How Solar Power is Supporting Kenya’s Efforts to Promote Green Energy
The Kenyan government is implementing several supporting policies, incentives, and regulations for off-grid technologies such as tax breaks, mini-grid regulations and feed-in tariffs and others. Despite the fact Electricity access increased from 22 percent in 2010 to about 75 percent in 2021. To support this growth, Kenya had to invest in the development of its electricity infrastructure. It pursued the engagement of the private sector to mobilize investments. This effort succeeded in attracting private capital, which is reflected today by the nearly 30 percent of electricity generation capacity undertaken by independent power producers.
The United Nations (UN) indicated that the 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace aand prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries – developed and developing – in a global partnership. Similarly, energy is at the heart of many of these Sustainable Development Goals – from expanding access to electricity, to improving clean cooking fuels, from reducing wasteful energy subsidies to curbing deadly air pollution that each year prematurely kills millions around the world. One of these goals – commonly known as SDG 7 – aims to ensure access to affordable, reliable, sustainable and modern energy for all by the end of the next decade.
Electricity is a good that adds massive value to modern life: from having light at night; to washing clothes; cooking meals; running machinery; or connecting with people across the world. Many would argue that it is crucial for poverty alleviation, economic growth and improved living standards. Furthermore, in order to produce electricity, a turbine generator set converts mechanical energy to electrical energy. In the cases of natural gas, coal, nuclear fission, biomass, petroleum, geothermal, and solar thermal, the heat that is produced is used to create steam, which moves the blades of the turbine. In the cases of wind power and hydropower, turbine blades are moved directly by flowing wind and water, respectively. Solar photovoltaic panels convert sunlight directly to electricity using semiconductors. The World Bank has noted that more than 800 million people lack even basic access to electricity services, and in many parts of the world, the power supply is limited and highly unreliable.
Overall investment in energy technologies grows around 7x between 2025 and 2050, driven by income and population growth as well as a shift to more capital-intensive low-carbon technologies. Throughout the period, transport accounts for the largest share of investment, at around 60%. While the very high share of capital investment in transport is driven by the costs of private cars and other vehicles, with ownership growing significantly as incomes grow. Power and hydrogen accounts for a significant share at around 30% of investment. Industry and clean cooking account for a smaller share of investment, at around 10% of total. The challenge, not only for Kenya but for all developing countries, is that there is no template for moving to a low-carbon future while accelerating economic growth and development. Kenya seeks to achieve all three goals. The emissions, economic growth and development targets are contained in the country’s updated Nationally Determined Contributions and its economic blueprint, Vision 2030.
Today, sub-Saharan Africa still has ground to cover to realize universal energy access and the potential of its youth. About half of Africans have electricity, while hundreds of millions live beyond national grids. But each year more people gain energy access – often through solar power. The World Bank notes that the deployment of solar mini grids has increased in sub-Saharan Africa, from around 500 installed in 2010 to more than 3,000 installed today. The UN’s environmental agency says 60% of the world’s best solar sites are located in Africa and says there is still a great potential as this only harnesses 1% of the power. When compared to other countries within the region (Africa), Kenyan manufacturers pay up to four times more for electricity. Currently, the tariff for industrial consumers is at US cts 16/kWh compared to Tanzania US cts 7/kWh, Uganda US cts 12/kWh, Ethiopia US cts 4/kWh, Egypt US cts 6/kWh and South Africa US cts 9/kWh. However, solar technology that is imported into Kenya continues to be taxed with import duties and retailers often have to charge over 15 percent value added tax making consumers foot the high cost of going green. Solar energy’s reliability and lower cost despite initial high installation capital has attracted steel manufactures and edible oil factories who form some of the biggest clientele for a company based in the capital, Nairobi. In addition, Kenya and Uganda have a power exchange programme during which either country supplies the other with power during periods of deficit. Also, at the close of the financial year, the country that will have exported more electricity to the other invoices its counterpart.
Kenya’s Energy Governance
The key public-sector institutions involved in managing and regulating the Kenyan electricity sector are the Ministry of Energy & Petroleum (MOEP), Energy Regulatory Commission (ERC), Kenya Power, formerly Kenya Power and Lighting Company (KPLC), Kenya Electricity Generating Company (KenGen), Geothermal Development Company (GDC), Kenya Electricity Transmission Company (KETRACO), Rural Electrification Authority (REA) etc. The power sector governance framework evolved constantly starting from the 1990s to reflect the evolution of market fundamentals, support the development of new technologies, and ensure reliable electricity supply to its growing economy. Policy and regulatory reforms were adopted to attract new investment, improve competition, and open the electricity supply industry to private companies. The climax of this process has been marked by the adoption of a new Energy Act in 2019 which liberalized the electricity supply industry. The Act legally opened all market segments (generation, transmission, distribution, and off-grid) to private sector participation. Another decisive step in crowding-in private sector investment is the recent Public Private Partnership Bill, which came into effect in 2021. It lays the foundation of public-private cooperation in the financing, construction, development, operation, and/or maintenance of infrastructure and services. As a result, Kenya can be considered one of the most advanced electricity markets in Africa in terms of policy and regulatory effectiveness.
At the moment, the Kenyan government is implementing several supporting policies, incentives, and regulations for off-grid technologies such as tax breaks, mini-grid regulations and feed-in tariffs and others. Despite the fact Electricity access increased from 22 percent in 2010 to about 75 percent in 2021. To support this growth, Kenya had to invest in the development of its electricity infrastructure. It pursued the engagement of the private sector to mobilize investments. This effort succeeded in attracting private capital, which is reflected today by the nearly 30 percent of electricity generation capacity undertaken by independent power producers. One of the reasons behind this success was the ability to implement a comprehensive reform of the electricity sector policy and regulatory environment through multiple waves of reforms. Following the enactment of the Electric Power Act of 1997, Kenya embarked on fundamental reforms that led to the unbundling of generation from transmission and distribution services in the electricity market. KenGen assumed power generation functions, while Kenya Power manages power transmission and distribution services. This was the beginning of Kenya’s path towards liberalization of the electricity market and the introduction of competition in the generation segment.
The Kenyan Solar Industry
Electricity is a production component and a catalyst for capital creation; it has the potential to reduce air pollution from residential sources and boost work hours. The positive relationship between energy and economic growth is clear: income and energy consumption are tightly correlated on every continent and across every time period for which data exists. Nowhere in the world is there a wealthy country that consumes only a little energy, nor a poor country that consumes a lot. Kenyan solar distribution networks are a web of partnerships between manufacturers, importers, distributors, transporters, retailers and others. Suppliers sell directly to end users or through chains of middlemen, both solar specialist companies and over-the-counter wholesalers and traders who carry various hardware and electrical supply equipment. Where they can, companies sell in multiple ways: Sollatek, for example, distributes through Tuskys, Naivas, Chandarana and other supermarket chains; through electronics wholesalers and retailers; and direct to customers for whom they can even courier product via G4S or Wells Fargo. But by and large, there is low visibility of nonsolar-specialist traders, and little information on their supply chain relationships, costs and margins, or technical capacities.
Using a combination of grid-connected and off-grid systems, the government has been able to increase connectivity both in urban and rural areas. The Kenya Off-Grid Solar Access Project, for example, aims at providing electricity to parts of the country not currently served by the bulk power system. The government’s collaboration with development partners through public-private partnerships also has allowed the Kenyan government to leverage private funding to reach its electrification targets. Over 70 % of the Kenyan landmass is Arid and Semi-Arid, which have potential renewable energy. Electricity production in Kenya is produced by approximately 90 % renewable energy but has a target of 100 % transition by 2020. KenGen and IPPs generate 62.97 % and 35.95 % of the electricity generated, respectively. Geothermal energy in Kenya is the highest source of electricity at approximately 45 %. The current amount of electricity connected to the grid is 2708 MW in 2021, with projections of 4763 MW, 6638 MW and 9790 MW in the low, reference and vision scenarios, respectively. By 2022, the percentage of Kenyan who had access to electricity was 76.89 %. It is estimated that, by 2100, the population in Kenya will reach between 80 and 220 million according to projection scenarios. An increase in populations leads to a greater energy demand, which is implicated in climate change.
Evidently, Kenya’s GDP growth averaged 4.6% between 2019 and 2023, lower than its 10% target in Vision 2030. Growth has been non-inclusive, attributable to the minimal contribution of structural transformation to growth. This has resulted in the low poverty-reduction and employment-creation capacity of growth. On average, structural transformation accounted for 28% of labour productivity growth between 2007 and 2022. A quarter of GDP growth came from sectors resilient to shocks. Output growth of 5.8% a year is needed to absorb the 680,000 people entering the labour market. With accelerated structural transformation, GDP growth of 7.3% could create 1.36 million new jobs and cut unemployment to 7%. Achieving this requires improving governance, infrastructure, human capital development, access to finance, and macroeconomic stability. In 2023, exports grew to KSh 1,007.9 billion (15.4%) from increased revenues from horticultural products and tea while imports increased to KSh 2,612.0 billion. While, trade balance narrowed from a deficit of KSh 1,617.6 billion to KSh 1,604.1 billion, according to the Kenya National Bureau of Statistics (KNBS).
Scaling up
The adoption of energy specific sustainable development goals was a milestone in moving the world towards a more sustainable and equitable system. Kenya has made major progress in reforming its electricity sector. If millions of young Africans and their families are to escape poverty and have a more stable and prosperous future, the challenges of large-scale power must be solved. Kenya would need around USD 600 bn in capital investment (USD 165 bn more than under BAU), with the majority of investment going to the power and transport sectors. Delivering this investment could drive new economic activity in the energy sector and beyond, potentially supporting an additional 500 thousand net new jobs by 2050 and beyond.
Nevertheless, solar energy has the potential to significantly reduce rural poverty in Kenya by providing reliable electricity, promoting education and enabling economic activities. Through innovative models and sustained efforts, solar energy initiatives are transforming lives and contributing to sustainable development. Continued investment, supportive policies and community engagement are key to maximizing the impact of solar energy and ensuring a brighter future for rural Kenya. Kenya has made notable progress in deploying renewables in large part because it has successfully attracted the necessary private investment for renewables projects. Further development of these resources would help it meet demand growth.
The Kenyan government should support the establishment and operationalization of the East Africa Power Pool spot market, and enable the participation of generation investors in the regional open market. Pay-as-you-go solar home systems, popularized by companies like M-KOPA in East Africa, have revolutionized energy access in East Africa, enabling households to afford solar energy. Similarly, micro-grid technologies provide community-based power solutions in areas beyond the reach of traditional grid infrastructure. Therefore, investing in research and development (R&D) for such localized solutions, alongside conventional renewable projects, and fostering innovation hubs can cultivate a culture of entrepreneurship in renewable energy technologies and accelerate energy access for sustainable growth. Finally, regular reviews on energy policies and innovations provide data that can be used to strategize future energy equity and access while maintaining environmental sustainability. But there is an urgent need for action on all fronts, especially on renewables and energy efficiency, which are key for delivering on all three goals – energy access, climate mitigation and lower air pollution.
Writer and researcher at Alafarika for Studies and Consultancy.