energy transitions: past, present,
future. International roundtable conference.

Kemmler, A, Spreng D. (2007) Energy Indicators for Tracking Sustainability in Developing

Countries. Energy Policy 35 (4) 2466-2480

National Renewable Energy Laboratory (NREL). (2007). National Solar Radiation Database
1991–2005 Update: User’s Manual. NREL/TP-581-41364. Golden, CO: National Renewable
Energy Laboratory.

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Päster P. (2009) Electric Kettle, Stove or Microwave Oven? Science and Technology

Prasad G. (2008) Energy Sector Reform, Energy Transitions and the Poor in Africa. Energy
Policy. 36 (8) 2785-2790.

Renewable Energy Policy Network (REN21). (2009). “Renewables Global Status Report,
2009 Update.” Paris: REN21 Secretariat, Deutsche Gesellschaft fur Technische
Zusammenarbeit

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