The aim is to increase access to electricity (equally in all 47 counties) and promote renewable energy development. An integrated approach is being employed, involving the expansion of national grid in rural areas, development of mini-grids and installation of stand-alone systems (primarily solar PV) - all with an equal (cross-subsidised) tariff. USAID estimates that about 10% of new connections by 2025 will be off-grid. Providing for basic needs in remote communities has also involved widespread dissemination of solar lanterns. Promotion of a private sector-driven approach to rural electrification has been a focus by encouraging private investments in off-grid systems such as solar home systems, solar lanterns and mini-grids. For example, at Kissi, private operators are leading the design, build and management of 4 advanced 100% solar micro-grids in villages with a total solar generation capacity of 80 kW; together with a pre-payment platform. The Rural Energy Authority (REA) has overall responsibility for increasing energy access in rural areas through all appropriate means, whether via grid expansion or through off-grid applications; REA is currently involved with constructing mini-grids in 11 sites.
The installed capacity of the interconnected system as at March 2016 was 2,341 MW which included 632 MW of geothermal energy and 821 MW of hydro power. The off-grid system installed capacity in 2015 was 28 MW and consisted of diesel, solar and wind power plants with supporting mini-grids. Following the full operationalization of the new 280MW geothermal plant in Olkaria, the national electricity consumption by mode will be 47% geothermal, 39% hydro, 13% thermal and 1% wind. Kenya’s demand is expected to rise to 15,000 MW by 2030. The Government's "Vision 2030" recognizes energy as a key priority, which requires an alignment of the energy sector policy and legislation. The target for rural electrification is “full access” for the rural population by connecting those public facilities (trading centres, state schools, health centres) that are not yet electrified (about 4,000 from the total of 25,000). However, this target of full access does not mean that all households will be connected. The tariff system is uniform (cross-subsidy) irrespective of grid or off-grid and is based on energy consumption and fuel used for generation (the average generation cost in 2010 was $0.29/kWh). In order to offset fuel consumption, renewable energy is being introduced into the off-grid systems. There is a huge potential for replacing diesel with solar power in micro-grids.
Although overall electricity access increased from 23% in 2009 to 50% in 2015, the coverage is still limited to the coastal, central and some eastern and western parts of the country, with remote regions (such as northern Kenya) having access of only about 5%. The mandate of REA to power the Vision 2030 is to reach ‘universal connectivity by 2030’. REA has a target of 23% of the population to be served by mini-grids, both publicly and privately owned. There are no such formal targets for stand-alone systems, though the government estimates that the cost of connecting a rural household to the national grid is between $800 and $1000 whereas a stand-alone solar system (providing enough power for an off-grid household) costs an average of between $150 and $300 – this acknowledgement is likely to see increased support for such systems as part of Vision 2030.
National Energy and Petroleum Policy (2015), provides the basis for the development of a comprehensive electrification strategy towards universal access by 2020. This provides dedicated targets for rural electrification and off-grid generation. For mini-grids, generation, distribution and supply licences are required from the Energy Regulatory Commission (ERC) as well as clearance from the National Environmental Management Authority (NEMA). For stand-alone solar systems, a licence is required for any person who “carries out any solar PV system manufacture, import, vending or installation work” according to the Energy (Solar PV) Regulation, 2012.
Institutions, Roles and Responsibilities
The national utility Kenya Power & Lighting Company (KPLC) is a for-profit corporation, majority-owned by the government. It is one of the two companies that dominate the Kenyan power sector. While KPLC is responsible for power transmission, distribution and supplies to consumers, and manages diesel-powered mini-grids set up in off-grid areas of commercial or strategic importance, Kenya Electricity Generating Company Limited (KenGen) is the leading electric power generation company, producing about 75% of installed electricity capacity (using hydro, geothermal, thermal and wind). Independent Power Producers (IPPs) such as IberAfrica, Tsavo, Or-power4 Inc., Rabai, Imenti, and Mumias - own and operate private power stations connected to the grid and sell electricity to KPLC. Collectively, they account for about 28% of the country’s installed capacity. The Geothermal Development Company (GDC) was formed by Government in 2008 to develop geothermal electric power. The Rural Electrification Authority (REA) was established in 2007 to extend electricity to rural areas - REA is responsible for the Implementation and sourcing of additional funds for the rural electrification programme – it handles the planning of network extension (including the development of mini-grid sites throughout the country), facilitates links with private investors/operators, and manages the Rural Electrification Program Fund. KPLC oversees the implementation of these mini-grids. For the 18 existing mini-grids, distribution and sales are done by KPLC, and the generating equipment is owned either by KenGen or REA (all three are government organisations). There are a few private developers (e.g. Powerhive, Powergen RE, and Talek Power) that own and operate independent mini-grids, though the licensing/tariff regulation regime presents a major barrier (regulations are still quite vague and generally prioritise grid expansion over non-grid electrification in remote areas), and the uniform national tariff is still predominant (though exceptions have been agreed e.g. for Powerhive). Other key players include the Ministry of Energy (MoE) - responsible for policy as well as generation and distribution licenses - and the Energy Regulatory Commission (ERC) – responsible for energy planning, tariff setting, and recommendations for licenses
The off-grid energy market in Kenya has developed on the basis of a wide range of well-co-ordinated interventions at many levels, including:
- Vision 2030 to prioritise energy and prepare appropriate policy/regulation frameworks
- the establishment of a dedicated Government agency (REA) with focussed mandate and a clear target (full access by 2030)
- specific actions to address barriers and encourage the private sector, including pilot projects to demonstrate that cost-reflective tariffs were socially possible for mini-grids, capex provided by government, cross subsidy from all KPLC customers, the removal of value-added tax on solar products
- proactive and customer-oriented marketing strategy that also covered the poor peri-urban districts
- promotion of solar lanterns as a substitute to the use of kerosene as the main source of lighting in rural areas and as the main back up lighting system in urban areas
Kenya added 1.3 million households to its electricity grid during 2016, raising the percentage of connected Kenyans to 55%, from just 27% in 2013. This has been complemented by a dramatic growth in implementation of off-grid solar powered electrification; it is projected that the installed capacity of solar photovoltaic systems in Kenya will reach 100 MWe, generating 220 GWh annually, by 2020. (In mid-2013, it was estimated that about 2.5 million people were already using off-grid solar lighting products, with evidence of more than 35% annual growth in this sector). The policy and regulatory environment for electrification is fairly advanced, with significant and growing IPP presence, unbundling and partial privatization of national utilities, and increasing take-up of cost reflective tariffs. Over 30% of the off-grid population has first hand experience with solar lighting (BNEF/GOGLA market trends report 2016), with many replacing kerosene and other fossil fuels with pico and small home solar PV systems for lighting, resulting in significant energy-related savings. However, there is need for continued effort in order to achieve the universal access goal, with additional connections becoming more challenging as they become more remote. By the end of 2016, 5.7 million households had been connected. The next target is 6.5 million connected households by 2017.
The potential for increased private sector involvement is not yet clear and the viability/sustainability of existing initiatives to increase electrification has not been fully proven mainly due to tariff issues. The Government has established regulatory and policy frameworks to encourage private sector investment, but there is still a lack of local capacity for planning and for financial assessments to consider the load demand growth. Clear national plans are required to motivate private reinvestment for new customers. The Solar Lantern programme has shown how government policy and strategy have a significant impact on the private sector’s ability to advance in these markets, but a key to commercial success will be making these products and services affordable and attractive to Kenyans. It is probably possible for high-quality off-grid lighting to compete with inexpensive, low-quality products if sufficient attention is given to consumer outreach, advertising, to raise awareness of quality differentiators. Another critical factor has been mobile pay-as-you-go off-grid solar vendors’ ability to leverage the popular M-Pesa mobile money and payments service for standalone solar products. Private enterprises generally agree that direct subsidies are counterproductive in the case of small lighting products such as solar lanterns and small SHSs. Such support is not needed, since this segment of the rural electrification market will grow quickly by itself. The private sector believes that government efforts should rather be centred on enabling issues such as consumer education (on quality), access to finance, and training of skilled local retailers.
A key to the success of this national programme in increasing use of off-grid energy systems has been the integrated approach to market development. This has combined policy frameworks with financial support mechanisms and customer education, which has led to growing market demand for off-grid products. It is important to note that direct subsidies from government are not seen as an effective route to a sustainable market. Despite this lack of direct financial support from the public sector, the growth of off-grid electrification (primarily through solar applications) has been substantial enough to represent a nascent commercial market. This has been stimulated by a range of supportive measures, with access to mobile banking services and customer awareness initiatives having the greatest impact. This facilitative approach has had positive results to date and certainly appears to represent a very cost-effective means to extend national electrification.
Authors: Mary Willcox, Dean Cooper
The Review was prepared by Mary Willcox and Dean Cooper of Practical Action Consulting working with Hadley Taylor, Silvia Cabriolu-Poddu and Christina Stuart of the EU Energy Initiative Partnership Dialogue Facility (EUEIPDF) and Michael Koeberlein and Caspar Priesemann of the Energising Development Programme (EnDev). It is based on a literature review, stakeholder consultations. The categorization framework in the review tool is based on the EUEI/PDF / Practical Action publication "Building Energy Access Markets - A Value Chain Analysis of Key Energy Market Systems".
A wider range of stakeholders were consulted during its preparation and we would particularly like to thank the following for their valuable contributions and insights:
- Jeff Felten, AfDB - Marcus Wiemann and other members, ARE - Guilherme Collares Pereira, EdP - David Otieno Ochieng, EUEI-PDF - Silvia Luisa Escudero Santos Ascarza, EUEI-PDF - Nico Peterschmidt, Inensus - John Tkacik, REEEP - Khorommbi Bongwe, South Africa: Department of Energy - Rashid Ali Abdallah, African Union Commission - Nicola Bugatti, ECREEE - Getahun Moges Kifle, Ethiopian Energy Authority - Mario Merchan Andres, EUEI-PDF - Tatjana Walter-Breidenstein, EUEI-PDF - Rebecca Symington, Mlinda Foundation - Marcel Raats, RVO.NL - Nico Tyabji, Sunfunder -
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