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Kenya (2014)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

The total electricity generation went up by 3.9% from 7,559.9 GWh in 2011 to 7,851.2 GWh in 2012.

The current electricity supply / demand balance in Kenya is tight, with an installed electricity generation capacity of around 1,650 MW under average hydrological conditions. Almost three quarters of KENGEN’s electricity output is currently hydropower, with 14% of electricity generated by geothermal plants.

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Reliance

Kenya imported 51,000 bbl/d of refined oil products in 2011, according to KNBS. Kenya has a product pipeline system that transports petroleum products from Mombasa to inland areas. Most of the imported and/or domestically refined products are sold in Kenya's major cities and the remainder is sent to neighbouring countries via trucks. In 2011, Kenya consumed around 81,000 bbl/d of oil products.

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Extend network

As of 2010, Kenya had an overall national electrification rate of 23%, with rural energy access to the grid about 5% and urban access at 50%.

The Kenyan Government is working to rapidly increase electrification rates in both urban and rural areas. As part of its national Vision 2030—to create a globally competitive and prosperous nation with a high quality of life by 2030— Kenya aims to grow rural electricity access to 20% by 2012 and 40% by 2024.

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Capacity concerns

As concerns production of electricity, the existing capacity is barely able to keep up with demand. Given that more than 50% of Kenya’s electricity comes from hydropower, the situation is particularly difficult during the summer months when water levels are low. Capacity gaps are then compensated by expensive thermal generation based on fossil fuels.

Increasing economic activities and a rising national population lead to a higher domestic energy demand in Kenya, which is mostly satisfied by imports of foreign energy. The high cost of energy imports significantly slows economic growth in the country. Imported crude petroleum, for instance, accounts for about 25% of the national import bill. The problem of high energy costs is supplemented by the unreliability of energy supply infrastructure. On average, Kenyan companies lose nearly 10% of their production because of power outages and fluctuations. Sustainable, affordable and reliable domestic energy for all citizens is, therefore, declared a priority factor in national policy.

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Renewable energy

Solar
Solar energy can be used for lighting bulbs, heating houses and water, drying and generating electricity. Kenya location astride the equator gives it a unique opportunity to invest in solar energy as it experiences solar radiations of 4-6kwh/m2/day and around 6 hours of strong sunlight (National energy policy, 2012). To get the amount of energy or the number of solar panels one would need the calculation below can be used: in Kenya where there is 5.6 hours of sun/day a 80W solar panel would produce=450Wh/day  (Kilonzo, 2013):

Wind Energy
Kenya Aeolus Wind — 60 MW: The Government of Kenya, project financiers, and Aeolus Kenya Ltd. are closing agreements for the funding and construction of the Kinangop Wind Park. Power Africa also supports the implementation of a grid management program to assist Kenya in managing integration of intermittent renewable energy. The installed wind energy capacity to the grid was 5.45 MW as at June, 2012. Exploitation of wind energy resource in Kenya has however been hampered by high capital cost and lack of sufficient wind regime data among other factors.

Biomass & biogas
Geothermal resources in Kenya have an estimated potential of between 7,000 MWe to 10,000 MWe spread over 14 prospective sites in the Rift Valley.

Hydro
Small hydro potential is estimated at 3,000 MW of which it is estimated that less than 30 MW have been exploited and only 15.3 MW supply the national grid.
www.ieakenya.or.ke/.../doc.../284-energy-in-kenya

Geothermal
Kenya’s Draft Energy Policy 2012 estimates geothermal potential within the Great Rift Valley at between 7,000 MW and 10,000 MW. The GDC, a state-owned Special Purpose Vehicle (SPV) established for the development of geothermal resources in Kenya, recently invited bids for the development of 90 MW of geothermal power in the Menengai field within the Rift Valley by 2014. In addition to supporting the GDC, the GoK is also expected to create a Directorate to oversee renewable energy policy and a Renewable Energy Lead Agency to undertake the promotion of this resource, with a target 5,000 MW of geothermal power expected by 2030.

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Energy efficiency

In Kenya, it is estimated that between 10-30% of the primary energy input is wasted (IEEN, 2002).

Significant opportunities exist for improving energy in all sectors, in particular, the industrial sector.  Food, beverage and tobacco, paper and paper products, chemicals, petroleum, rubber and plastic products are among the major consumers of energy.   Energy savings of up to 25 per cent are possible in steam systems, largely by improving the efficiency of steam boilers, better steam distribution, and the use and recovery of waste heat and condensate.   Motor systems, the largest users of electricity in industry, are often oversized, resulting in lower efficiency of operation.  Potential savings are of the order of 20-50 per cent through motor system efficiency.

The Kenya Association of Manufacturers (KAM, http://www.kam.co.ke/) provides training and energy audits on energy efficiency through the Centre for Energy Efficiency & Conservation (CEEC). KAM also manages the annual Energy Management Award (EMA), which recognizes major and sustainable gains in energy efficiency, energy and cost reductions.

The production of energy efficient charcoal and fuel-wood stoves has provided  significant employment opportunities in urban and rural areas. For Excample,  the ceramic jiko, an energy efficient charcoal stove which are produced by over 200 businesses, the bulk of which are informal sector manufacturers.

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Ownership

Electricity
The restructuring of Kenya’s power sector began in 1997 with the unbundling of KPLC into distinct entities each responsible for the various aspects of the electricity supply value chain. KenGen took charge of publicly owned power generating plants in 1998, with other power sector institutions created on the authority of Sessional Paper No. 4 of 2004 and the Energy Act (2006). These include the Rural Electrification Authority (REA), the Geothermal Development Company (GDC), the Energy Regulatory Commission (ERC) and the Kenya Electricity Transmission Company (KETRACO).

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Competition

A number of Independent Power Producers (IPPs) are currently active in Kenya. Power Purchase Agreements are negotiated with KPLC on a project by project basis. Active IPPs contribute approximately 30% of the effective generating capacity.

Overall vertical integration in the sector has not changed much, with transmission and distribution now bundled and generation unbundled into a few suppliers. As a result of the public sale of shares in KenGen and the entry of independent power producers to the power market, the pro¬portion of total installed generating capacity under private ownership increased from 16% in 2001 to 46% in 2007. Despite the creation of a formal regulatory framework in the early and mid-2000s, the sector experienced severe financial problems in that period, with average tariffs below operating costs and the sector unable to finance sufficient investments in generation, transmission, and distribution, despite an impressive expansion of medium and low voltage networks between 2002 and 2008.

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Energy framework

The Energy Policy and Act: Kenya’s energy policy of 2004 encourages implementation of indigenous renewable energy sources to enhance the country’s electricity supply capacity. The policy is implemented through the Energy Act of 2006, which provides for mitigation of climate change, through energy efficiency and promotion of renewable energy. In addition, the Feed in Tariffs (FiTs) policy of 2008 (revised 2012) promotes generation of electricity from renewable sources. It applies to geothermal, wind, small hydro, solar and biomass.

Kenya’s Updated Least Cost Power Development Plan 2011-2030 (LCPDP).  The government of Kenya (GoK) identifies nine projects as key pillars to the successful implementation of Vision 2030. These are expected to push the country’s energy requirements by about 890 MW, with highest demand expected from the Konza City ICT Park (440 MW) and Meru’s iron and steel smelting industry (315 MW).  The LCPDP is the Ministry of Energy (MoE’s) power implementation plan for delivering the power sector targets outlined in Vision 2030.

Under the LCPDP, Kenya’s generation capacity is projected to increase to 19,220 MW by 2030, with geothermal contributing a quarter of  Kenya’s total installed capacity and hydro power dropping ten-fold to about 5 percent. The plan also highlights nuclear power as a potential power source, with an inaugural 1,000 MW plant planned for 2022. Commissioning of subsequent nuclear plants is expected to increase nuclear power generation to 3,000 MW by 2030.

KPLC’s Updated Retail Tariff Application on 7 February 2013 (the Tariff Application) also identifies an additional 851 MW of generation capacity expected to be developed by independent power producers (IPPs) (private companies which generate and sell electricity). IPPs account for about 26% of the Kenya’s installed capacity thereby bridging the demand gap.

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Energy debates

The government announced in late November that it will suspend issuing new licenses for solar and wind projects until 2017 as it focuses on cheaper electricity sources in a bid to reduce power process.

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Energy studies

Kenya is an active participant of the Energy, Environment and Development Network for Africa (AFREPREN/FWD).  The network is a registered Non-Governmental Organization (NGO) based in Nairobi, Kenya, with vast expertise on energy in East and Southern Africa and some experience in West and North Africa. AFREPREN/FWD brings together African energy practitioners, professionals, researchers, investors and policy makers from Africa who have a long-term interest in the development of cleaner energy services for Africa as well as energy research/capacity building and the attendant policy-making process.

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Role of government

The institutional arrangement in the electricity sub sector in Kenya currently comprises the Ministry of Energy (MOE), Energy Regulatory Commission (ERC), Kenya Generating Company (KENGEN), Kenyan Power and Lighting Company (KPLC), the Rural Electrification Authority (REA), Kenya Transmission Company (KETRACO), Geothermal Development Company (GDC) and Independent Power Producer (IPPs).

Ministry of Energy (MOE)
MOE is mandated by both the Policy and the Law for the stewardship of the sector through energy policy development. The Ministry is in charge of creating energy policies to enable the efficient operation and growth of the sector, and facilitating the mobilization of resources for the sector investment.

Geothermal Development Company (GDC)
The Geothermal Development Company (GDC), a 100% state-owned company established in 2008 under the Companies Act as a special vehicle to accelerate the development of geothermal energy in Kenya. GDC falls under the MOE and is tasked with exploration, drilling, assessing and development of geothermal resources and selling geothermal energy for electricity generation.

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Government agencies

Climate Innovation Centre
This business hub for African climate technology entrepreneurs was launched in Nairobi  to boost locally sourced green technologies in the Africa region. The Kenya Climate Innovation Centre (CIC), a cutting-edge facility, will offer financing and other services to a growing network of climate innovators and entrepreneurs. The first of its kind in the world, it is expected to support up to 70 sustainable climate technology ventures in the first five years, and is set out to generate 4,600 direct and over 24,000 jobs in total within 10 years.

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Energy procedure

Like all energy projects, RE projects under a capacity of 1 MW do not need a license or permit, those over 1 MW and under 3 MW need a streamlined Electricity Permit from ERC. Only RE projects with a capacity above 3 MW must be licensed by ERC. Those licensing requirements are relatively cumbersome and a long list of data and documents must be submitted as listed in the Annexes of the Energy (Electricity Licensing) Regulations, 2010. Considering that under FiT a set tariff is applied (though the FiT speaks of a maximum tariff, these maximum tariffs are the ones applied) and the tariffs are negotiated by the investor and Kenya Power and then stipulated in the PPA, then it should be analysed which data ERC needs to assess technical and financial ability and eliminate the irrelevant requirements or those that are already part of previous clearances.

The same might be valid for the technical arrangements though this has to be further assessed. Kenya Power ensures in the PPA that the investor fulfils all technical requirements to provide safe power. It might be sufficient if ERC obtains the technical information stipulated in the annexes of the PPA instead of requesting the same or similar information within the Electricity Generation Licensing procedure.

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Energy regulator

The ERC was established as an Energy Sector Regulator under the Energy Act of 2006.

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Degree of independence

The ERC is operationally independent. The ERC finances its activities from a levy in electricity tariffs, license fees, the petroleum levy and appropriations by Parliament. The Commission’s Chairman is appointed by the President for four years with a possibility of reappointment for another four years. The President may terminate the appointment of the Chairman on the advice of the Commission for specific reasons stated in the Energy Act 2006.

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Regulatory framework

The passing of The Constitution of Kenya in 2010 altered the governance structure of the country thereby necessitating the review of the energy sector framework. This led to the review of the Energy Policy (Sessional Paper No. 4 of 2004), the Energy Act (2006) and related Subsidiary Legislation in light of The Constitution, culminating in the Draft Energy Policy 2012.

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Regulatory roles

ERC is the single sector regulatory agency responsible for economic and technical regulation of electric power, renewable energy, and downstream petroleum sub-sectors, including tariff setting and review, licensing enforcement, dispute settlement, and approval of power purchase and network service contracts.

It oversees pricing and plays a role in negotiation of Power Purchase Agreements (PPAs) between KPLC and the power producers as private entities.

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Energy regulation role

The Ministry of Energy is responsible for overseeing the actions of the ERC, without direct involvement. The ERC is responsible for aiding the Ministry in the formulation of national energy policy with statistics and information as necessary.

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Regulatory barriers

The lack of access to comprehensive, accurate and reliable information on the renewable energy regulatory landscape in Kenya has been a significant barrier to private sector participation. Types and number of licenses/clearances, application procedures, associated costs, contacts of related government agencies, expected turn-around time and the sequence of application process remains a mystery to many local and international investors interested in the renewable energy subsector in Kenya.

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References

Institute of Economic Affairs (2013): Energy in Kenya. Available at www.ieakenya.or.ke/.../doc.../284-energy-in-kenya Accessed 24th July.

Lighting Africa (2012): Policy Report Note Kenya. Available at http://www.lightingafrica.org/component/docman/doc_download/349-kenya-policy-report-note.html Accessed 25th July

GEF (2012): African Rift Geothermal Development Facility Available at http://www.thegef.org/gef/sites/thegef.org/files/documents/document/05-31-2012%20ID2119%20Council%20letter.pdf Accessed 27th February

EIA (2012): Kenya Overview Available at  http://www.eia.gov/countries/country-data.cfm?fips=ke  Accessed 27th February

Unep.org (2013) Renewable Energy Available at http://www.unep.org/greeneconomy/Portals/88/GETReport/pdf/Chapitre%206%20Renewable%20Energy.pdf  Accessed 27th February

Vagliasindi, M. & Jones, J. (2013): Power Market Structure: Revisiting Policy Options Available at http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2013/03/22/000445729_20130322120523/Rendered/PDF/761790PUB0EPI00LIC00pubdate03014013.pdf   Accessed 27th February

Kerea.org (2011): Inventory of Regulatory Requirements to Start and Operate A Renewable Energy Project in Kenya Available at http://kerea.org/wp-content/uploads/2012/12/Regulatory-Requirements-to-Start-and-Operate-a-RE-Project-in-Kenya.pdf Accessed 27th February

Climate Investment Fund (2011): SREP INVESTMENT PLAN FOR KENYA Available at http://www.climateinvestmentfunds.org/cifnet/sites/default/files/Kenya%20SREP%20Investment%20Plan%20-%20Endorsed.pdf Accessed 15th February

World Bank (2012): Climate Innovation Centre Opens in Nairobi to Unleash Kenya’s Green Business Potential Available at http://www.worldbank.org/en/news/press-release/2012/09/26/climate-innovation-center-opens-nairobi-unleash-kenya-green-business-potential Accessed 17th February

Renewableenergy.com (2012): Kenya Launches Renewable Energy Portal Available at http://www.renewableenergyworld.com/rea/blog/post/2013/06/kenya-renewable-energy-portal-www-renewablenergy-go-ke Accessed 14th February

Kilonzo, David (2013):  Identifying and Managing the Market Barriers to Renewable Energy in Kenya Available at https://publications.theseus.fi/bitstream/handle/10024/56103/Kilonzo_David.pdf?sequence=2 Accessed 15th February

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