Kenya’s change of policy on the purchase of electricity from renewable sources by independent power producers (IPPs) is discouraging new investments in the sector and slowing down efforts to close the country’s energy access gap, the International Energy Agency (IEA) warns.
The Cabinet last year approved the Renewable Energy Auction Policy (Reap), effectively allowing a transition from the previous policy of Feed-in Tariffs (FiT), which allowed IPPs to earn a pre-determined fixed tariff over a given period of time.
The FiT was introduced in 2008 to encourage investments in Kenya’s renewable energy generation capacity, and successfully increased the country’s electricity generation from 1,113 megawatts in 2008 to more than 3,078 megawatts as of last year, according to the Energy and Petroleum Regulatory Authority (Epra) data.
The change of policy came after a task force appointed in 2021 by former President Uhuru Kenyatta to look into the high cost of electricity for end-consumers called for the renegotiation of power purchase agreements (PPAs) with IPPs and alignment of new PPAs with the low-cost power development plan.
The Reap framework approved by Cabinet last year allows the Kenya Power and Lighting Company (KPLC) to take bids from IPPs and accept only the cheapest bidders based on their financial and technical evaluation.
According to the IEA, while the FiT programme had “spurred multiple new solar PV and wind project announcements” a decade after its introduction, the PPA renegotiations initiated in 2021, coupled with the transition from FiT to the auction system could slow down investments in the renewable energy sector.
The Paris-based intergovernmental organisation said in its Renewables 2023 report that Kenya could add up to 2,000 megawatts of renewable energy generation capacity by 2028, if the trajectory in the last 10 years was to be maintained, and if the new auction scheme is properly done.
“Kenya is planning to transition from a system based on feed-in tariffs to an auction scheme. While the initial auctions have yet to be announced, firm pricing structures, coupled with a reliable schedule would accelerate [renewable energy] additions,” IEA reported.
Renewable energy sources, including solar, wind, and geothermal energy, currently produce over 90 percent of the electricity consumed in Kenya.
According to Epra, the country’s total electricity generation capacity is currently more than the peak power demand by nearly 1,000 megawatts.
However, nearly 15 million people have no access to reliable electricity and millions more not connected to the national grid, meaning that increased generation could close the country’s energy access gap.
