With an electricity access rate of 100% for urban areas and 65% for rural areas, Kenya boasts one of the most developed power sectors in sub-Saharan Africa. Roughly 81% of the country’s energy mix derives from renewable energy sources, including hydro, wind and solar, while low-carbon geothermal energy accounts for roughly two-thirds of Kenya’s power share. The country boasts a generation capacity of 2,150 MW and aims to expand transmission and distribution networks through private-sector participation in the energy sector while reducing carbon emissions by focusing on renewable energy development.
Renewable Energy
Germany is set to back Kenya’s green hydrogen sector through a $64.6 million loan to support the development of a fertilizer plant in the Olkaria Area region. Announced in September 2023, the plant will use geothermal energy to produce green hydrogen while supporting Kenya’s target of 100% renewable energy generation by 2030.
Meanwhile, an agreement signed between the European Investment Bank (EIB) and Kenya is poised to develop public and private sector investment that utilizes renewable energy to drive the country’s green hydrogen ambitions. Under the terms of the agreement, the EIB will mobilize an initial $1.9 million in grants to invest in large green hydrogen projects.
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Additionally, Kenyan independent Milele Energy secured financing from investment group Gemcorp in April 2023 to help the company fund its bid for a stake in the country’s largest wind facility, the 310 MW Lake Turkana Wind Power project.
Geothermal
Kenya derives roughly two-thirds of its energy mix from geothermal sources. In a recent development, the 35 MW Menengai geothermal project achieved financial close in December 2023. Having received $72 million in debt funding from the African Development Bank, the Eastern and Southern African Trade & Development Bank and development financier FinnFund, the project is set to start commercial operation in 2025.
With plans to double its overall geothermal power output by 2030, Kenya’s state-owned Kenya Electricity Generating Company announced in October 2023 its efforts to collaborate with service company GreenFire Energy to assess new technologies for implementation in the parastatal’s geothermal plants.
Rural Electrification Initiatives
Established with the aim to drive universal access to energy in Kenya, the Rural Electrification and Renewable Energy Corporation (REREC) has expanded its mandate to spearhead the country’s green energy drive. In October 2023, REREC announced its plans to connect 300 households in the village of Mitedi and Nguu Tatu to electricity while implementing an additional 73 projects across six counties to drive rural electrification.
Meanwhile, in August 2023, renewable energy developer Hydrobox announced the successful commissioning of a 750-kW hydroelectric power plant that serves educational institutions, businesses and over 2,000 households in Kenya’s Murang’a County. During the same month, the state-owned Kenya Power and Lighting Company issued an invitation for the submission of bids for the establishment of solar PV mini grids in several counties in the country.
Private Sector Partnerships
Kenya is moving ahead with the privatization of 35 state-owned entities following the signing into law of a revised Privatization Bill by President William Ruto in October 2023. In an attempt to stimulate economic growth on the back of foreign investments, the move aims to incentivize private participation and competition while boosting the efficiency of previously state-owned companies.
Grid Modernization
As Kenya works toward realizing universal access, the country has sought to prioritize the modernization of its energy grid. As such, the governments of Kenya and China signed a deal in October 2023 to enhance the flexibility and reliability of Kenya’s electrical grid.
Under the MoU, Kenya’s Ministry of Energy and Petroleum and the China Energy Engineering Company will collaborate on the planning, design, transformation and modernization of power generation, transmission and distribution lines and substations across the country.
Energy Efficient Programs
To accelerate Kenya’s decarbonization efforts, exploration company Africa Oil Corp announced plans to implement two carbon offset projects in Kenya in October 2023. Meanwhile, the International Finance Corporation signed an agreement with KCB Bank Kenya during the previous year to mobilize $150 million in loan financing to fund the development of smart energy projects aimed at boosting the country’s climate action initiatives.
In September 2023, the governments of Kenya and Tanzania finalized the signing of a transnational agreement for the construction of a gas pipeline linking Tanzania’s Tanga facility with the recently renovated Kenya Petroleum Refinery. The pipeline is poised to reduce costs associated with transporting gas to Kenya, which is mainly done with trucks.
Outlook on the Sector
Backed by a $70 million investment from the Climate Investment Fund, the Kenyan government’s Kenya Vision 2030 strategy aims to achieve universal access to clean energy by the end of the decade. In a bid to achieve this objective, the government has implemented various measures to incentivize private sector investment in the country while promoting rural electrification initiatives, the development of renewable energy, grid modernization and energy efficient programs.
This article was first published on Energy Capital Power
