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MOBILISING EUROPEAN RESEARCHFOR DEVELOPMENT POLICIES

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DEVELOPMENTOONN

Role of Renewable eneRgy in pRomoting inclusive and sustainable development in Kenya

prof peter Kimuyu, University of Nairobi with John mutua and John wainaina, School of Economics, University of Nairobi

RolE of RENEwablE ENERgy iN pRomotiNg iNclUSivE aNd SUStaiNablE dEvElopmENt iN KENya

synopsis

this paper looks at the role of renewable energy in Kenya toward promoting inclusive and sustainable development.

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E U R O P E A N R E P O R T

DEVELOPMENTOONN

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This paper served as a background paper to the European Report on Development

2011/2012: Confronting scarcity: Managing water, energy and land for inclusive and

sustainable growth. The European Report on Development was prepared by the

Overseas Development Institute (ODI) in partnership with the Deutsches Institut für

Entwicklungspolitik (DIE) and the European Centre for Development Policy Management

(ECDPM).

Disclaimer: The views expressed in this paper are those of the authors, and should not

be taken to be the views of the European Report on Development, of the European

Commission, of the European Union Member States or of the commissioning institutes.

The role of renewable energy in promoting inclusive and sustainable development in Kenya

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Contents

Contents 4 Tables, figures & images 5 Abbreviations 6

1 Kenya’s renewable energy market 7

1.1 How much energy provision is renewable? 8 1.2 Overall structure of the energy sector 9 1.3 How energy is financed in Kenya 10 1.4 Publicly backed guarantees 12 1.5 Fiscal incentives 12 1.6 Laws and institutions governing the energy sector 12

2 The status of hydropower 14

2.1 Constraints to development of hydropower 15 2.2 The role of public and private actors 15 2.3 Factors that have led to successful implementation of hydropower 16

3 The status of geothermal energy 17

3.1 Reasons for emergence of geothermal power 17 3.2 Constraints to further development of geothermal power 17 3.3 The role of public and private actors 18 3.4 Factors that have led to successful implementation of geothermal power 18

4 The status of bio-fuels 19

4.1 Why bio-fuels for Kenya? 19 4.2 Sources of bio-fuels (plants) 21 4.3 The history of bio-fuels in Kenya 22 4.4 Constraints to further development of bio-fuels 22 4.5 Links to food production and water withdrawal 23 4.6 The role of public and private actors in bio-fuel energy 24 4.7 The impact of legislation on bio-fuel production 24 4.8 The future of bio-fuels in Kenya 24

5 The status of solar and wind energy 25

5.1 Development of solar energy in Kenya 25 5.2 What has helped the development of solar energy? 27 5.3 Development of wind energy 27 5.4 Constraints to the further development of wind energy 30 5.5 Wind farms in Kenya 30 5.6 The challenge of financing wind power 31 5.7 Role of public and private actors in solar and wind energy 31

6 Summary 32

References 34


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Tables, figures & images

Tables

Table 1.1 Installed effective electricity power capacity in Kenya, 2010 8 Table 1.2 Summary of feed-in tariffs in Kenya, 2008 12 Table 5.1 Urban and rural electrification rates (%) by region, 2000 25 Table 5.2 PV dissemination in selected sub-Saharan African countries 26 Table 5.3 Wind energy data for selected African countries (estimates for 1990s) 27 Table 5.3 Potential wind farms/plants 30

Figures

Figure 1.1 Analysis of expenditure in the energy sector in Kenya (KSh millions) 11 Figure 2.1 Forecast of installed electricity generation capacity in Kenya, 2009–2030 14 Figure 3.1 Projected generation mix for Kenya by 2030 17 Figure 4.1 Kenya’s imports of petroleum products, 1996–2011 20 Figure 5.1 Wind-power production in some selected African states 28 Figure 5.2 Wind resource locations in Kenya 29

Images

Image 4.1 Sugarcane and cassava roots 21 Image 4.2 Jatropha seeds and plant 21 Image 4.3 The Kenya Jatropha energy pilot project inside the Dakatcha woodlands 22 Image 5.1 Windmills 28


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Abbreviations

ASAL Arid and Semi Arid Lands

COMESA Common Market for East and Southern Africa

EMCA Environmental Management and Coordination Act

ERC Energy Regulatory Commission

ESD Energy for Sustainable Development Africa

GDC Geothermal Development Company

GoK Government of Kenya

GWh Gigawatt Hours

FiT Feed-in Tariff

ICRAF International Centre for Research on Agro-Forestry

IDA International Development Association

ILRI International Livestock Research Institute

IDA International Development Association

KenGen Kenya Electricity Generating Company

KEFRI Kenya Forestry Research Institute

KEREA Kenya Renewable Energy Association

KEPHIS Kenya Plant Health Inspectorate Services

KETRACO Kenya Electricity Transmission Company

KIPPRA Kenya Institute for Public Policy Research and Analysis

KPLC Kenya Power and Lighting Company Limited

KWh Kilowatt Hour

LCPD Least Cost Power Development

MIGA Multilateral Investment Guarantee Agency

MOE Ministry of Energy

MOF Ministry of Finance

MW Megawatt

NGO Non Governmental Organization

PBG Publicly Backed Guarantee

PCGs Partial Credit Guarantees

PPA Power Purchase Agreement

PRG Partial Risk Guarantees

PV Photovoltaic

REA Rural Electrification Authority

RED Renewable Energy Directive

RET Renewable Energy Technologies

SWH Solar Water Heaters

TWh Terawatt Hours

UNEP United Nations Environment Programme


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1 Kenya’s renewable energy market

Renewable energy comes from natural resources such as sunlight, wind, rain, tides and

geothermal heat. About 16% of global energy consumption comes from renewables: 10% is

from traditional biomass, which is used mainly for heating and 3.4% from hydroelectricity.

New renewables such as small hydro, modern biomass, wind, solar, geothermal, and bio-fuels

account for about 2.8% (UNEP, 2011). There has been a rapid growth in new renewables

because of increased uptake of the relevant technologies. The share of renewables in

electricity is about 19%, and it is estimated that about 16% of global electricity comes from

hydroelectricity and 3% from new renewables.1 Global investments in renewable energy

increased by 32% in 2010, to a record US$211 billion. The increase was mainly because of

wind-farm development in China and small-scale solar PV installations in Europe (UNEP, 2011).

Africa achieved the largest percentage increase in investment in renewable energy among

developing regions excluding the three big economies. Total investment on the continent rose

from US$750 million to US$3.6 billion, largely because of strong performance in Egypt and

Kenya.

In 2008, India accounted for 17.7% of the global population but was the fifth-largest consumer

of energy, accounting for 3.8% of global consumption. India’s commercial energy supply is

dominated by coal and oil (most of it imported), with renewable energy contributing less than

1% overall and accounting for approximately 10% of installed capacity. As in many countries

that are experiencing high economic growth, its power-generating capacity is insufficient to

meet current demand, and in 2009–2010, India experienced a generation deficit of

approximately 10% (84 TWh) and a corresponding peak load deficit of 12.7%, i.e. over 15

GW. As a result of frequent electricity shortages, the Indian economy lost about 6% of Gross

Domestic Product (GDP) in FY2007–2008. To meet its current goals of economic growth, by

2017 India will need to increase its installed generating capacity to over 300 GW. In recent

years, control over generating facilities has shifted to federal government and private entities,

including those that have set up captive power plants for their industrial facilities. The private

sector dominates the generation of renewable energy (Arora et al., 2010). China and India are

currently two of the key drivers of world energy mainly due to their large populations and

initiatives to adopt renewable energy technologies (RET).

In Egypt, which is Kenya’s main competitor within the COMESA region, investment in

renewable energy rose by US$800 million to just over US$1.3 billion as a result of just two

deals, a 100MW solar thermal project in Kom Ombo, and a 220MW onshore wind farm in the

Gulf of El Zeit. The country’s next move in renewable energy is likely to be a tender for several

hundred MW of wind projects in the Gulf of Suez region (UNEP, 2011).

Although Kenya has vast renewable energy resources such as solar, wind, biomass, bio-fuel,

geothermal and hydropower, their use has been limited. Expansion of the sector is being

catalysed by the growing demand for and cost of electricity, increasing global oil and gas prices

and environmental pressure. In Kenya biomass accounts for over 70% of total consumption.

The other sources are petroleum and electricity, which account for about 22% and 9%

respectively (Mwakubo et al., 2007). Currently, the Kenyan energy sector is characterised by

the heavy reliance on biomass, frequent power outages, low access to modern energy, over-

reliance on hydroelectricity and high dependence on oil imports. Renewable energy is,

therefore, an important means to meet the challenges of growing demand and addressing the

related environmental concerns.

The Least Cost Power Plan (LCPP) aims to identify new generation and sources to enable the

national electricity supply to respond to demand, taking into account the 15% margin required

to ensure its security. In the light of frequent droughts and the increase in oil prices, there will

be an emphasis on developing alternative energy resources especially geothermal, solar, wind

1 http://en.wikipedia.org/wiki/Renewable_energy/


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and coal. Since power projects take time to construct, there will be measures to fast-track

implementation of the power projects in the Master Plan, to ensure adequate energy supply to

meet the demand over the MTP period (Ministry of Finance, 2011a)

As evidenced by good government policy and energy planning that aim to ensure a sustainable

energy mix, Kenya’s move towards renewable energy has been broad-based. Investment has

grown from virtually zero to more than US$1.3 billion, including funding for wind, geothermal

and small hydro capacity of 724MW, and for the production of 22 million litres p.a. of ethanol.

Geothermal was the highlight, with the local electricity-generating company, KenGen, securing

debt finance for additional units at its Olkaria project (UNEP, 2011). With the new financing

arrangement, the company will add 280MW of power to the grid in the next three years.

1.1 How much energy provision is renewable?

According to KNBS (2011), Kenya’s installed electric power capacity was 1,412.2MW as of 31

December 2010. The effective installed capacity was not enough to meet demand, so the

government contracted for 60MW of emergency power. This was needed in order to meet the

growing demand and reduce load-shedding, particularly during peak periods. Hydropower is

the main source, accounting for 51.55% of total installed capacity. Petrol thermal, geothermal,

co-generation and wind account for 33.2%, 13.38%, 1.84% and 0.36% respectively, as shown

in Table 1.1. Renewable energy accounts for about 67.1%, which means that power generation

in Kenya is now largely ‘green’. Although installed capacity in hydropower has not seen much

growth in the last decade, there have been increased initiatives in geothermal exploitation,

sustaining the level of clean electricity in the national grid.

Table 1.1 Installed effective electricity power capacity in Kenya, 2010

Year Hydro Thermal

oil

Geothermal Co-

generation

Wind Total Total

renewable

energy

Renewable

energy (%

of total)

2006 677.3 369.8 128.0 2.0 1,177.1 807.3 68.6

2007 677.3 389.3 128.0 2.0 1,196.6 807.3 67.5

2008 719.0 418.9 128.0 2.0 1,267.9 849.0 67.0

2009 730.0 421.5 158.0 2.0 5.1 1,311.5 895.1 68.3

2010 728.0 469.2 189.0 26.0 5.1 1,412.2 948.1 67.1

% in

2010

51.55 33.22 13.38 1.84 0.36 100

Source: KNBS, 2011.

The solar market in Kenya is among the largest and its usage per capita is the highest among

developing countries. Cumulative solar sales in Kenya (since the mid-1980s) are in excess of

200,000 systems, and annual sales growth has regularly topped 15% over the past decade

(Jacobson, 2006). Much of this activity is related to the sale of household solar systems, which

account for an estimated 75% of solar equipment sales in the country (KEREA, 2009).

Compared to countries such as Germany, the existing solar PV market in Kenya remains small.

This market is, however, relatively well established compared to other countries in East Africa,

such as Tanzania and Uganda. In 2006, the total installed base was about 250,000 units or 5

MW. New installations have averaged about 25,000–30,000 units p.a.

Further growth in the solar sub-sector is likely to be held back by market failures and other

barriers. Most demand for PV systems is driven by the rural non-electrified private sector, with

cash sales being the usual method of transaction. Changes in Kenya’s power sector since the

adoption of the Sessional Paper No. 4, 2004 on a blueprint for the country’s energy policy have

led to new interest in renewable energy. Recent policies have focused on geothermal,

hydropower and co-generation technologies with much less emphasis on PV technology,

although the government is currently implementing an electrification scheme for remote

schools using solar energy (Ngigi, 2006).


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In addition to its energy policy, interest in renewable energy in Kenya has risen due to

renewed initiatives in rural electrification and environmental concerns about global warming

and air quality. The previous focus on renewable energy responded to two main orientations.

Large-scale renewables, such as large hydropower and geothermal projects, were developed in

order to improve the security of supply through diversification and reduced exposure to

external shocks such as high oil prices. Recently, there has been growing interest in new

renewable energy technologies (RET) such as wind, small hydro, and PV energy. These

technologies have been developed to expand access to modern energy services, especially in

rural and marginalised areas.

Although Kenya is well endowed with renewable energy resources, only geothermal, wind and

co-generation (generation from bagasse) have been seriously exploited and connected to the

national electricity grid (Table 1.1). Solar energy is relatively well developed and has enormous

potential due to the country’s proximity to the equator. Kenya is the third largest market for

domestic solar systems after India and China. In fact, Kenya and China are the fastest growing

markets, with annual growth rates of 10%–12% in recent years, with private dealers providing

most solar systems (Arora et al., 2010 although the government has also taken measures to

increase uptake of these technologies. The initial markets received donor seed money in the

1980s (Mwakubo et al., 2007), which allowed PV system components to become accepted and

available. The government has recently intensified measures to increase the uptake of

renewable energy by championing initiatives to adopt these technologies. Some of these

initiatives include the fitting of the Ministry of Energy (MoE) offices (Nyayo House), the Office

of the President (Harambee House), the Office of the Prime Minister and the Ministry of

Finance (Treasury) with solar PV and natural lighting. Funds for this were factored in the

National Budget 2011/2012, demonstrating government commitment to these initiatives

(Ministry of Finance, 2011b).

1.2 Overall structure of the energy sector

Kenya has one of the most developed energy sectors in East Africa. The MoE coordinates the

overall policy and provides guidance on investment and development of the energy sub-sectors

covering electricity, petroleum and renewable energy. The country’s energy policy is guided by

the 2004 Sessional Paper No. 4 on Energy and by the resulting Energy Act 2006. In August

2010, Kenya promulgated a new constitution that further promotes sustainability and the

independence of the energy sector to secure supply and protect the environment. The energy

policy and Act are being streamlined to incorporate the aspirations of the constitution.

The Energy Act 2006 brought the regulations affecting all the energy sub-sectors under one

umbrella body, the Energy Regulatory Commission (ERC). The ERC is a single-sector regulator

with responsibility for economic and technical regulation of the electric power, renewable

energy, and downstream petroleum sub-sectors, including tariff-setting and review, licensing,

enforcement, dispute settlement and approval of power purchase and network service

contracts (Republic of Kenya, 2006a). The Act also recognises other institutions such as the

Rural Electrification Authority (REA) to oversee the implementation of the rural electrification

programme (previously the role of the MoE) and the energy tribunal, and also created other

key institutions such as the Geothermal Development Company (GDC) to oversee geothermal

exploitation, and the Kenya Electricity Transmission Company (KETRACO) to carry out

electricity transmission in addition to the existing institutions in power generation, supply and

distribution. The new constitution provides for some regulatory functions to go to county

governments in electricity and gas networks. Nevertheless, national laws and policies

supersede county laws to avoid duplication.

Traditionally, modern sources of energy have been promoted in order to meet growing

demand. But poverty levels and the nature of human settlements and dispersed populations

mean that these have been unable to cope with the demand for clean energy at the household

level. This is why the National Energy Policy recognises the broad advantages of renewable

energy: potential for income and employment generation, diversification of energy supply and

environmental benefits. Hence the national energy policy now incorporates strategies for


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promoting the contribution of renewable energy to electricity generation. For instance, section

6.3.2 of the policy shows the government’s commitment to promote co-generation in the sugar

industry and other establishments to meet a target of 300 MW by 2015. Section 6.4.1 requires

the government to undertake pre-feasibility and feasibility studies on the potential for

Renewable Energy Technologies (RET) and for packaging and dissemination of information on

these technologies to raise investor and consumer awareness.

Due to the previously low uptake of RET, the government has developed additional policies and

incentives to promote these technologies. These include Feed-in Tariffs (FiT) to promote the

adoption of solar, wind, small hydro and biomass as well as fiscal incentives to investors in

these technologies (Ministry of Energy, 2008). For example, the import and production of solar

panels are zero tax-rated.

A FiT seeks to promote the generation of electricity from renewable energy sources. It allows

power producers to sell and obliges distributors to prioritise the purchase of renewable energy

sources for generating electricity at a fixed tariff for a fixed period of time. Kenya’s FiT policy

aims to achieve two main objectives. First, it seeks to facilitate resource mobilisation by

providing investment security and market stability for investors using renewable energy

sources to generate electricity. Second, it aims to reduce transaction and administrative costs

by eliminating the conventional bidding processes.

1.3 How energy is financed in Kenya

Globally, there have been proactive measures to increase investment and financing for RET.

According to UNEP (2011), there were sharp increases in asset finance of utility-scale projects

such as wind farms, in venture capital provision for young firms, and in equity-raising on the

public markets by quoted renewable energy companies. Asset finance rose 19% to US$128

billion in 2010, while venture-capital investment increased by 59% to US$2.4 billion, and

public market investment rose by 23% to US$15.4 billion. The highest gains were investment

in small-scale projects, up 91% annually at US$60 billion, and in government-funded research

and development, up 121% at US$5.3 billion, as more of the ‘green stimulus’ funds promised

after the financial crisis were pumped in the sector.

Renewable energy development in Kenya is financed by the government, development

partners, and the private sector as well as by individual households. The government finances

energy development via the national budget while development partners provide loans and

grants. The private sector uses debt and equity to fund its projects. Debt financing occurs

when a firm raises money for working capital or capital expenditure by selling bonds, bills, or

notes to individual and/or institutional investors. In return for lending money, the creditors are

promised repayment of the principal and interest. Equity financing raises money for company

activities by selling common or preferred stock to individual or institutional investors. In

return, shareholders receive ownership interests in the company. All of these financing models

have been practised in Kenya, whether as energy financing by the public sector, private

sources, or new Public–Private Partnerships (PPP) that are currently being explored.

As already mentioned, the government has increased funding in the renewable energy sector.

The establishment of the Geothermal Development Company (GDC) has accelerated funding in

the sector; its role is to explore for, drill and sell steam to electric power producers. KenGen, a

public company, leads in this sector. Its main financing has been from government and

development partners as well as from the public through share capital. Development partners

have continued to increase funding for green electricity.

Currently, the private sector has invested in geothermal power generation, wind energy,

bagasse, and small hydro and solar energy, financed mainly from corporate savings and loans.

Some private entities have raised their entire portfolio from debt or from a combination of debt

and equity.

Expenditure in the energy sub-sector has increased significantly. In FY 2007/08, total

expenditure was over Kshs. 18 billion of which Kshs. 17.7 billion was development


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expenditure. This increased to an estimated Kshs. 68 Billion in FY 2011/2012, as shown in

Figure 1.1. The expenditure trends show that government efforts are more focused on

development, which was previously undermined leading to poor investment and performance

of the sector. More than Kshs. 11.5 billion has been allocated to the GDC to promote

exploitation of geothermal steam (MOF, 2011b).

Figure 1.1 Analysis of expenditure in the energy sector in Kenya (KSh millions)

Source: Ministry of Finance, 2011b, Budget Strategy Paper, 2011.2

The other source of financing is the tariff charged on generated power, agreed between

generators and the distributor. Such tariffs are guided by a power purchase agreement (PPA).

Currently, KPLC is the sole distributor of power in Kenya and has negotiated PPAs with all

generators. The revenue requirement in the PPA helps to pay for the investment over the life

of the plant.

As stated earlier, there are FiT for smaller investments, shown in Table 1.2 below. The tariffs

aim to encourage more investors in the renewable energy sub-sectors and are effective only

for a limited time. In the geothermal sub-sector, the FiT for generating up to 100MW under

this policy is US$0.085/kWh, while generating between 0.5–100MW of wind has a higher tariff

of US$0.12/kWh. The main reason is that geothermal is a base load, and it load capacity is up

to 95% of installed capacity. Investors are therefore likely to see higher returns even when the

plant size is small due to its potential to produce more energy. The FiT for biomass for

generation of 0.5–100MW is US$0.08/kWh while small hydro has tariffs ranging from

US$0.12/kWh to US$0.08/kWh for generations between 0.5 and 10MW. The tariff for

generating 0.5–40MW of biogas is US$0.08 while generating power from solar energy of

0.5MW–10MW attracts a tariff of US$0.20. These tariffs provide revenue for the various plants

and investors can realise their investment.

2 Expenditures for 2010/11 and 2011/12 are estimates.

2007/08

2008/09

2009/10

2010/2011

2011/2012

290

348

362

2,283.31

2,682.88

17,704

30,560

32,513

34,072.86

65,448.38

Development Recurrent


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Table 1.2 Summary of feed-in tariffs in Kenya, 2008

Renewable

technology

Plant

capacity(MW)

Maximum firm power

tariff ($/kWh) at the

interconnection point

Maximum non-firm power

tariff ($/kWh) at the

interconnection point

Geothermal Up to 70 0.085 -

Wind 0.5–100 0.12 0.12

Biomass 0.5–100 0.08 0.06

Small hydro 0.5–0.99 0.12 0.10

1.0–5.0 0.10 0.08

5.1–10 0.08 0.06

Biogas 0.5–40 0.08 0.06

Solar 0.5–10 0.20 0.10

Source: Ministry of Energy, 2008.

1.4 Publicly backed guarantees

A publicly backed guarantee (PBG) is a contractual obligation through which a government

institution, against payment of a fee, makes a compensatory payment to a creditor or investor

in the case of default on a third-party obligation. Whereas insurance involves two parties,

guarantees involve interlocking contracts between multiple parties. In the case of partial credit

guarantees (PCG), the contracts are between creditors and borrowers (loan agreement) and

between guarantors and creditors (guarantee agreement). In the case of partial risk

guarantees (PRG), the contracts are between guarantors and host-country governments (e.g.

a commitment to pass a law introducing FiT). Since risks are inherent in financial transactions,

PBG are applied in all phases of the finance continuum to improve access to, and terms of,

financial products that would be under-supplied in the absence of PBG (UNEP, 2010). In

Kenya, PRG are the most common PBG in the energy sector. Many investments in the power

sector in Kenya are going for PRG, which are provided by IDA/World Bank. 3 In addition, the

government may give letters of comfort to parties in energy projects so that they can access

long-term finance from financial institutions.

1.5 Fiscal incentives

Fiscal incentives in the energy sector include policies that are focused on cost reductions and

improvement of the relative competitiveness of RET in given markets, via capital grants, third-

party finance, investment tax credits, property tax exemptions, production tax credits, sales

tax rebates, excise tax exemptions, and similar interventions. Some of these measures can be

applied to RET invested in by the users themselves. Taxes on fossil fuels also improve the

competitive position of renewable energy and are particularly appropriate for internalising the

negative effects on the environment and energy security (UNEP, 2011; REN21, 2010). Kenya

offers various incentives to investors and users of renewable goods. For example, all solar

panels are zero tax-rated and exempt from excise tax, and larger firms are allowed investment

allowance for the entire construction period (Ministry of Energy, 2010a).

1.6 Laws and institutions governing the energy sector

The regulatory framework that governs the energy sector is just as important as incentives for

renewable energy. Two main types of regulatory policy have been used to open the grid to

renewables. One guarantees price and the other ensures market share through government-

mandated targets or quotas. These are intended to give renewable energy a considerable role

3 World Bank Guarantees catalyse private financial flows to developing countries by mitigating critical government

performance risks that private financiers are reluctant to assume. Guarantees cover private debt against a government’s (or government entity’s) failure to meet specific obligations to a private or a public project (http://siteresources.worldbank.org/INTGUARANTEES/Resources/IDA_PRG/).

http://siteresources.worldbank.org/INTGUARANTEES/Resources/IDA_PRG/


13

in the electricity generation and transport fuel markets. In segregated partial markets,

competitive bidding for renewable energy concessions and renewable energy or green energy

tradable certificates also constitute mandated market policies. In some cases (e.g. off-grid

areas where previously no markets existed) policy must organise markets and promote the

desirable institutional development (UNEP, 2011).

Kenya has stronger laws and institutions supporting the energy sector than many other

countries in sub-Saharan Africa. As already mentioned, the sector is guided by the Energy

Policy 2004 and the Energy Act 2006. In addition, the new constitution provides further

governance of the energy sector in line with the devolved government system. The

government is currently harmonising the existing policy and law in light of the new

constitution. The National Energy Policy No. 4 2004 recognises that renewable energy has

broad benefits namely: potential for income and employment generation, diversification of

energy supply and environmental benefits. In this regard, the national energy policy

incorporates strategies to promote contributions of other renewable energy sources in

electricity generation. Some sections of the policy address renewable sources. For instance,

section 6.3.2 shows government commitments to promote co-generation in the sugar industry

and other establishments to meet the target of 300 MW by 2015 while section 6.4.1 provides

for the government to undertake pre-feasibility and feasibility studies on potential for RET and

for packaging and dissemination of information on RET to create investor and consumer

awareness. The Energy Act 2006 provides a legal basis for implementing sub-sector policies.

Other laws such as the EMCA Act 1999 either promote or give guidelines that favour RET.


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2 The status of hydropower

Hydropower generation in Kenya goes back to 1940s when the first dams were developed in

Masinga along the Tana River basin. The current installed hydropower capacity in Kenya is

about 759 MW and effective capacity was 728MW in 2010. Most projects in Kenya are

clustered along the Tana River with a few in regions such as Sondu Miriu and Turkwell. All

these plants are operated and managed by KenGen. As indicated earlier, power generation

planning and development follows the Least Cost Power Development (LCPD) strategy, which

has for many years been used to develop hydropower projects in the country. The potential (in

the range of 3000–6000 MW) for small hydropower development is huge but not fully

exploited. At least half of the overall potential originates from smaller rivers that are key for

small hydro-generated electricity.

These small hydropower projects such as the community-managed schemes4 have been

adopted to improve rural provision. The MoE has developed replicable pilot projects for rural

electrification in collaboration with community-based organisations (CBOs) to tap the small

hydropower potential. About 30% of these projects are considered economically feasible.

Estimates from the LCPD plan show that forecast demand and energy demand (peak load) was

1,205MW and 7,391GWh in 2009. The base scenario is projected to rise to 15,065MW and

92,380GWh by 2030, so the government plans to increase installed power capacity from

1,591MW to 17,688MW by 2030 as shown in Figure 2.1.

Figure 2.1 Forecast of installed electricity generation capacity in Kenya, 2009–2030

Source: Based on LCPDP Data, Ministry of Energy, 2010.

In order to achieve the planned capacity, it is assumed that the power industry or sub-sector

will commission and implement projects on time. Delays are bound to affect the installed

capacity and therefore energy sales. The LCPDP estimates that hydropower production will not

see significant increases in the next 20 years compared to other technologies such as

geothermal and power imports. Most of the imported power will come from Ethiopian hydro

sources. Hydropower production will average slightly over 1100MW by 2030. As noted earlier,

4 Small hydropower is usually defined as 10 MW or less, although the definition varies by country and sometimes

extends to 30 MW.

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

MW

Year

Hydro Geothermal Import

Total Expon. (Total)


15

small hydropower potential is about three times this average, although this is not factored into

the LCPDP.

2.1 Constraints to development of hydropower

Despite the numerous advantages of renewable energy over traditional fuel, its use remains

limited in Kenya. The barriers to the effective development, implementation and dissemination

of this attractive energy resource can be grouped into three main categories: socio-technical,

economic and cross-cutting. The first refer to the technological, resource-based, environmental

and social barriers while the economic barriers refer to the market, costs and benefits, and

finance. Cross-cutting barriers include aspects of institutions, information and policies. These

are discussed separately below.

Economic barriers

A major barrier to the use of renewable energy is its cost to users. RET investment costs are

usually higher than comparable conventional energy options and traditional fuels. For instance,

a solar PV system has a high start-up cost associated with acquiring the technology against a

backdrop of 46% of Kenya’s population living in poverty. This results in the failure to secure

investment, in addition to which investors prefer more lucrative ventures. Similarly, it is hard

to access financial services to support RET, and microfinance has not succeeded in this sector

in Kenya. Despite technological strides, the market share for RET remains small mainly

because of lack of competitiveness, limited funding, low demand and compartmentalisation of

actors. 5

Technological barriers

Access to technology is a barrier to widespread adoption of RET, mainly because of the large i

initial investment. Since many Kenyans, particularly in rural areas, subsist on less than a dollar

a day, the price of some RET is prohibitive. Other factors include designs that meet users’

needs, users’ ability to understand how sunlight can be converted to energy for lighting, low

literacy levels, limited scope for experimentation and aversion to innovation.

Cross-cutting barriers

Kenya’s national energy policy has been designed on the basis of supplying modern energy

services, which has restricted RET initiatives to isolated projects. There is a lack of

coordination among various bodies and interventions, which undermines synergies in the

sector.

2.2 The role of public and private actors

Funding for renewable energy development is essential for the continued growth of these

technologies. There are two main methods of public financing for the sub-sector. One assists in

the distribution of funding for implementation, while the other is a means for awarding

contracts. Financial support from national and sub-national governments helps to fund

infrastructural development and award contracts for construction and operation as well as for

fixed quantities of renewable capacity. Public financing strategies can be used for the

development of a multitude of different RET in addition to hydropower.

The role of public sector in hydropower development has been in policy coordination and

legislation, and provision of fiscal incentives to attract investors. The government allocates

huge resources to hydropower projects and also coordinates donor funding and bilateral

inputs. The private sector has in recent times invested in small hydropower plants. Some tea

farms generate their own hydropower. Communities in Kirinyaga and Imenti have also

exploited hydropower and Imenti Tea sells 0.6MW into the national grid (www.erc.go.ke).

5 This refers to gap among actors such as research institutions, development bodies and private sectors. This hinders

the development of mutually exclusive relationships, and prevents synergies between actors.

http://www.erc.go.ke/


16

2.3 Factors that have led to successful implementation of hydropower

The key factors for success in development of hydropower in Kenya include good government

planning, for instance the multi-stakeholder plan in the LCPDP, including the private sector.

Other factors include financing from the government and development partners, low tariffs due

to the longevity of hydropower investments, easy adoption of hydropower technology by local

engineers and personnel and the availability of water resources in the river basins.


17

3 The status of geothermal energy

Kenya is richly endowed with geothermal energy resources. It is also a market leader in this

technology in Africa. So far, geothermal activities have concentrated in the East African Rift,

which is associated with the worldwide rift system and is still active. The East African Rift

system has been associated with intense volcanic activity and faulting, which have created

geothermal systems. The MoE, GDC, KenGen and other partners, have undertaken detailed

surface studies of some of the most promising geothermal prospects. The data suggest that

5,000MWe to 7,700MWe can be generated from high-temperature resource areas across more

than 14 sites. According to the LCPDP, by 2030, geothermal energy will account for over 26%

of total electric power in the country. This will sustain the mix at the current green levels.

Other significant sources will be nuclear and coal, which will contribute each about 24% of the

total installed capacity. Coal is not a clean fuel while nuclear energy raises security and safety

concerns, as has been witnessed in Japan and elsewhere. Kenya needs to do more to meet the

International Atomic Agency (IAA) standards. For this reason, geothermal sources of electricity

are Kenya’s most promising source of the future. Although the initial investment costs are

high, geothermal energy is cheaper in the long run. It is also a base load with a load factor of

over 90% compared to hydropower plants, which have low base loads.

Figure 3.1 Projected generation mix for Kenya by 2030

Source: Calculations based on LCPDP 2009:2030, Ministry of Energy, 2010.

3.1 Reasons for emergence of geothermal power

Geothermal energy exploitation has emerged largely because of technological advances and

has also benefited from the global movement towards clean energy, including the carbon-

credits market. It comes just after hydropower in terms of cost, is reliable and is used as a

base load. In addition, the potential for hydropower generation under the LCPDP is limited,

which makes re geothermal the fuel for the future.

3.2 Constraints to further development of geothermal power

The main constraints to geothermal development are:

Huge investment costs: Investment in geothermal energy requires vast resources for

exploration, drilling and development of steam. The technology used in Kenya is expensive

Hydro

6% Nuclear

24%

MSD

4% Import

13% Gas Turbine

2%

Geothermal

26%

Coal

24%

Wind

1%


18

compared to the Philippines and South America, which has severely constrained development

of geothermal power.

Lack of human capacity: Kenya does not have a sufficient pool of trained geologists and

engineers, which means there is a need for intensive and deliberate initiatives to build capacity

in geothermal energy technology.

High cost of capital: the high cost of debt and equity adds to the cost of generating geothermal

energy, mainly because of the huge investment costs. The cost of capital in many developing

countries is high due to the perceived level of risk. This impedes investment in geothermal

technologies. Since these technologies require more funds than conventional energy sources,

high interest rates significantly discourage borrowing for such investments.

High cost of insurance and other investment guarantees: geothermal power exploitation

requires guarantees because of the nature of the investment. Very few financial institutions are

willing to undertake risk and insure such investments because of they are assumed to be prone

to volcanic activity and earthquakes. However, financial institutions such as the World

Bank/MIGA are willing to provide insurance and guarantee for such investments.

Natural disasters: the danger of natural disasters such as earthquakes or mudslides threatens

geothermal development, and the increased level of risk leads to higher costs.

3.3 The role of public and private actors

The role of public sector in geothermal development has been in policy coordination and

legislation and fiscal incentives to attract investors. The government has also allocated huge

resources to geothermal projects and in many cases coordinates donor funding and bilateral

borrowing. The government also extends guaranteed concessionary funding to KeGen to

increase its investment in geothermal power, while the private sector has invested in big

project such as Orpower4 in Olkaria. Flower firms such as Oserian have also invested in

geothermal power for the flower farms in Naivasha.

3.4 Factors that have led to successful implementation of geothermal power

Geothermal power is one of the most sustainable sources of electricity in Kenya. This is

because it is a base load and has lower tariff than most of the other technologies, although the

initial investments are high. This technology is also clean with few if any GHG emissions. The

increased uptake of geothermal power technology is driven by the fact that it is a clean energy

source, and that the government and development partners are willing to invest in its

exploitation and make it the energy source of the future. Kenya’s geothermal resources in the

Rift Valley are readily exploited and have an estimated potential of 7,000–10,000MW. The

planning for geothermal energy is well coordinated by the government and there is a very

strong partnership with development partners and the private sector. Furthermore, Vision

2030 has identified energy/electricity as an enabler of economic growth and transformation.

This initiative has spurred interest in geothermal exploration, exploitation and development to

increase Kenya’s electricity supply with sustainable reserve margins for future needs.


19

4 The status of bio-fuels

Projections for 2030 show that world oil consumption will increase by more than a third and

Africa’s demand for oil will double.6 At a time of record oil prices and growing concern about

global warming, bio-fuels present a valuable opportunity to reduce dependence on volatile

global oil markets, create local economic opportunities in agriculture and industry and improve

the environment. Bio-fuels are liquid, solid or gaseous energy sources derived from renewable

biomass. They generally emit fewer toxic air pollutants and GHG than petroleum-based fuels

and can be produced wherever sufficient biomass feedstock can be grown.

In March 2011, a national bio-fuel draft strategy to promote and harmonise the development

of sustainable bio-fuels was presented to the Kenyan government. The draft strategy aims to

increase access to energy through bio-fuel production, reduce dependence on imported

petroleum products by 25% by 2030, mitigate environmental degradation and support the

development of Kenya’s pastoral and agro-pastoral regions.

4.1 Why bio-fuels for Kenya?

Kenya aspires to achieve middle-income status in the next 20 years and targets a 10% GDP

growth trajectory. To achieve this, the productive and service sectors will demand more

energy. The country spends about US$1 billion per year (5.6% of GDP since 2006) on oil

imports. Since the 1990s, Kenya has spent over US$169 million exploring for oil and gas and

has drilled over 30 wells without making any discoveries. Due to recent increases in GDP

growth rates, Kenya experienced a rapid rise in the demand for energy that it could not meet

from expensive and mainly non-renewable energy supplies. Fuel wood (firewood and charcoal)

provides 68% of all energy consumed in Kenya, followed by petroleum (22%) and electricity

(9%). Most Kenyans (80%) have no access to electricity from the national grid. Domestic

demand for petroleum products has grown significantly over the last 20 years. As indicated in

Figure 4.1, the volume of petroleum products imports increased at an average annual rate of

12%, from 2,972 MT in 2005 to 4,677 in 2009.

6 U.S. Department of Energy, Energy Information Administration, World Marketed Energy Use by Fuel,

1990-2030, available at: http://www.eia.doe.gov/oiaf/ieo/excel/figure_11data.xlshttp://www.eia.doe.gov/oiaf/ieo/excel/figure_11data.xls> (10 December 2007). U.S. Department of Energy, Energy Information Administration, International Energy Outlook 2007, available at: http://www.eia.doe.gov/oiaf/ieo/index.html (accessed 10 December 2007).

http://www.eia.doe.gov/oiaf/ieo/excel/figure_11data.xlshttp:/www.eia.doe.gov/oiaf/ieo/excel/figure_11data.xls

http://www.eia.doe.gov/oiaf/ieo/index.html


20

Figure 4.1 Kenya’s imports of petroleum products, 1996–2011

Sources: Kenya Economic Surveys (various).

Kenya could save US$71 million a year by substituting 12% (10% of gasoline and 2% of

diesel) of its imports with locally produced bio-fuels (Endelevu, 2008).7 The country can

produce 27,400 MT (32 million litres) of biodiesel annually, using 50,000 ha.

Ethanol from sugar cane in Brazil and maize in the USA and bio-diesel from rapeseed in Europe

have achieved commercial success as petroleum substitutes, albeit with government support.

In Africa, and Kenya in particular, Jatropha curcas (jatropha) is considered one of the most

viable candidates for bio-diesel feedstocks due to its adaptability to arid and semi-arid lands

(ASAL).

The national bio-fuel policy envisages a switch to bio-diesel and bio-ethanol via eight strategic

areas to:

improve energy security at domestic, national and regional levels

increase the percentage of renewable energy in the national energy mix without

jeopardising food production, existing natural resources and wildlife, other

environmental benefits, and sustainable land use

facilitate access to clean and safe energy

establish equitable access to Kenya’s natural energy resources and the economic

opportunities they provide

create employment and income-generation opportunities especially in rural areas

support development of a sustainable bio-fuel value chain that is market-driven

promote public and private-sector research and development in bio-fuels

7 Being a low income country whose main goal is to attain middle-income status by year 2030, Kenya is keen to

exploit opportunities to save public and private spending and encourage alternatives to expensive imports to enable her invest more locally.


21

meet the Millennium Development Goals (MDGs) in line with Vision 2030, which

stipulates a 10% annual economic growth rate over the next 10 years to transform

Kenya into a food-secure, prosperous nation

4.2 Sources of bio-fuels (plants)

Ethanol was first used as an automotive fuel in 1908 with the Model T Ford and has been used

as an additive in petrol fuel for over 30 years. Kenya has produced ethanol from sugar cane

since the early 1980s and for a time blended it with petrol as part of its now-defunct gasohol

programme.

The basic production process involves extracting sugars from biomass, which is much easier

and cheaper for sugar crops than grains, and fermenting the sugar using yeast. The resulting

product is distilled, leaving 200º proof alcohol. Methanol or some other denaturant is then

mixed with the pure ethanol to make it unsuitable for consumption.

Feedstocks that are considered best for producing ethanol include cassava, sugar cane and

sweet sorghum. Other crops, including maize and sugar beet, have been discredited due to

potential conflicts with food security or incompatible agro-ecological conditions. Investors are

more attracted to Jatropha than to other feedstocks, in the belief that it is readily available and

less expensive to produce than rapeseed and soybeans. It also mitigates GHG emissions.

Image 4.1 Sugarcane and cassava roots

Image 4.2 Jatropha seeds and plant

Jatropha’s attractive yellow fruit is poisonous but its seeds have a 37% oil content. Introduced

to Africa centuries ago, it is now widely observed in semi-arid lands throughout the drier area

of continent. In Kenya, Jatropha grows naturally in bushlands and along rivers in the central,

western and coastal region at 0–1,650 m (Maundu and Tengnäs, 2005). In the 1990s, Mali

was one of the first countries to study the use of jatropha oil as a renewable fuel for powering

diesel engines in a German Technical Cooperation (GTZ) partnership project (Henning, 2002).

http://www.irinnews.org/PhotoDetail.aspx?ImageId=2008081316


22

But it is only recently that the production of Jatropha as a bio-diesel feedstock has been widely

promoted by private business, NGOs and aid agencies. There are, however, concerns that the

crop’s ratio of value to cost and gross margins are not competitive, and that bio-fuel produced

using Jatropha seed may not yet compete with petroleum-based fuels.

4.3 The history of bio-fuels in Kenya

Kenya abandoned its gasohol programme more than 15 years ago.8 The producers were Agro-

Chemicals and Food Processing Company and Spectre International, with a combined daily

production capacity of 125,000 litres. The firms used molasses as the feedstock for ethanol,

the supply of which was limited, hence production was 50% of capacity. Since molasses comes

from sugar companies, full production capacity at the two plants would have required almost

the entire supply of molasses from Kenya’s sugar companies, which was not feasible given the

alternative markets for molasses and the low productivity of sugar cane.

Image 4.3 The Kenya Jatropha energy pilot project inside the Dakatcha woodlands

Image from Piers Benatar/Panos Pictures/ActionAid.

Thriving in an increasingly competitive global commodities market will require Kenya’s sugar

and ethanol industries to innovate and diversify, as well as to invest in more efficient methods

of production. The integrated production of sugar, ethanol and power planned by Mumias

Sugar Company is promising.

Following the example set by Mumias Sugar Company, Spectre International is expanding

production from the current 65,000 litres to 230,000 litres per day. However, limited available

land and competition with food production could frustrate the plans and there will be a nned

for other feedstocks, such as sweet sorghum. A potential benefit of sweet sorghum is that it

can thrive in drier, more marginal agricultural areas than sugar cane. But other sources have

been successful too. Already motorists are using bio-diesel from a project in Naromoru, near

Nanyuki Town, where a self-help group is currently producing over 1,000 litres of bio-fuel daily

from local croton, cape chestnut and castor seeds. The farmers have increased incomes and

improved livelihoods.

4.4 Constraints to further development of bio-fuels

The development of bio-fuels has elicited mixed reactions, which has a bearing on

sustainability. Opponents insist on the traditional role of crops and feedstock used in bio-fuels

but also on the resources (such as land and water) diverted to producing bio-fuels. Proponents

favour the use of idle factors of production such as land and labour.

Competition with agricultural land

Countries like Kenya with no proven oil reserves but a suitable climate for growing bio-fuels

could potentially surmount high or volatile oil prices. A major criticism often levelled against

8 It was undermined by state functionaries with stakes in the oil industry and who were concerned that the gasohol

programme would jeopardise their interests.


23

biomass, particularly against large-scale fuel production, is that it displaces the production of

food crops. The basic argument is that farming energy crops requires similar inputs (land,

infrastructure, water, fertilisers, skilled labour etc.) as food crops and thus causes food

shortages and price increases.

Emissions and other environmental cost

An ActionAid report on the emissions and other environmental costs of bio-fuel plantations

found that carbon emissions caused by land conversion (essentially clear-cutting in order to

create a monocrop plantation) should be accounted for in the calculations behind the EU

Renewable Energy Directive (RED) and GHG emissions from bio-fuels from Jatropha in

Dakatcha were found to be 2.5 to 6 times higher than fossil-fuel equivalents. Thus even if

exceptionally high Jatropha yields are achieved, the plantation is unlikely to meet the 35%

GHG saving required by the RED.

Displacement of populations and wildlife

The Tana Delta region has more than 50,000 ha set aside for Jatropha, which means that the

delta is disappearing and inhabitants are being evicted to make way for feedstock. The delta,

one of Kenya's last wildernesses, and one of Africa’s most important bird habitats, is the flood

plain of the Tana River, which flows 1,014 km from Mount Kenya to the Indian Ocean. The

river also waters maize paddocks in Bura and Hola irrigation schemes. All considered, Jatropha

does not appeal to local populations.

Regional disparities in productivity, high input costs and poor infrastructure

Not all of Kenya is suitable to develop bio-fuel feedstocks. The regions with large tracts of

available land (say in the east and north-east) have a dry and extremely hot climate that does

not favour bio-fuel feedstock production. The absence of rivers or water masses means that

irrigation is scarce. There is much slack in agricultural productivity due to poor technology,

high input costs and very limited use of fertilisers. Also, transaction costs are typically very

high, which is a major obstacle for any kind of agriculture. The effect is to make bio-fuels too

expensive to compete with alternatives.

Uncertainty about profits from feedstocks

There might be minimal benefit to local farmers in large-scale Jatropha bio-diesel production.

The bio-fuel industry is interested in Jatropha because it is expected to be less expensive. But

in India, where commercial Jatropha production has taken place since 2003, project developers

are raising concerns about the possibility of over-estimation of yield and profitability (Singh et

al., 2006).

4.5 Links to food production and water withdrawal

Food production

With most bio-fuels, once the energy is removed, the producer is still left with the food – or

‘feed’ – for livestock. With ethanol the feed value is enhanced: the distillers’ dried grains by-

product is more nutritious than the original unprocessed grain, because of the yeast. A by-

product of bio-diesel oilseed cake after the oil has been pressed out – again, depending on

what seed is use – is usually a highly nutritious, high-protein livestock feed. ‘With bio-fuels you

CAN have your cake and eat it.’

For poor countries, however, production of bio-fuels from locally grown crops is double-edged:

it can encourage commercial farming that may lead to increased incomes, but it can also cause

food insecurity by diverting attention from nutritious food crops to fuel crops.

Water withdrawal

Jathropa is not a water-intensive plant and thrives even in ASAL areas. The literature also

suggests that bio-fuels have no proven negative impact on water usage, since most of the

crops can be grown under rain-fed conditions. Jatropha panduripfolia and Jatropha gossypifolia

are said to be as water-efficient as soybean and oil palm (Li Guo, 2002). This means that bio-

fuel production in Kenya does not compete with other farm or household water uses.


24

Fuelling deforestation

Forests play an important environmental role in the production of timber, wood, fuel, and other

products, in the conservation of biodiversity and wildlife habitats, as well as in the mitigation of

global climate change and the protection of watersheds against soil degradation and flood

risks.

4.6 The role of public and private actors in bio-fuel energy

The public sector participates in planning, stimulating (e.g. by subsidies and tax policies),

policy formulation and implementation, research and extension rather than in direct

production, except perhaps in a supervisory or regulatory sense. In Kenya, most agricultural

sub-sectors (e.g. sugar, tea, horticulture, dairy, pyrethrum, coffee and sisal) have regulatory

authorities operating as boards. The country has constituted a National Bio-fuels Oversight

Committee, but more needs to be done, for instance in the form of regulatory authorities.

A further level of participation for the public sector is in terms of core government ministries

(Ministry of Energy, Ministry of Agriculture and Ministry of Environment and Natural

Resources), public research institutes (Kenya Forest Research Institute (KEFRI), Kenya Plant

Health Inspectorate Service (KEPHIS) and Kenya Agricultural Research Institute (KARI)),

environmental protection agencies (National Environmental Management Authority (NEMA))

and para-statals (e.g. Kenya Forest Service, Kenya Sugar Board).

The private sector (individual and commercial farm owners, financial institutions, agricultural

extension agents and academic institutions) mission agencies and NGOs are, however,

expected to be the real actors in all stages: production, value-added, marketing, linkages,

technology transfer, financing, research and development (R&D) etc.

4.7 The impact of legislation on bio-fuel production

Session Paper Number 4 (Republic of Kenya, 2004), the Forest Act of 2005 and the Energy Act

of 2006 (Republic of Kenya, 2006a) have all helped to empower new institutions that promote

renewable energy.

Bio-fuel standards

The Energy Act of 2006 mandates the government to pursue and facilitate the production of

bio-fuels, but does not say how to do so. Under current law, bio-fuels must comply with local

or international fuel-quality standards developed or adopted by the Kenya Bureau of Standards

(KEBS), although it is unclear whether this would apply to bio-fuels produced and consumed at

the farm level and not for commercial sale. A standard exists for ethanol but not yet for bio-

diesel. A petroleum license is required to blend bio-fuels with petroleum products.

Energy-switching issues

The technical implications of blending of petrol with ethanol mean that Kenya's switch to green

bio-energy cannot happen immediately. According to the National Bio-fuels Sub-Committee,

the government agency dealing with the project, distillers may lack the technical capacity to

undertake the assignment quickly. The KEBS recently published draft guidelines for public

comments, which means the country is beginning to address this gap on standards.

4.8 The future of bio-fuels in Kenya

The future of bio-fuels (bio-diesel) production in Kenya will depend on how well these compete

with petroleum-based products. The cost of producing bio-diesel is determined by the cost of

producing feedstock. As the feedstock for bio-diesel could be any vegetable or animal fat,

jatropha oil is economically viable only if it competes favourably with alternative oils such as

castor, sugar cane, cassava, croton and coconut, which are also being explored. Since bio-fuels

are still in the experimental stages in Kenya, it is difficult to be conclusive about their future.


25

5 The status of solar and wind energy

The cost of electricity in Kenya is far higher than in the rest of the region, which discourages

productivity. At the same time most Kenyans are not connected to the national grid for many

reasons, including low installed capacity (about 1,300MW). In order to attract investors, the

country needs to produce more power, more cheaply. Sessional Paper No. 4 of 2004

emphasises affordable, quality and cost-effective energy services as a prerequisite to

accelerated social economic growth and development.

Table 5.1 Urban and rural electrification rates (%) by region, 2000

Region Urban Rural Total

North Africa

Sub-Saharan Africa

99.3

51.3

79.9

7.5

90.3

22.6

Total Africa 63.1 16.9 34.3

South Asia 68.2 30.1 40.8

Latin America 98.0 51.5 86.6

East Asia/China 98.5 81.0 86.9

Middle East 98.5 76.6 91.1

Developing countries 85.6 51.1 64.2

World 91.2 56.9 72.8

Source: IEA, 2002.

Source: Kenya Review in African electricity regulator peer review and learning network –

Kenya’s electricity supply industry.

To reduce the reliance on hydro and thermal energy, which account for almost 80% of Kenya’s

power production although they are expensive and not environment-friendly, the MoE has

ventured into renewable energy.

5.1 Development of solar energy in Kenya

Countries like Kenya that are located near to the equator have great potential to harness solar

energy, estimated to be 4–6KWH/M2/day. Currently about 1.2% of households in Kenya use


26

solar energy, primarily for lighting and powering television sets. Solar energy has not yet been

exploited commercially, but with rising oil prices and the concern about emissions, solar

energy is a renewable source that will play a crucial role in fulfilling the world’s energy

demand.

Solar energy has since time immemorial been used for drying animal skins and clothes,

preserving meat, drying crops and evaporating seawater to extract salt. There has been

substantial research on how to exploit this huge resource. Today, solar energy is used at the

household level for lighting, cooking, heating water. Medium-scale applications include water

heating in hotels and irrigation. At the community level, solar energy is used for vaccine

refrigeration, water pumping and purification and electrification of remote rural communities.

Industries use solar energy for pre-heating boiler water and power generation, detoxification,

municipal water heating, telecommunications, and, more recently, transport (solar cars)

(Karekezi and Ranja, 1997; Ecosystems, 2002). In Kenya, some of these uses are still a

distant dream.

Almost every sub-Saharan African country now has a major PV project. Table 5.2 shows the

dissemination of solar PV in selected countries.

Table 5.2 PV dissemination in selected sub-Saharan African countries

Sources: Nieuwenhout, 1991; Bachou and Otiti, 1994; Hankins, 2001; AFREPREN, 2001.

Solar energy is provided mainly through PV systems for drying and water heating. Such

systems are used in Kenya mainly for telecommunications, cathodic protection of pipelines,

lighting and water pumping. Kenya is a market leader for solar energy in Eastern Africa,

mainly thanks to a supportive policy environment. This market has greatly grown since 1980s

largely driven by the private sector, although the data are inconclusive on this.

Solar photovoltaic technologies

Sessional Paper No 4 of 2004 recognises the need to promote the use of solar energy. Solar PV

systems are mainly for domestic use, with the private sector playing a major role in re-

selling/installing the panels with a focus on areas not reached by the national grid. Owing to

high capital outlay, solar technology has not yet reached low-income households and financing

arrangements are required to enable them acquire the technology. Households using solar

technology have reported savings since it has no maintenance cost.

Solar thermal technologies

Solar thermal technologies in developing countries include solar water heaters (SWH), solar

cookers (Kammen, 1991; 1992), solar stills and solar dryers. Solar thermal technology is

mainly used for drying and water heating, and SWH is used mainly by households and

institutions such as hotels and hospitals. There are currently over 140,000 SWH systems in

Kenya and it is projected to reach more than 400,000 units by 2020. Solar dryers are widely

used in the agricultural sector for drying of cereals and other farm produce such as coffee,

pyrethrum and mangos (Draft Policy, 2011).

The uptake level of SWH systems in Kenya is, however, extremely low in relation to the

enormous potential and the demand for low-temperature water for both domestic and

commercial use. The Kenyan government has developed SWH regulations to promote uptake

and guide the incorporation of low-temperature SWH systems in industrial, commercial and


27

residential buildings, and new commercial building owners are installing SWH systems to save

electricity. The output from the national grid can be directed to villages and areas that cannot

afford costly solar systems, so this initiative may indirectly facilitate the rural electrification

programme.

High initial capital costs, low awareness of the potential opportunities and economic benefits

offered by solar technologies, and suppliers’ non-compliance with system standards are some

of the barriers affecting the exploitation of solar energy resources.

5.2 What has helped the development of solar energy?

The development of solar energy has benefited from the recognition that Kenya has significant

year-round solar potential. Other incentives include the exhaustion of hydroelectric potential

and shifts towards more expensive sources, increased cost of electricity from the national grid,

population concentrations in remote parts of the country and progressively rising incomes. The

development of solar energy has also benefited from fiscal incentives such as removal of duties

and taxes on solar panels and the enactment of by-laws that require developers to install SWH

systems.

5.3 Development of wind energy

Many countries are investing in research on ways to harness wind energy as a source of

green/renewable energy and such efforts need be intensified in Africa. Much of sub-Saharan

Africa straddles the tropical equatorial zones and only in the southern and northern regions

overlap with the wind regime of the temperate westerlies (Grubb and Meyer, 1993). South

Africa has the highest wind potential in the region (Hankins, 1987). Largely as a result of low

wind speeds, most wind machines in Eastern and Southern Africa are used for water pumping

(Smalera and Kammen, 1995) rather than to generate electricity. The development of wind

energy continues to be hampered by the absence of adequate assessment especially at the

micro-level.

Table 5.3 Wind energy data for selected African countries (estimates for 1990s)

* Average wind speed for two seasons

** Highest wind speed recorded

- Unknown or unavailable

Sources: Milukas et al., 1984; World Bank, 1988; Dutkiewicz and Gielink, 1991, 1992;

Stockholm Environment Institute, 1993a, 1993b; Bob Harris Engineering Ltd, 1994.

Most African countries with wind-power potential are now developing wind energy resources.

By 2009 wind-power plants had been installed in Egypt (430MW), Morocco (253MW), Tunisia


28

(54MW), South Africa (8MW), Kenya (5.1MW) and Algeria (70KW). There is a lot of interest in

Africa and new wind-power projects include the 100MW wind-power farm being constructed in

Ethiopia, 10MW wind-power farm in Nigeria, and a proposed 300MW wind-power farm in

Kenya.

Figure 5.1 Wind-power production in some selected African states

Wind-power harvesting in Kenya started more than a century ago, having been introduced by

the white settler farmers. They installed windmills in their settlement schemes and ranches to

pump water for domestic and irrigation purposes. Areas where windmills were first installed

include Laikipia, Ngong, Nyanyuki, Eldoret, Kilifi, Ukunda, Thika, Turkana, Mbooni, Garissa,

and Amboseli.

Image 5.1 Windmills


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In the late 1950s and early 1960s, there was a dramatic drop in the use of windmills, mainly

because the decline in the price of petroleum products encouraged a shift to engines that ran

on diesel and petrol. The other reason for the reduced use of windmills was that spares were

not readily available because they had to be imported from the UK or the USA.

The rise in the price of oil during the 1970s saw a shift away from diesel and petroleum

engines because these became expensive and unsustainable. The few broken and neglected

imported windmills were revived, sending a strong signal to the local people and the

government to appreciate the immense potential of wind power. In the 1970s schools, private

individuals, government, churches, hospitals, volunteers, development agencies and

universities started up wind-power projects. The motivation was to build local windmills for

self-reliance and to reduce the cost of importing them.

This dream was not fully realised because some of the projects failed because of inadequate

research into the design and manufacturing of windmills, workshops were not equipped to

handle demand and lack of trained personnel to maintain the machines. Later research on the

potential of wind-power resources in Kenya revealed that the potential had been

underestimated and that good sites have been overlooked.

Figure 5.2 Wind resource locations in Kenya

Source: SWERA, 2008.

High capital cost and lack of sufficient wind-regime data are some of the barriers to the

exploitation of wind energy. Moreover, because the potential areas for wind-energy generation

are far away from the grid and load centres, this increases the capital investment in

transmission lines.

Kenya’s installed wind capacity is 5.1 MW operated by KenGen at the Ngong site. The low level

of exploitation prompted the government to develop a fixed tariff not exceeding US$ 0.12 per

Kilowatt-hour of wind-generated energy supplied in bulk to the grid. Investment in wind power

is likely to see a rapid expansion. In 2003 the MoE developed the Wind Atlas with indicative

data to guide investors and, with the assistance of development partners, is installing 53 wind

masts and data loggers will collect site-specific data for the Atlas.


30

5.4 Constraints to the further development of wind energy

Pricing distortions

Government attempts to provide basic energy services by extending subsidies, either directly

through pricing (relative pricing) or in the form of taxes and fees, have affected fuel choices,

technology choices and the total energy demand. Subsidies are universally thought to foster

greater access to services by the poor once service providers transfer the benefits of reduced

production costs. Ironically, this does not always happen with renewable energy. Experience

suggests that subsidies have been ineffective in disseminating energy services to the poor:

non-price barriers such as lack of information, building regulations, first-time utility connection

fees and the prohibitive cost of end-user devices have proved more important factors

(Stockholm Environment Institute, 1993b).

Institutional deficiencies

The monopoly of power utility companies in the generation, distribution and sale of electricity

is an important institutional barrier to RET dissemination. The only energy utility company

mandated to distribute electricity from the national grid is the Kenya Power and Lighting

Company, a public body. Its legal monopoly serves to stifle the development and growth of

independent power producers and has left many promising co-generation (particularly in the

solar and wind) resources unexploited.

Limited information on renewable energy resource base

Limited access to information about the region’s renewable resource base is a barrier to the

wider use and development of wind and solar energy. As a result, Kenyans continue to rely on

familiar but expensive traditional options: hydro, petroleum, wood fuel and charcoal.

Some environmental impacts of wind energy

Notwithstanding all the benefits, wind power also has some negative environmental impacts. It

is known to kill flying birds and bats. This impact on wildlife is not particularly material and

proponents of wind power claim birds also fly into stationary objects (Langston and Pullan

2003), but wind turbines are usually located in regions where they could cause accidents to

flying objects. A further concern is visual impairment at a range of 2–8km. The third aspect is

the noise and moving shadows created by the turbines. These impacts depend on the type of

turbine and the speed of wind (Albert, 2006). Furthermore, most wind farms are located in

remote areas, which poses a problem for the development of infrastructure and transmission

lines to reach the consumer. This increases the initial cost of establishing a wind farm.

5.5 Wind farms in Kenya

Kenya has three operational wind-generating farms, two in Ngong owned by KenGen with a

total capacity of 5.45MW and one in Marsabit owned by Kenya Power with a total production of

0.55MW. There are proposals for additional wind farms with a production capacity of 625MW

as shown in Table 5.3.

Table 5.3 Potential wind farms/plants

Name of firm Capacity(MW)

1. Aeolous Kinangop Wind 60

2. Aeolus Ngong Wind 100

3. Aperture Green Wind 60

4. Daewoo Ngong Wind 30

5. KenGen Wind 15

6. Lake Turkana Wind 300

7. Osiwo Ngong Wind 60

Total 625

Source: Kenya national power development plan (1986–2006)


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The government’s focus on wind energy immediately elicited interest from private investors. In

the Ngong Hills, for example, Vestas, a Danish company has already put up six 50m turbines

which added 5.1 MW to the national grid from August 2009. Another dozen turbines will soon

be added. The Dutch consortium behind the Lake Turkana Wind Power (LTWP) project has

leased 66,000 ha on the eastern edge of the world’s largest permanent desert lake to invest in

generating wind energy.

5.6 The challenge of financing wind power

One of the main obstacles to implementing renewable energy projects is often not the

technical feasibility but the absence of low-cost, long-term financing (News at Seven, 1994).

There is growing evidence that solar PV projects in the region have mainly benefited those who

can afford solar PV, which is not the case for most people in sub-Saharan Africa (Karekezi and

Kithyoma, 2002).

The strict conditions that the banks impose for RET financing deter potential users. Since most

banks know little about renewables, these conditions include a feasibility study conducted at

the applicant’s expense. In addition, the banks require land titles as collateral, portfolios of

project sponsors and managers, data on past and current operations, the approximate value of

existing investments, a valuation report, raw material procurement plans, and the marketing

strategy for the finished product (Turyareeba, 1994).

Other challenges include the lack of necessary data, e.g. appropriate and affordable credit and

financing mechanisms, the high cost of resource assessment and feasibility studies, low

awareness of the potential opportunities and economic benefits, suppliers’ lack of adherence to

system standards and poor after-sales service.

5.7 Role of public and private actors in solar and wind energy

The ERC is imposing the mandatory shift to solar power especially for heating purposes, which

means that homeowners and developers are now required to install PV panels. Micro-inverters

are mounted on each PV panel to convert the voltage and the AC electricity is automatically

sent to the national grid. The regulatory information is in the SWH policy from the MoE.

This practice is now common in emerging economies and BRICS.9 The policy in Kenya has

already taken root and demand for solar panels is projected to grow at an annual rate of 25%.

The need for repair and maintenance will provide opportunities for technology transfer, trade

in accessories and employment creation. The private sector will continue to play a major role

in the production and distribution of relevant wind-harvesting technologies.

9 Brazil, Russia, India, China and South Africa.


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6 Summary

The production of renewable energy, particularly hydropower and geothermal electricity, has

led to the growth of Kenya’s modern energy sector. This has been in response to improved

household income and general welfare, while the growth in the use of modern forms of energy

has also led to improved welfare. As the national economy grows, so the need for a

sustainable supply of adequate energy will rise. Electricity plays a key role in the energy

balance and socioeconomic transformation, and its production is critical in sustaining growth in

all sectors of the economy. The production of electricity from different sources is critical to the

achievement of the goals set out in Vision 2030, which should be pursued hand in hand with

sustainable energy sourcing and use.

Other than small hydropower, Kenya has exploited most of its hydropower potential, but its

huge geothermal potential makes this the energy of the future. Other clean sources include

wind and solar energy. There are joint public and private efforts to develop and distribute

power generated from these sources, although the government still carries the major

responsibility.

The adoption of power from these sources is undermined by poverty, but demand is expected

to grow as incomes rise. Further development of geothermal energy will, however, encounter a

problem of inadequate human capacity and high capital costs.

The key factors in the successful implementation of renewable energy in Kenya in hydropower

and geothermal include appropriate policies, sustainable technologies and support from

development partners. Good planning has also been helpful as has been the move towards

clean energy at the global level, more PPPs and the availability of new and innovative models

of project finance, which have increased the available credit for energy projects. Lessons

learned from the successful development of geothermal and hydropower are being applied to

other RET such as wind, solar and bio-fuels.

Although bio-fuel farming has some potential in Kenya, if it is implemented on a large scale it

is likely to compete with food production. While bio-fuels also achieve net GHG savings they

can also lead to deforestation and pose a mild threat to biodiversity and agricultural

productivity. Among the first-generation feedstocks, rain-fed sugar-cane production in the

western and coastal areas of Kenya offers an environmentally and economically attractive bio-

fuel option.

Bio-fuel development does, however, have a direct impact on meeting the triple challenges of

food security, energy security and climate change. Balancing these will be critical for social,

economic and environmental sustainability. However, low-intensity subsistence farming, low

value chains and inadequate market linkages constrain smallholder production of bio-fuels.

Inappropriate bio-fuel polices can hamper production and the speed of entry into the sub-

sector since production standards have not yet been set. Such policies and standards are vital

because of the direct and indirect impacts of bio-fuel production on food security, agriculture

and the environment.

Although private firms (such as sugar manufacturers) are investing in bio-fuels, the absence of

clear bio-fuel standards, environmental governance and detailed sector-wide planning could

jeopardise sustainable development.

Sector reforms in Kenya have achieved much, especially in attracting private capital to fund

expansion. Private-sector participation has also improved efficiencies in the energy sector. The

clear allocation of responsibilities and linkages between planning, tendering and contracting for

new power, including building institutional capacity, is especially necessary in renewable

energy (solar, wind and bio-fuels) to avoid conflict between the private and public sectors.

Solar energy is diffusing steadily, encouraged by the increased cost of electricity supplied

through the national grid, fiscal incentives and higher incomes. There are also recent plans to


33

exploit wind energy, reduce the dominance of hydroelectric energy and improve energy supply.

There is also exploratory works on bio-fuels driven by a national desire to reduce reliance on

oil imports.

Policies geared to the use of renewable energy and attracting private capital to the RET sub-

sector will be crucial for uptake of these technologies. It would be useful to highlight the real

and tangible economic benefits (such as job creation and income generation) that such

programmes can deliver.

For the private sector to play a key role in production of renewable energy, Kenya needs to

establish sustainable RET financing programmes. These may range from the creation of a

national fund for renewable energy projects financed by a modest tax on fossil fuels to credit

schemes specifically aimed at developing renewable energy industries and endowment funding

of renewable energy agencies.

Most renewable energy technologies (especially those that can be locally manufactured)

require subsidies in the initial stages but can become financially sustainable once they reach a

certain level of diffusion.


34

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