Governmental Framework

Ministry of Energy and Petroleum

The ministry oversees policy and strategy development for the entire sector. At present, Hon. Davis Chirchir is acting Cabinet Secretary.

http://www.energy.go.ke/

Energy Regulatory Commission (ERC)

The Energy Regulatory Commission was established under the Energy Act 2006. In terms of renewable energy, the ERC drafts and publishes regulations, coordinates the indicative energy planning process, sets electricity tariffs, collects and maintains data and carries out the licensing process for independent power producers looking to connect power plants to the national grid.

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

Rural Electrification Authority (REA)

The Rural Electrification Authority was set up in 2007. It implements the Rural Electrification Programme, which involves planning and commissioning power plants in off-grid areas. Its aim is to accelerate the pace of rural electrification in order to promote sustainable socio-economic development. Under the Energy Act, the REA is mandated to perform the following functions:

• Managing the Rural Electrification Programme Fund
• Developing and updating the rural electrification master plan
• Promoting the use of renewable energy sources including small hydro installations, wind, solar, biomass, geothermal, hybrid systems and oil-fired components, taking into account the specific needs of certain areas including the potential use of electricity for irrigation and in support of non-farm income-generating activities.
• Implementing and sourcing additional funds for the rural electrification program
• Managing the delineation, tendering and award of contracts for licenses and permits for rural electrification

http://www.rea.co.ke/

Kenya Electricity Generating Company (KenGen)

KenGen is Kenya’s largest power producer and operates hydro, geothermal, and gas- and diesel-fired power plants. The company’s output accounts for 72% of the electricity consumed in the country. KenGen is 70% state-owned, with the remaining 30% held by private investors.

http://www.kengen.co.ke/

Kenya Power and Lighting Company (KPLC) ltd.

Kenya Power is the main off-taker in the power sector. The publicly-listed utility signs purchase power agreements (PPAs) with KenGen and all independent power producers looking to inject electricity into the national grid. It is responsible for power transmission and distribution as well as supplies to consumers. Kenya Power’s mandate is expected to decline as the ERC plans to create an independent power system operator (ISO). The entity is intended to operate as a middleman between the distributor, transmitter and generator in order to ensure that only the cheapest energy available in the market is fed into the power grid.

http://www.kplc.co.ke/

Kenya Electricity Transmission Company (KETRACO)

KETRACO is a transmission company. As a government-owned entity, KETRACO plans, designs, builds, operates and maintains all new transmission lines above 132 kV. Existing lines are operated and maintained by Kenya Power.

http://www.ketraco.co.ke/

Geothermal Development Company (GDC)

As a state-owned special purpose vehicle, the GDC is responsible for the exploration of geothermal fields, exploration and production drilling, development of steam fields and concluding contracts for the off-take of steam by power plant operators.

http://www.gdc.co.ke/

Independent power producers

Private investors such as IberAfrica, Tsavo and Or-Power produce and sell electricity to KPLC. They currently run 28% of Kenya’s generating capacity.

The Kenyan government is dedicated to putting in place the conditions for renewable energy. The electricity sector is unbundled. Generation by independent power producers is permitted by law and is regulated. The private sector produces 28% of Kenya’s centralised electricity supply. The Energy Act 2006 set out a framework for regulation and rural electrification. Renewable energy sources will play a major role in the expansion of centralised generating capacity and rural electrification over the coming decades. The government has drawn up a least-cost development plan and prioritises resources that enable the power sector to grow as efficiently as possible. Another sign of the government’s commitment is the feed-in tariff. The tariff was revised twice after the private sector criticised it as being too low to enable economically viable renewable energy projects. A net metering regulation is under development.

Energy Act 2006

The Energy Act 2006 outlines national policies and strategies for short- and long-term energy development. The broad objective of the new energy policy is to ensure the adequate, high-quality, cost-effective and affordable supply of energy while also protecting the environment. Furthermore, the Act created the ERC and the REA. A series of additional regulations, including the Electricity Licensing Regulations and the Energy Solar PV Systems Regulations that set out licensing procedures, have been published under the Energy Act 2006.

Least Cost Power Development Plan 2010

Kenya’s generation and transmission system planning is based on a 20-year, rolling Least Cost Power Development Plan, which is updated every year. As a result of the power production costs, a mix of geothermal (20%), nuclear (19%), coal-fired (13%), wind (9%), hydroelectric (5%), medium-speed diesel (9%) and gas-fired (11%) power plants will be commissioned by 2030 to ensure reliable energy supply. Furthermore, the plan accounts for 9% of imports. The total estimated cost of system expansion for the 2011-2031 period is USD 41.4bn.

Feed-in tariff

Feed-in tariffs (FITs) were introduced in 2008 and revised in 2010 and 2012. The regulation enables independent power producers to sell electricity to KPLC at a fixed price for a fixed term of 20 years. The tariffs vary depending on the technology.

FITs for small renewable projects (installed capacity of up to 10 MW) connected to the grid

Source: Kenya Vision 2030, Updated Least Cost Power Development Plan, Study Period: 2011-2031

FITs for renewable projects with installed capacity of over 10 MW

Source: Kenya Vision 2030, Updated Least Cost Power Development Plan, Study Period: 2011-2031

Inflation is taken into account by the percentage escalable portion. The tariffs should reflect the power generation costs and should not exceed the long-term marginal costs for on-grid systems of 12 US cent/kWh.

Further conditions include:

• The off-taker is obliged to buy the electricity produced.
• All connection costs are borne by the project developer/Investor.
• The standardized PPA is applicable to all systems with a capacity of up to 10 MW.
• The FIT regulation is revised every three years or less. The changes only apply to new systems.

The regulation sets out the application process.

Standardized power purchase agreements

In order to keep transaction costs to a minimum, Kenyan authorities have published standardised power purchase agreements for systems with capacities above and below 10 MW. The agreements are open to technologies. In regard to PPA contracts the following principles apply:

• There are no bidding procedures for locations or resources in place. Applications are considered on a first come, first served Basis.
• The systems are embedded and the national control centre cannot command add or switch off Systems.
• The standardised PPA has a “step-in” clause.

Electricity Licensing Regulations

The Electricity Licensing Regulations published by the ERC sets out the conditions and requirements for obtaining an electricity licence, as well as the duties of a licensee.

Connection Guidelines for Small-Scale Renewable Generating Plant

The Connection Guidelines for Small-Scale Renewable Generating Plant published by the regulator establish procedures and the use of equipment to ensure the sound injection of electricity from small renewable energy systems into the distribution network.

Energy Management Regulations

The Energy Management Regulations 2012 are aimed at expanding the use of energy-efficient technologies in industrial and commercial businesses, as well as in public institutions. The application of renewable energy also counts towards the increase in energy-efficient measures.