Increased Investment In Energy Sector Crucial For Kenya’s Economy

Between the years 1999- 2001, Kenya experienced severe periods of power rationing due to a decline in water levels at the Seven Forks hydroelectric dams.

These power outages negatively affected the social and economic impact on key industries such as manufacturing, small and medium enterprises, and retail and service industries. This shortage led to increased costs in the production of goods and services, which were passed on to consumers resulting in a higher cost of living.

Various policy and regulatory changes have been implemented to enhance energy security and regulate investments in green energy. Such legislation includes the Energy Act (2019) and the Feed-in-Tariff Policy [FiT] (2021), with the latter being critical in guiding investments in renewable energy, establishing guidelines and procedures through which projects can be appraised to ensure their viability. The FiT policy has been crucial in expanding the energy resource pool to include wind, biomass, mini-hydro, geothermal, biogas, and solar energy resources.

In 1999, electricity production derived from renewable sources excluding hydropower was at 11% and grew up to 48% by 2015 (IEA, 2014). Currently, this stands at almost 80%, with Kenya’s peak demand currently at 2 Gigawatts. The installed capacity stands at 2.8 Gigawatts (GW) as a result of increased investment in the energy market.

To fully utilize this generation, the government needs to create a conducive environment to maximize economic growth. Government can act to facilitate market and regulatory conditions to make it easier for businesses setting up in these areas, along with the corresponding electricity costs thrive well. Renewable energy in Kenya is capable of matching future electricity demand from an entire green economy.

There is a direct correlation between economic growth and growth in per capita electricity consumption and the availability of generation capacity to spur that growth. The reliability of electricity supply was one of the factors that made Kenya ranked 56th in the Ease of Doing Business Index (2020). The energy security of Kenya has tremendously increased over the past 20 years, due to the joint effort of public stakeholders, public utilities, and targeted public and private sector investments.

The ongoing reforms in the power sector should consider sustaining gains achieved in the energy sector and the goal in sight is to have a reliable energy power supply capable of sustaining growth and meeting demand in the long term. Players in the industry should create enabling conditions to utilize power generation capacity. In the words of Winston Churchill, “those that fail to learn from history are doomed to repeat it.”

By Catherine Irura, member of the Electricity Sector Association of Kenya