Discussion Paper No. 166 of 2014 on Analysis of Electricity Consumption by Households in Kenya

Abstract

An estimated 1.3 billion people around the world lack access to electricity, with majority of them living in Sub-Saharan Africa, where two out of every three households stay in darkness after sunset. In Kenya, according to the Draft National Energy Policy 2014, the overall electrification rate is approximated at 28.9 per cent, despite recent government efforts to rapidly increase electrification rates in both urban and rural areas. Similarly, electricity access in rural areas is approximately 5 per cent, and 51 per cent in urban areas. The continued use of solid biomass and kerosene contributes to household air pollution, which leads to respiratory illnesses that are a major health burden. The main objective of this study is to estimate the amount of electricity consumed by households with a view to determining the factors that explain the differences in the levels of consumption and expenditure on electricity. The study uses crosssectional data of 3,339 households in Kenya. I an attempt to undertake household expenditure analysis of energy services - mainly biomass and electricity - the study also uses the Tobit model. Data was obtained from the KIPPRA National Energy Survey of 2009 and analyzed using the Tobit and the Probit model. The key findings are that location of household, marital status of the household head, involvement of household head in agriculture, per capita household income, and the tenancy type are significant in explaining the household expenditure on electricity. Also, expenditure on biomass is not significant in explaining the overall household expenditure on electricity. The key policy recommendation is that the government should increase investments in energy and continue to subsidize electricity, especially in terms of pricing.