Unlocking The Power Of Solar: Financial Incentives Driving Kenya''s Energy Revolution
Kenya is on an ambitious quest to provide electricity for all its citizens by 2022. This article examines how solar power is helping to achieve this universal access goal. It does so by discussing policies and incentives Kenya is using to both encourage local consumption of solar energy and attract private sector solar investment in Kenya.
Like most countries, Kenya''s energy sector broadly comprises the Petroleum Industry, the Electricity Subsector, and the Renewables Energy Industry.
The Ministry of Energy and Petroleum (MoEP) sets policy for the entire energy sector.
MoEP has less than 100 employees and in the fiscal 2020/2021 budget unveiled in June 2020, the energy sector was allocated KSh 63.3 billion out of a total budget of KSh 2.7 trillion.
In terms of regulation, the Energy Act of 2019 created the Energy & Petroleum Regulatory Authority (EPRA) to succeed the Energy Regulatory Commission (ERC).
Therefore, the 2019 Act expanded EPRA''s regulatory mandate to cover upstream petroleum and coal. This made EPRA the sole, independent regulator for the entire energy sector.
The Energy Act of 2019 supersedes all previous energy-related legislation and is now the main regulatory act for all energy-related matters.
Before Kenya discovered commercial oil in 2012, its petroleum industry centered on upstream exploration and downstream activities.
Following a pilot oil production scheme in 2020, the government expected full oil production to commence in 2024, depending on the construction of the pipeline needed to export the oil.
The 100 percent government-owned National Oil Corporation of Kenya (NOCK) is the state agency involved in all petroleum upstream and downstream activities except wholesale transportation.
The government is currently mulling how to save the debt-ridden company from collapse.
The state-owned Kenya Pipeline Company (KPC) handles wholesale transportation of petroleum products through its network of pipelines and depots.
Before the Energy Act of 2006, Kenya Electricity Generating Company (KenGen) was the state-owned utility responsible for power generation while state-owned monopoly Kenya Power (KP) was responsible for transmission, distribution and retail of electricity.
The 2006 Act carved out transmission from KP and transferred it to the Kenya Electricity Transmission Company (KETRACO) in 2008.
The electricity sector is now restructured into:
KenGen, responsible for power generation, is a limited liability company listed on the Nairobi Securities Exchange (NSE). It is 70% state-owned and 30% privately-owned. KenGen is the biggest electricity producer but not the only power generator, it is competing with private companies in generation. Kenya allows Independent Power Producers (IPPs) to sell bulk electricity to Kenya Power under power purchase agreements. IPPs account for about 28% of Kenya''s installed power generation capacity. .
100 percent government-owned KETRACO is responsible for transmission from new transmission infrastructure.
KP, formerly Kenya Power and Lighting Company (KPLC), is responsible for distribution and retail of electricity, and transmission from legacy transmission infrastructure. KP is 50.1% government-owned, the rest is listed on the Nairobi Securities Exchange (NSE).
According to a World Bank report, in 2018, KP had 11,270 staff, of whom 32 percent had short-term or contract status; about 20 percent of the staff were women (World Bank 2019).
The Energy Act of 2006 created the Rural Electrification Authority (REA) in 2007 to accelerate Kenya''s rural electrification drive. Before the creation of the REA, KP reportedly did a poor job of electrifying the rural areas.
Then in 2019, the Energy Act of 2019 created the Rural Electrification and Renewable Energy Corporation (REREC) to succeed the REA. REREC''s mandate is to spearhead Kenya''s renewable energy drive, in addition to electrifying the rural areas.
According to the latest audited financial results of KenGen, as of June 2020, Kenya had a total installed power generation capacity of 2,832 MW with a system peak demand of 1,926 MW, which implies a surplus generation capacity.
Furthermore, about 74% of this installed capacity came from renewables – primarily geothermal, hydro, and wind.
In December 2018, Kenya launched the National Electrification Strategy (NES), which is an ambitious roadmap developed in conjunction with the World Bank to provide electricity for all Kenyans by 2022.
At the time of the launch the government said 75% of Kenyas had access to electricity from both grid and off-grid connections.
Given that the government is poised to reduce reliance on fossil-fuel power generation, it will likely rely heavily on renewable energy to achieve this 2022 universal access goal.
As at April 2020, the renewable energy mix was reportedly the following:
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FiT tariffs are guaranteed prices that an offtaker pays an IPP over the term of the Power Purchase Agreement (PPA) for the renewable power the IPP produces.
FiT "provides investment security to renewable electricity generators, reduces administrative and transaction costs and encourages private investors in establishment of IPPs (Institute of Economic Affairs, 2015).
Kenya was the first country in Africa to introduce a FiT system in April 2008. The 2008 FiT Policy covered wind, small hydro and biomass sources, for plants with capacities not exceeding 50 MW, 10 MW, and 40 MW respectively, but it did not include solar.
The policy was first revised in 2010 to incorporate grid connected solar, and the latest revision in December 2012 incorporated off-grid solar.
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