Discussion Paper No 294 of 2022 on Analyzing Kenya’s Electricity Sector Financing: Vision 2030

Abstract

Electricity plays a crucial role in improving livelihoods and enabling economic growth. However, access to electricity in Sub-Saharan Africa (SSA) remains low, hindering economic development. Kenya has made significant progress in electricity access compared to the SSA average. However, inadequate financing poses a major barrier to achieving universal access by 2022. This study analyzes the electricity sector value chain and explores financing options. Challenges in electricity generation include land issues and weather patterns affecting capacity. Poor grid systems pose challenges in electricity transportation, and tariff settings impact demand. Untapped generation potential, decentralized energy solutions, increasing demand, and supportive government policies present opportunities for financing. Proposed financial options include Power Purchasing Agreements (PPAs) with local currency, auction systems, local financing, concessions for improved management, and customer options such as net metering and wheeling. Policy and legislative frameworks are critical to facilitate these options. Recommendations include balanced renegotiations of PPAs, incentives for local financing, and the development of policies for net metering, wheeling, and PPAs.