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Occasional  Paper 29: Contribution of Renewables to a Sustainable Power Sector in Kenya  

A Publication of AFREPREN/FWD and HBF – HA Initiative on

Renewables in Eastern and Horn of Africa

Sponsored by

HBF-HA and AFREPREN/FWD

By

Stephen Karekezi, John Kimani and Oscar Onguru


Executive Summary 

Kenya’s energy scene is dominated by two primary factors; a predominant reliance on dwindling biomass energy resources to meet the energy needs of the rural households and heavy dependence on imported petroleum for the modern economic sector needs. Biomass dominates as the principal source of primary energy for the majority of the population accounting for upto 68% of the total energy consumption. Estimates from the Ministry of Energy reveal that woodfuel provides upto 93% of rural household’s energy requirements. However, in 2004, sustainable biomass energy supply was estimated at 15.4 million tonnes against a corresponding demand estimated at over 38.1 million tonnes reflecting a supply/demand deficit of about 60%.  

Modern energy consumption is very low at 84 kgoe per capita. Only 11.5% of the total modern energy is consumed by the household sector while 20% is consumed by agriculture, 29% by transport, and 39.5% by industry and commercial sectors. Petroleum is the major source of commercial energy in the country, providing about 22% of the country’s requirements. The transport industry consumes about 69% while the other industries consume 31% of the petroleum fuels used in the country. Kenya heavily relies on imported petroleum for its local consumption. As a result, crude oil and imported refined petroleum products remain among Kenya’s main imports accounting for 25% and 19.6% of the total imports in the years 2000 and 2002 respectively.

Electricity generation in the country is mainly hydro-based at 57% while thermal-based generation contributes 33% and geothermal about 10%. Although the country has enormous geothermal potential estimated at over 3,000 MW, nearly three times the current installed capacity in the country, only about 4.3% of this (130 MW) has been exploited. The demand for electricity has in the past continuously outstripped supply, precipitating a significant level of unserved demand, which in 2004 was estimated to be 413 GWh (CAN, 2004).  

A severe drought, which occurred in 1999/2000, led to unprecedented power supply shortfall resulting in a devastating power rationing program. Many industries either closed down or operated at minimal capacity.  

Reportedly, the country lost revenue during the power crisis resulting in an overall economic loss variously estimated at 1 % of the GDP (Karekezi and Kithyoma, 2005). Increased load shedding and higher electricity prices have led to over-reliance on fossil fuel thermal based power generation. This has led to high electricity tariff due to steady upward trend in oil prices overtime. Large hydro schemes are also associated with huge costs of transmission which are often ignored in the initial computation of project unit costs under the least cost power development plan developed by the Ministry of Energy to rank viable projects for potential development. 

This study assessed the contribution that renewables can make to the current power sector in the country to make it more sustainable. The study analysed into details, the contribution that small hydropower can make in terms of potential, benefits as well as planned developments in the small hydro industry. Consensus has not been reached on what is regarded as the defining capacity of small hydropower. However, in this study, small hydropower was defined as projects that have less than 10 MW of generating capacities. In addition, the study examined the current power plan by reviewing three key documents, namely, the Energy Policy, the Power Masterplan and Rural Energy Masterplan.  

The study revealed that small hydropower has been harnessed in the country for over a century but the development of small hydro power was mainly aimed at supplying mechanical power for agro-processing activities such as maize milling and – in very few cases – for electricity generation for villages far from the grid.  

Though Kenya is endowed with rich small hydropower potential of about 3,000 MW only 18.7 MW representing less than 1% has been harnessed. Nevertheless, comprehensive assessment of available small hydropower potential is still required as no systematic study to establish the exploitable potential for small hydropower seems to have been undertaken.  

Exploitation of small hydropower can contribute to the rural electricity supply as most of the sites are located in remote areas, often not accessed by the main grid. In addition, small hydro can also be harnessed to provide mechanical power for productive end uses such as grain milling.  

There is growing evidence that investment in small and medium-scale RET projects such as small hydropower, wind, solar and cogeneration may have more impact in improving energy services for the majority of the country’s population especially the poor. The modular nature of most renewables (i.e. the fact that they can be developed incrementally) and the consequent low and progressive nature of investment requirements make them particularly suitable for the capital-constrained Kenyan economy. In addition, small scale renewables such as small hydropower have the following key benefits:

  • Reduce exposure to high oil import costs

  • Local availability of the resources

  • Ability to provide cost-competitive energy sources as renewables often have no transmission cost component

  • Significant job and enterprise creation potential

The study also demonstrated that the current Power Masterplan lacks explicit targets for small and medium-scale renewables such as cogeneration, small hydropower, solar as well as wind. However, the ambitious target set for geothermal should be commended.

The Power Masterplan is based on the Least Cost Development Plan which tends to underestimate the unit cost of conventional energy sources such as large hydro since the hydro-drought risk factor, and in most cases, transmission costs are not factored in. The Energy Policy, on the other hand needs to better target incentives for renewable power development. Similarly, no funds have been set aside to specifically promote development of renewables. 

The Rural Electrification Masterplan identifies schemes for potential development. However, there is not established timeline for implementation of such schemes. Moreover, the masterplan focuses on rural electrification efforts to only cover market centres and agro-based and other small industries, shops, institutions, water supply and other public facilities. Individual households are considered of secondary importance, but they are encouraged to take up supply if located within reach of an installed transformer. The masterplan also gives priority to schemes with high positive net present values (NPVs); low NPV projects, which often have more impact on the poor, are relegated to the bottom of the list. 

Although a Rural Electrification Fund was established to promote rural electrification, the fund has often been used by the national utility to offset its losses. 

A number of interventions are necessary to promote renewables in the power sector. These include:

  • Need to set clear targets in the Power Masterplan for other renewables such as cogeneration, small hydropower, solar and wind energy resources.

  • The Regulator could set specific targets for the Independent Power Producers (IPPs) and offer attractive feed-in tariffs as well as other incentives to promote IPPs’ investments in renewables.

  • Funds need to be set a side to develop small scale renewables in areas that are considered uneconomical to be reached by the national grid. In addition, the Rural Electrification Funds needs to be “ring-fenced” to ensure it’s optimum use.

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