As with most African markets, Kenya’s power sector is defined by a two-track approach, with an eye to boosting generation and improving access.

The reasoning behind the latter is clear. Electrification rates in the country are low even by continental standards, and this is exacerbated by the modest urbanisation rate. As for the former, in contrast to much of the rest of the continent Kenya currently has ample supply to meet demand, but has nonetheless set a series of targets to boost generation, based on projections of increasing consumption on the back of rapid GDP growth and large public works projects. The government hopes to increase power supply dramatically over the next 12 years, with a large share coming from renewable sources.

Size & Scope

Kenya’s power sector stands out in an African context for its robust generation capacity. There are 2177 MW available through the main system to meet demand of approximately 1600 MW, so Kenya is not only able to meet demand unlike many others in the region, but also has an ample buffer of extra capacity to hand. Around 75% of power in the country is produced by Kenya Electricity Generating Company (KenGen).

Roughly 35% of Kenyans are connected to the grid, which is generally not available in remote areas, and increasingly not all potential users have chosen to sign up in places where connections are available. The up-front cost is often beyond the means of lower-income citizens, and many of those who have connected have proven to be light users. Downstream distributor Kenya Power’s total customer base jumped from 1.3m in 2009 to 2.8m in 2014, but average consumption per customer dropped from 1187 KWh to 806 KWh over the same period.

Many low-income Kenyans and light users have opted for small-scale solutions, such as home solar kits. “Given the numerous challenges Kenya has in terms of electricity distribution and cost, home solar units – known as ‘piqo solar units’ – are in increasing demand, for a variety of applications,” David Gatende, CEO of solar energy equipment supplier Davis & Shirtliff, told OBG. The country now has an estimated total of 26 MW of off-grid generation capacity (see analysis).

Demand Calculation

Future ambitions for the sector are detailed in Kenya’s Least-Cost Power Plan, its Vision 2030 document and the Power Sector Medium-Term Plan (PSMTP), which was published in June 2015. The latter aims for 10% annual GDP growth, and envisions access to energy being a catalyst for that level of growth. Kenya plans to surpass 5000 MW of capacity by 2020. That could imply a further widening of its reserve margin, as demand is expected to reach 2834 MW by 2020, according to the PSMTP, which anticipates an annual growth rate of 11% for electricity demand. KenGen on its own is targeting 33,000 MW of capacity by 2030.

However, much of the demand is predicated on a baseline assumption of increased consumption from infrastructure projects like the Standard-Gauge Railway and the LAPSSET pipeline (see Transport and Energy chapters). Because of these variables the PSMTP leaves open the possibility of reducing goals for new generation capacity. “Important among the recommendations is either stepping up the electricity demand creation or possible reduction of the generation capacity if current initiatives do not yield desired rate of demand growth,” it states.

Brief History

Until 1995 Kenya’s electricity sector was an integrated monopoly under the supervision of Kenya Power, which continues to own and operate the majority of the transmission and distribution system, though the market has become increasingly liberalised over the past two decades.

The country’s reliance on hydroelectric generation eventually led to serious capacity constraints, and by 1995 Kenya had launched a comprehensive restructuring of its energy sector, issuing its first tender for independent power producers (IPPs) the same year. The power sector was fully unbundled in 1997 and underwent structural reform, culminating in the announcement of the Energy Act in 2006.


Kenya’s Ministry of Energy and Petroleum (MoEP) is in charge of energy policy and development, with the Energy Regulatory Commission (ERC) the main regulator. The MoEP enforces regulations, issues licences, approves power purchase agreements (PPAs) and sets tariffs. Prices are set according to the type of user and the quantity they consume, and in the manufacturing sector are often given as one of the reasons for a lack of significant investment (see analysis).

KenGen – which provides roughly two-thirds of total supply – and the Geothermal Development Company are the two state generation companies, but they have been joined by a number of IPPs. The IPP market is small but growing: as of 2014 there were 10 IPPs with a total of 606 MW of capacity.

Another government agency that is involved in generation is the Rural Electrification and Renewable Energy Authority. In addition to boosting rural access, the body is responsible for the development of all types of renewables other than geothermal and large-scale hydropower.

Downstream distribution is handled by Kenya Power, which has a monopoly over the retail market and operates the grid. This doesn’t leave much room for smaller or even other distributors. “Growth for smaller companies in Kenya’s downstream sector has been stifled, in part to aggressive pricing from larger firms,” Enock Makokha, group CEO of Petrostar Energy, told OBG .

Both Kenya Power and KenGen are publicly traded on the Nairobi Stock Exchange but are majority-owned by the state. State-owned Kenya Electricity Transmission Company (KETRACO) is in charge of grid development.

The ERC has announced its intent to establish a national load dispatch centre, which would exist as an independent body to prioritise generation on the basis of cost, and relieve Kenya Power of the need to perform some market operator roles. A tender was announced in May 2016 for a feasibility study.

Though they do not yet have a formal role in the sector, Kenya’s 47 recently created county governments – the result of a devolution process mandated by the 2010 constitution – are often involved in the planning process for new generating facilities, in particular in regard to land acquisition. Still, these negotiations often contain some resistance and disagreement. “Land demarcation and clarity of working relationships between the federal government and the county governments are issues that have yet to be resolved,” Simon Ngure, regulatory and corporate affairs director at KenGen, told OBG.

To help ensure community support and local buy-in for projects, investors have been partnering with local governments in joint ventures to develop new facilities. KenGen signed a memorandum of understanding with Meru County in 2015 to secure land for a 400-MW wind power facility.

Energy Bill

A pending overhaul in the form of the Energy Bill, which is currently under consideration by parliament, would reform the power sector in several ways, including the manner in which electricity is bought from producers.

Plans would include a national dispatch centre created under KETRACO, the grid’s developer but not its operator. The ERC’s director-general Joe Ng’ang’a told media in May 2016 that it was seeking consultants for a feasibility study, and that an independent operator would remove any potential conflicts of interest by prioritising purchasing the lowest-cost power available at any given time.

Another potential change would be to require Kenya Power to compensate its customers for any losses due to blackouts that last for longer than three hours, unless the company has provided 24 hours’ advance notice. Compensation would come in the form of a subsidy being applied to a customer’s bill, according to the draft law.


Geothermal energy has surpassed hydro as the main source of power in Kenya, with the two sources accounting for 46.4% and 38.1% of the generation mix, respectively. Thermal energy comprises 14.8% and wind 0.4%, the latter being a figure that is set to jump when the Lake Turkana Wind Power Project begins production in 2017.

Under the government’s Vision 2030 plan the generation mix will incorporate more forms. It calls for 26% of power to come from geothermal sources, 19% from nuclear, 13% from coal, 11% from liquefied natural gas (LNG), 9% each from wind and thermal, and 5% from hydro, with the rest coming from imports. Kenya has negotiated with Qatar, Iran and others to import LNG, but upstream exploration for natural gas is ongoing, and has led to delays in signing any supply contracts. Deposits have been found but none have yet been declared commercially viable.


With potential output of between 7000 MW and 10,000 MW, Kenya is expected to become one of the top geothermal producers in Africa, and is already the eighth-largest globally.

In 1956 Kenya became the first African country to begin developing geothermal plants. Geothermal production has soared in recent years after KenGen began commercial production at the 140-MW Olkaria IV plant, which was commissioned in August 2014, and the 140-MW Olkaria I Units 4 & 5, which began operations in January 2015.

The private sector is also involved in the development of Kenya’s geothermal resources at the 110-MW Olkaria III plant, which is owned by Israel’s Ormat Industries, and the Akiira One plant.

Upfront costs are generally high for geothermal energy, with the price of drilling a single well at around KSh700m ($6.8m), but operating costs are low over the 25-year estimated life of a geothermal facility, and producers can earn carbon credits to further improve the economics of their projects.


KenGen operates 15 hydroelectric plants, ranging in capacity from 0.4 MW at Sosiani to 225 MW at Gitaru. Output from the facilities has been variable, and the reliability of reservoirs as a source has waned in recent years because droughts have lowered water levels. While the long-term plan envisions hydro’s share of the generation mix falling, new construction is still a possibility. Three dams were planned in Kerio Valley in joint power and irrigation projects, deputy president William Ruto said in May 2016, though the lead agency for the development of these is uncertain, with both Lake Victoria North Water Services Board and Kerio Valley Development Authority claiming responsibility.



Kenya has seen a notable increase in investment in renewables, from utility-scale generation to home solar kits to meet basic needs. In 2015 Bloomberg New Energy Finance ranked it among the top 10 countries in terms of significant investments made, and Kenya, South Africa and Ethiopia as the three largest markets in sub-Saharan Africa for utility-scale renewables projects in 2014-16.

The biggest investment to date, as well the biggest of any kind in Kenya’s history, is in the Lake Turkana Wind Power Project, in Marsabit County in the country’s north. The KSh70bn ($683m) scheme is being developed by a combination of public and private investors, including Google. Production was to begin in September 2016, but delays caused in part by the slow pace of building new transmission lines pushed the projected start into 2017. The complex will add 90 MW of power in its first phase, with subsequent stages bringing overall capacity to 310 MW.

As an equatorial country benefitting from over 3500 hours of sunlight annually in some regions, Kenya’s solar potential is also high. However, apart from China’s June 2015 announcement that it plans to build a 50-MW solar plant in Garissa, development to date has been limited to smaller-scale projects in both rural and unconnected urban areas.

Renewables Offtakes

Kenya became the first country in Africa to introduce a feed-in-tariff (FIT) system in 2008 with the publication of the MoEP’s FIT policy on wind, biomass, small hydro, geothermal, biogas and solar-generated energy. Under the FIT policy, Kenyan offtakers are required to guarantee priority purchase, transmission and distribution of all electricity supplied by small-scale renewable energy projects, with tariffs ranging from $0.09 per KWh for geothermal projects to $0.12 per KWh for grid-connected solar projects.

The FIT policy applies to all wind projects generating between 10 MW and 50 MW, all geothermal projects generating 30-70 MW, and any solar project offering 10-40 MW. These tariffs are only offered for the first 500 MW of wind projects, the first 500 MW of geothermal projects and the first 100 MW of grid-connected solar projects. Larger renewable schemes exceeding aggregate capacity limits can be negotiated on a case-by-case basis under a PPA.

More recently, the Renewable Energy Portal was launched in 2013 to provide easy access for potential investors, informing them about the administrative entry requirements and procedures necessary to operate renewable IPPs in Kenya, as well as the legal and regulatory framework for investments.


Despite the promising strides that have been made in renewables development, the government is also launching several new coal-fired power plants in a bid to increase the country’s generation capacity. In May 2015 the government announced that it had awarded two new coal blocks in the east of the country to China’s HCIG Energy Investment Company and Liketh Investments Kenya. The deal also includes the construction of a coal-fired power plant.

In 2011 the MoEP selected China’s Fenxi Mining Group to develop blocks in the Mui basin, estimated to hold more than 400m tonnes of coal. Fenxi formed a joint venture with local firm Great Lakes Coal Corporation in 2014, with coal mined from the project to be used in the cement and steel industries, as well as in energy generation.

Most significantly in the coal-fired segment, a consortium led by Kenya’s Centum Investment and Gulf Energy won a government tender to build a 1000-MW plant in Lamu in September 2014. The consortium has partnered with China Huadian Corporation Power Operation Company, Sichuan Electric Power Design and Consulting Company, and Sichuan No. 3 Power Construction Company.


Kenya is exploring the potential of inaugurating a nuclear plant and has taken a number of concrete steps forward in recent months. The Kenya Nuclear Electricity Board was formed in 2012 to develop nuclear generation capacity. In April 2016 the International Atomic Energy Agency approved Kenya’s plans to develop a nuclear power plant, and the country has announced its intention to establish a 1000-MW facility by 2027. It plans to expand that capacity to 4000 MW by 2033.


Kenya Power is currently the sole buyer of power for distribution via the grid, though the pending Energy Bill could change its role.

In addition to boosting collections and combatting theft by using smart meters, which allow for real-time remote monitoring of usage, the national distributor has focused on extending access to grid power. The number of connections has more than doubled since 2009, and in recent years grid extension has focused on low-voltage lines extended to rural settings and informal settlements, through schemes such as the Kenya Electrification Modernisation Project and the Informal Settlements Project.

Last Mile Connectivity Project

In May 2015 the government officially launched the KSh34bn ($331.7m) Last Mile Connectivity Project, which is aiming to connect 70% of the country’s population to the national grid by the end of 2017 – and to increase that to 95% by 2021 – via the rollout of 24,000 km of new power lines. It will accomplish this in part by addressing a backlog of thousands of Kenyans who have waited years for connections.

The project appears to be making significant progress. In March 2017 figures from the ERC and Kenya Power indicated that the proportion of the population with access to electricity had risen from 27% in 2013 to 55%. Kenya Power also increased its number of customers from 4.4m in January 2016 to some 5.7m in December 2016.

The government is also looking to reduce connection fees to help increase subscription totals among households. The fee for new customers was cut by more than half in 2015, from KSh35,000 ($341) to KSh15,000 ($146), and Kenya Power is now offering low-income customers a reduced connection fee of KSh1165 ($11.40), which is around one-tenth of the normal cost and can be paid in instalments.


As part of the effort to attract more IPPs, a number of national governments have sought to limit the financing burden of private sector investors and provide cover for risk in offtake agreements. Nigeria and the investment vehicle for its Azura-Edo IPP, Amaya Capital Partners, negotiated a put-call option on the project – one of the first on a large-scale IPP in Africa. The option frees Azura’s owners from a contractual obligation to sell power to the offtaker, Nigerian Bulk Electricity Trading, in the event of gas supply interruptions to the plant or if its owners are not paid for the power it produces. It also gives the plant’s ownership the right to sell it to the government in such a case.

Instruments such as partial-risk guarantees and put-call options are often embedded in PPAs. To limit currency risk, PPAs are frequently denominated in dollars or euros. In some African markets, however, PPAs are getting a second look, in particular ones in which generation capacity is no longer a pressing need. In Kenya, a government committee is currently reviewing terms, and is expected to form recommendations about potential adjustments.

Off-Grid & Mini-Grid

Kenya has also been turning to a range of off-grid solutions and mini-grids, which serve small areas and can use a variety of feedstocks to produce power, to help improve electrification rates. A study by German development agency Deutsche Gesellschaft für Internationale Zusammenarbeit found 21 mini-grids operating in Kenya and another 19 under construction in 2014. While mini-grids are seen as an ideal way to provide power to remote communities, their output is considerably more expensive than on-grid power, in part because diesel fuel is an expensive alternative to the energy sources used by the national system.

Mini-grids in remote areas are typically run by a state agency using development financing in order to extend access to power. One example of this was the deal announced in August 2016 to add another 23 mini-grids using $37m in financing from the French Development Agency. Private mini-grids are typically found in urban areas, and sell to customers who already have power and can afford a secondary, more expensive deregulated option to improve quality and reliability (see analysis).


The country’s transmission grid and distribution network totalled 52,850 km of lines as of June 2014. Recent expansions include the extension of the grid to northern Kenya, with a KSh826.6m ($8.1m) line that was funded in part by the World Bank. The project included building substations at Kindaruma and Garissa, which – in addition to increasing access to power – are expected to provide a route to the national grid for wind power projects currently in development in the area. KETRACO plans to build more than 4000 km of lines in the next three to four years, according to its website, ranging from 132 KV to 500 KV.

Kenya’s national grid also features international connections to several neighbouring states and there are plans for more, including those currently under construction to Ethiopia and Tanzania.

Power exports and imports are common in the region, and Kenya is a member of the Eastern Africa Power Pool, a group formed in 2005 by seven African countries to further integrate national power systems (see analysis). Kenya nearly doubled its electricity exports to Tanzania and Uganda in 2015 on the back of increased geothermal generation, with Kenya Power selling 46.6m KWh to the two countries, up from 26.9m in 2014.

Water & Sanitation

For non-power utilities, water is overseen by the Water Resource Management Authority and the Water Services Regulatory Board, along with local authorities at subnational levels. Solid waste is handled by a combination of municipal agencies and the private sector, often funded by donor organisations and civil society groups. Kenya’s difficulties in ensuring an optimal level of sanitation are a common challenge across Africa, and a report released in August 2016, during the Tokyo International Conference on African Development, found that across Africa GDP is 0.9% lower due to disease burdens and other challenges created by the lack of ideal sanitation conditions.


Kenya has prioritised its power sector in recent years, believing that inexpensive and reliable power will be a growth catalyst for all parts of its economy. Given Kenya’s already notable surplus of capacity and the PSMTP’s suggestion that ambitious generation targets may be a candidate for review, the future is likely to involve a refocusing from building capacity to addressing cost and reliability.