Kenya has an ambitious INDC which it submitted to the UN, underpinned by a 30% emissions reduction target in 2030 compared to business-as-usual. Its stable and lucrative feed-in tariff policy has attracted a lot of interest from developers and sustained large pipeline of renewable energy projects. However, few of these projects have been able to move forward and proposed policy changes may signal uncertainty for new investors. Clean energy (excluding large hydro) accounted for 51% of total power generation in 2016. This value rises to over 80% inclusive of large hydro. Kenya does not have a specific renewable energy target.

The liberalization of the generation market has seen 13 independent power producers cut into KenGen’s market share, and the government has mandated Ketraco to compete with Kenya Power on transmission. Distribution and retail are also beginning to open up to independent players, with mini-grid developer PowerHive receiving the first independent distribution license from the Energy Regulatory Commission in 2016. Kenya still has an oversupply of power generation relative to demand and demand growth has continued to slow. However, low hydro levels due to drought and the idling of diesel generators create some opportunities for new generators.

Kenya’s Feed-in-Tariff (FiT) prices were set in 2012 and benefit all renewable energy sources. Significant technology cost declines, especially for solar, have increased the appeal of the tariffs and led to an oversupply in proposed sites. By late 2016, Kenya had 2-3GW of proposed renewable energy projects in its FIT, compared to an installed grid capacity of just over 2.3GW. The surplus of projects reduces the incentive to rush large renewables projects to commissioning, and has led to growing uncertainty around permitting and PPA timelines for developers. Several clean energy projects have also been held back while renegotiating clauses in the default PPA template.

Land access has been a challenge for both site selection and transmission connection. The 310MW Lake Turkana wind farm, by far the largest clean energy project currently under construction, is expected to connect to the grid in 2018 after facing severe delays in the construction and transmission phases. Several other wind projects are in early planning stages, but are not expected to see a breakthrough soon.

There are also a handful of large solar projects, each around 40MW, which received PPAs in late 2015. These projects are still awaiting final licensing approvals, which is likely to come later this year. While the going feed-in-tariff for utility-scale solar is $0.12/kWh, several projects have bid for PPAs at just two-thirds this price level. Once built, these solar projects will be among the largest PV plants in sub-Saharan Africa. However the stamina and risk appetite required to overcome challenges in PPA negotiation and land access, combined with slowing power demand growth, also casts a shadow on the other PV projects whose initial ‘expression of interest’ has been approved but whose permitting status is less advanced.

Future wind and solar projects will likely find themselves in a new policy environment before 2020. Kenya intends to roll out an auction for wind and solar, to replace the ongoing feed-in tariff. The country has been seeking to amend its National Energy and Petroleum Policy since 2014, although the new draft is still undergoing approval. The Energy Ministry also intends to introduce net metering for customer-sites generation (dependent on the enactment of the energy bill), establish regulations for mini-grids, and has started exploring the idea of local-currency-denominated tariffs in a bid to encourage local commercial banks to participate in energy projects. These proposed policies are unlikely to progress until after the August 2017 elections, and demark a time of policy upheaval in a country that has seen otherwise stable support for renewable energy in recent years.

One of the most noteworthy successes in Kenya’s power sector is in geothermal. The nation offers three pathways for geothermal engagement: contracts for sites owned by Kengen, partnerships with government-owned Geothermal Development Company (which takes on the exploration risk and sells the geothermal resource to power plant developers), or independent development on sites allocated by the government (in which the private developer takes on the exploration risk). Kenya’s feed-in tariff price and significant past experience in geothermal development means that there is relatively reduced uncertainty in exploration and development of new projects or capacity additions, as well as ready access to development finance institution loans, within Kenya as compared to other regions in the world. Geothermal accounted for 27% of installed capacity in 2016, following the addition of a unit at Orpower’s Olkaria geothermal project. Yet geothermal development is a lengthy process in the best of scenarios, requiring several years from conception to commissioning.

As utility-scale projects face a lengthy planning process, developers have started to target captive generation projects. The approval process for on-site power generation up to 1MW is far simpler and all projects below 3MW do not require a generation permit, which can be a lengthy process to obtain. The generation technology of choice is typically solar, although small hydro has been favoured in some regions – especially by the Kenya Tea Development Agency.

More than half of Kenya’s homes are not connected to the national grid. Several programs exist to expand distribution lines, reach remote villages, and maximize the utilization of existing transformers by connecting people within their immediate reach or in informal settlements underneath, often subsidized by DFIs. These have started to make an impact on energy access numbers. Kenya’s electrification rate rose from 26% in 2012 to 55% as of mid-2016. Mini-grid capacity is rapidly growing in Kenya, despite uncertainties around geographic territory clauses in distribution tariffs. Kenya has become one of the best-served off-grid populations in the world, featuring some of the most advanced pay-as-you-go solar home system companies and innovative business models for mini-grid development.