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Report on the Electrical Power Industry in Kenya



Overview

Kenya's electrical power sector has exhibited consistent growth over the past two decades. The country boasts abundant renewable energy resources, particularly geothermal power, making it one of the world's lowest-cost developers of geothermal energy. Efforts to enhance electricity accessibility have resulted in a substantial increase, with electricity access expanding from 32% in 2013 to 75% of households in 2022. Urban areas enjoy near-universal access at 100%, while rural areas have reached 65%. The national electrification strategy aims to achieve universal access at an acceptable service level by 2022.


However, the COVID-19 pandemic posed challenges to the sector, causing a decrease in power demand as companies scaled down operations and businesses struggled to survive. In response, the Government of Kenya (GOK) has sought to renegotiate power tariffs with Independent Power Producers (IPPs) to mitigate rising goods costs. Tax amendments have also eliminated exemptions for businesses in renewable energy, introducing a 14% VAT charge on supplies for power generation and solar equipment.


Generation

As of 2021, Kenya's installed electricity capacity reached 2,990 MW, a significant increase from 1,800 MW in 2014, though relatively low for a nation of over 50 million people. The GOK is actively pursuing measures to increase power demand and supply while reducing electricity costs. These efforts involve incorporating cheaper renewable energy sources like geothermal, wind, solar, and natural gas while reducing reliance on expensive heavy fuel oil (HFO) plants. The target is to reach 5,000 MW by 2030, with a substantial portion coming from geothermal, natural gas, wind, and solar energy. Kenya also has long-term plans for nuclear power, with the first project scheduled for 2035. The sector presents trade and investment opportunities, particularly in renewables such as geothermal, solar, and wind.


Approximately one-third of Kenya's installed capacity is owned and operated by IPPs, encompassing various plants, including small-scale hydro, geothermal, biomass, wind, solar, and heavy fuel oil. The remaining capacity is managed by the Kenya Electricity Generating Company (KenGen), which is 70% government-owned.


Renewable Sources

Over 80% of Kenya's electricity is generated from clean and renewable energy sources. Geothermal stands as a significant source, with a potential of 10,000 MW, but current installed capacity remains below 863 MW. Despite this, Kenya ranks as the eighth-largest geothermal producer globally, home to the largest geothermal power plant, the 280 MW Olkaria IV plant. Government and private sector projects are underway to realize over 1,100 MW capacity in geothermal generation.


Wind energy presents another growth opportunity, with an estimated potential of 3,000 MW. The Lake Turkana Wind Power Plant is the largest wind generation facility in Africa, supplying 310 MW to the grid. Kenya is also making strides in solar power, adding 120 MW in 2021, with more projects planned for 2023. There is a significant untapped market for off-grid solar systems, especially in remote areas. Plans are underway to convert off-grid diesel stations into solar hybrids to reduce power costs.


Kenya has plans for nuclear power by 2035, cooperating with various nations and organizations to build capacity for this endeavor.


Transmission

Kenya experiences a 16% system loss in power generation due to aging transmission and distribution networks. To address this issue, the Kenya Electricity Transmission Company (KETRACO) is expanding the transmission network by constructing 4,500 kilometers of new power lines, including the first high-voltage 400kV and 500kV DC lines, and establishing three regional interconnectors to Ethiopia, Uganda, and Tanzania. An additional 4,200 kilometers of lines are planned for future grid expansion.


Distribution

Kenya Power (KP) is the sole distribution company in Kenya, responsible for the interconnected grid and off-grid stations in the northern regions. KP significantly increased access from 26% of households in 2013 to 77% in 2018, largely through the Last Mile Connectivity Program. The goal is to achieve near-universal access by 2022. KP collaborates with the Rural Electrification and Renewable Energy Corporation (REREC) to achieve these objectives.


REREC, founded in 2006, focuses on rural electrification, helping to connect rural households and public facilities to the grid. KP and REREC have set four major objectives, including reaching near-universal access, improving grid reliability, increasing renewable off-grid access, and reducing distribution losses.


Oil and Gas

Kenya is emerging as a significant player in the East Africa oil and gas market. Tullow Oil's onshore discoveries since 2012 have generated optimism. The country has announced 63 oil exploration blocks, with 37 licensed to international oil companies and one to the National Oil Corporation of Kenya (NOCK). Several wells have been drilled, with some indicating oil discoveries and natural gas flows. Tullow estimates recoverable crude oil reserves at about 750 million barrels, with investments set to increase.


Current Energy Mix

Kenya's energy mix is predominantly green, with geothermal, hydro, wind, and solar contributing approximately 81% to the generation in 2021. Thermal, biomass, and imports make up the remaining share. Geothermal is expected to grow further as investments target reducing dependence on expensive HFO plants.


Electricity Sector Institutions

Key institutions involved in Kenya's electricity sector include the Ministry of Energy and Petroleum, the Energy and Petroleum Regulatory Authority (EPRA), KP, KenGen, the Geothermal Development Company, KETRACO, and REREC.


Power Africa

Power Africa is a U.S. Government-led initiative that aims to double electricity access in Africa. It supports Kenya's energy sector through financing, grants, technical assistance, and investment promotion.


Leading Sub-Sectors

  • Kenya is a leading electricity generator in East Africa.

  • Solar Home Systems (SHS) have witnessed significant growth, with innovative financing models.

  • The captive power market is growing, particularly with a focus on solar.

  • Transmission projects and grid expansion offer opportunities.

  • Green hydrogen and renewable energy projects are gaining traction.

Opportunities

  • The GOK is investing in geothermal power development.

  • Transmission and distribution grid expansion projects require equipment and materials.

  • Solar mini-grids are being implemented, offering potential for investment.

  • Net metering regulations are expected to drive solar growth.

  • Geothermal, battery storage, and transmission projects are on the horizon.

  • Continued investment in renewable energy is likely.

Electricity Demand and Consumption

Electricity domestic demand in Kenya amounted to 10,008.4 gigawatt hours in 2022, increasing from 9,565.

The largest consumer of electricity in Kenya is the Kenya Pipeline Company, followed by Bamburi Cement.


Conclusion

Kenya's electrical power industry presents opportunities for investment, particularly in renewable energy sources like geothermal, solar, and wind. The government is committed to expanding access, improving grid reliability, and reducing distribution losses. Additionally, the exploration of oil and gas resources offers potential for growth in the sector. However, challenges such as renegotiating power purchase agreements and addressing delays in regulatory processes must be considered. Overall, Kenya's electrical power sector appears promising for businesses seeking to enter the market.

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