Electrification in Kenya
Kenya has ambitious plans for the electrification of the country. In recent years it has increased the percentage of Kenyans connected to the electricity grid from 27% in 2015 to levels currently around 55%. The target is for 95% of homes to have access to electricity by 2020.
If increased access to electricity is to have any beneficial effect, significant investment will also be required in electricity generation to meet rising demand. The high level of investment required means that Kenya is likely to need assistance from private investors.
Around 60% of Kenya’s energy currently comes from sustainable sources, with a significant amount of capacity generated by hydroelectric power and geothermal power. Notable recent developments in Kenya’s electricity generation include:
- Geothermal: Kenya is located in the Rift Valley which is well placed for exploiting geothermal energy and there is expected to be significant further investment in this sector. In 2015 an expansion plan to create the world’s largest geothermal plant with a capacity to generate 280MW of power was completed in the Olkaria geothermal field. Work on Olkaria V (a 158 MW geothermal power plant) commenced earlier this year and Kenya Electricity Generating Company intends to add 653 MW of geothermal power by the year 2022.
- Wind power: Africa’s biggest wind farm, the Lake Turkana wind power project is nearing completion at a reported cost of approximately US$674 million. Once up and running, the project is expected to produce up to 310MW of power.
- Nuclear: Kenya plans to construct its first nuclear power plant by 2027 following the execution of an agreement with Korea Electric Power Corp.
- Solar: In 2017 China Jiangxi Corporation will commence construction of East Africa’s largest solar plant (a 55MW plant, projected to cost US$ 135 Million). There are also a large number of developments of small-scale off-grid energy production with start-ups such as M-Kopa (which sells and finances home solar systems) rapidly growing their customer base.
- Coal: Following the development of a 400 million tonne coal mine discovered in the Mui Basin, Kenya’s first coal-fired power station is expected to commence energy production in 2018 following a US$1.9 billion agreement with China Power Global.
Until 1995, Kenya’s electricity was supplied by Kenya Power (a state monopoly). Since then, the Kenyan government has sought to liberalise the energy market and encourage investment in it.
The regulatory framework was overhauled with the introduction of the Energy Act in 2006 which created an autonomous independent sector regulator (the Energy Regulatory Commission) to strengthen governance and oversight. Although the overhaul of the regulations was generally recognised as a step in the right direction it has also been criticised for failing to reduce red tape in a highly fragmented regulatory framework.
It is anticipated that the Energy Act 2006 will be repealed by the Energy Bill 2015, which if enacted, aims to consolidate energy regulation in Kenya and to clarify the roles of county and national governments in relation to energy regulation. However, it is currently unclear whether the Energy Bill 2015 will have the desired benefit as, for example, there is criticism that the bill creates multiple regulatory bodies with oversight for different areas of the Kenyan energy industry. This may have the effect of adding to the bureaucracy rather than cutting red tape.
Notwithstanding the room for improvement in the regulation of Kenya’s energy industry, the Kenyan government is eager to encourage foreign investment. Recent developments such as the Memorandum of Understanding agreed between the London Stock Exchange and the Kenyan Ministry of Energy and Petroleum in May 2017 may well stimulate this investment. Assuming the recent disputed Kenyan elections do not have a de-stabilising effect on the country, the Kenyan energy industry will be one to follow.