Kenya's renewable energy expansion faces tariff challenges

Kenya is significantly expanding its renewable energy capacity, aiming to increase long-term targets from approximately 2,600MW to nearly 6,000MW by 2030. This expansion includes geothermal, wind, solar, and hydropower, supporting the nation's goal of near-100% renewable electricity and universal energy access.

Despite this growth, experts warn that electricity tariffs may not decrease. While renewable generation costs are competitive, consumers face high costs driven by non-generation factors. These include high financing costs due to perceived project risks, transmission losses exceeding 20 per cent—well above the global average of 8 to 10 per cent—and currency fluctuations.

Additional economic pressures stem from power purchase agreements with independent power producers, which account for roughly 40 per cent of total capacity. Some of these contracts include ‘take-or-pay’ clauses that require payment even when electricity is not consumed. Consequently, the complexity of the entire supply system, rather than just generation capacity, remains the primary determinant of consumer prices.