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Kenya's ambitious renewable energy goals are facing a potential roadblock. A proposed amendment within the Finance Bill 2025 threatens to impose Value Added Tax (VAT) on solar energy equipment and lithium batteries, effectively reversing previous incentives designed to promote their adoption. This shift has sparked concern within the industry, with one engineer now petitioning Kenyan Members of Parliament (MPs) to reconsider the move.

The Current Proposal & Its Implications

The Finance Bill 2025, currently under parliamentary review, initially offered zero-rating for solar energy equipment. However, a recent proposal suggests removing this crucial benefit and imposing VAT on both solar equipment and lithium batteries – essential components for energy storage solutions. This change would significantly increase the upfront costs for consumers and businesses looking to invest in solar power, potentially stifling the growth of the renewable energy sector.

“This is a step backward for Kenya’s clean energy transition,” stated the engineer, who wishes to remain anonymous. “The zero-rating was instrumental in making solar power more accessible, particularly for low-income households and small businesses. Reintroducing VAT will make it considerably less attractive.”

Why Solar and Lithium Batteries Matter

Solar energy, coupled with battery storage, is increasingly recognized as a key solution for addressing Kenya’s energy needs. It offers a pathway to:

• Increased Energy Access: Bringing electricity to remote and underserved communities.
• Reduced Reliance on Fossil Fuels: Contributing to a more sustainable and environmentally friendly energy mix.
• Lower Energy Costs: Providing consumers with a more affordable alternative to traditional power sources.
• Economic Growth: Creating jobs and stimulating investment in the renewable energy sector.

Lithium batteries are particularly vital for storing solar energy, allowing it to be used even when the sun isn't shining. They enhance the reliability and versatility of solar power systems.

The Engineer's Plea to Parliament

The engineer's petition to MPs highlights the detrimental impact this VAT could have on Kenya's renewable energy sector. The petition argues that removing the zero-rating will:

• Discourage Investment: Making solar projects less financially viable.
• Slow Down Energy Transition: Hindering Kenya’s progress towards achieving its renewable energy targets.
• Impact Consumers: Increasing the cost of electricity for households and businesses.

The engineer urges MPs to carefully consider the long-term consequences of this proposal and to prioritize policies that support the growth of a sustainable and affordable energy sector. “We need policies that encourage, not discourage, the adoption of clean energy,” they emphasized.

Looking Ahead

The Finance Bill 2025 is currently undergoing debate in Parliament. The outcome of this debate will have a significant impact on Kenya's energy future. Industry stakeholders are closely watching the proceedings and advocating for the preservation of the zero-rating on solar energy equipment and lithium batteries. The hope is that MPs will recognize the importance of these incentives and reject the proposed VAT, ensuring that Kenya remains on track to achieve its ambitious renewable energy goals. The debate underscores the delicate balance between fiscal policy and sustainable development, and the need for policymakers to consider the broader implications of their decisions on the country’s future.