Green hydrogen manufacturing plants will be designated as Special Economic Zones (SEZ) to enjoy tax breaks as part of State-backed incentives to promote the growth of clean energy.
This week, the Energy and Petroleum Regulatory Authority (Epra) published new guidelines that chart Kenya’s path to becoming an exporter of green hydrogen over the next decade.
Green hydrogen refers to the extraction of gas from water using electricity derived from renewable sources such as wind and solar. Hydrogen has several applications, including storing energy and powering vehicles.
“Investors in green hydrogen and its derivatives may apply for areas where their projects are being developed to be designated as SEZ,” say the guidelines, which took effect on May 1.
The government has established three public SEZs—Dongo Kundu, Konza, and Naivasha—and has licensed more than 15 private SEZs.
Firms in the SEZs enjoy a 10-year tax holiday, exemption from import duty, excise duty, import declaration fee, value-added tax (VAT) exemption on imported goods, and zero-rated VAT for local supplies.
They also operate under a single licence, enjoy perpetual exemption of stamp duty, preferential rates for withholding tax at five percent on interest, management, and royalties, a 100 percent investment deduction allowance over 20 years, and access to special electricity tariffs.
The guidelines are part of Kenya’s efforts to nurture the production of green hydrogen locally, which can be utilised for power generation, heating, transport and industries such as steel, chemical and refineries.
As part of this shift, Kenya unveiled its Green Hydrogen Strategy and Road Map during the Africa Climate Summit in Nairobi last September.
"Green hydrogen is recognised as a promising alternative for decarbonizing the transport, agricultural, and energy sectors,” said Epra.
This was followed by the commissioning of the country’s first green hydrogen plant in Morendat, Nakuru County that produces one tonne of green ammonia per day.
The facility comprises a 2.1 megawatt-peak (MWp) solar PV installation with 780 kilowatt-hours (kWh) Lithium-ion storage supplying a 1 megawatt (MW) alkaline electrolyzer.
The government aims to use the locally-produced green hydrogen to substitute 20 percent of imported ammonia-based fertilizer by 2027 which translates to about 100,000 tonnes annually.
It also seeks to substitute 100 percent of imported methanol, which translates to more than 5,000 tonnes annually, with local production during the same period.
