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Access to Clean Energy in Rural Kenya Through Innovative Market Based Solutions

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Access to Clean Energy in Rural Kenya Through Innovative Market Based Solutions Empowered lives. Resilient nations. NATIONALLY APPROPRIATE MITIGATION ACTION ON ACCESS TO CLEAN ENERGY IN RURAL KENYA THROUGH INNOVATIVE MARKET BASED SOLUTIONS United Nations Development Programme Contact Information Principal Secretary, Ministry of Environment Natural Resources and Regional Development Authorities / [email protected] Dr. Alexandra Soezer, United Nations Development Programme (UNDP), Low Emission Capacity Building Programme (LECB) / [email protected] Technical Oversight and Guidance Dr. Harun M. Warui, Ministry of Environment & Natural Resources / UNDP Dr. Alexandra Soezer, Climate Change Technical Advisor, Low Emission Capacity Building Programme (LECB) Authors Mr. Arindam Basu and Dr. James D. Marett at Grue + Hornstrup; and Mr. Stefan Wehner at the greenwerk Contributors Mr. Tom Owino at ClimateCare; Mr. Douglas Marett at Grue + Hornstrup Acknowledgements We would like to acknowledge the following stakeholders for their participation in the NAMA process: Timothy Ranja - UNDP, Veronica Lekopole - CAGE, Stephen Kiama – KEFRI, John Katimbwa - Matatu Welfare Association, Nyaga Kebuchi – Sustainable Transport Africa, Andrew Cheboi – NETFUND, Suresh Patel - KAM/KEPSA, Francis Nderitu – MOEP, Nathan Bogonko – KIRDI, David M. Kigo - Nairobi County, Fenwicks Musonye – ERC, David B. Adegu – MENRRDA, Joash Obare – ClimateCare, James M. Gatimu - GVEP/CCAK, Michael Muchiri –MOTI, John Kioli – Green Africa Foundation, Elizabeth Murua – MENRRDA, Ivy Murgor – MENRRDA, Richard Mwangi – KFS, Lucy Kamande – MENRRDA, Salome Machua – NEMA, Harrison Oloo – WENMAK Editor Georgina Wilde Design Kimberly Koserowski Disclaimer: The views expressed in this publication are those of the author(s) and do not necessarily represent those of the United Nations, including United Nations Development Programme (UNDP), or their Member States. UNDP LOW EMISSION CAPACITY BUILDING (LECB) PROGRAMME This product was developed under the LECB Programme, with generous funding from the European Commission (EC), the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB), and the Australian Government. The UNDP Low Emission Capacity Building (LECB) Programme is a country-driven initiative that promotes essential cooperation between relevant institutions, engaging the public sector and industry in a concerted effort to design and implement approaches to low emission development that are consistent with national development priorities. National counterparts are supported to strengthen technical and institutional capacities to identify and formulate Nationally Appropriate Mitigation Actions (NAMAs) and Low Emission Development Strategies (LEDS) in the public and private sectors, and to strengthen the underlying greenhouse gas inventory management and Measurement, Reporting and Verification (MRV) systems. The LECB Programme runs through 2016 and is active in 25 countries: Argentina, Bhutan, Chile, China, Colombia, Costa Rica, the Democratic Republic of Congo (DRC), Ecuador, Egypt, Ghana, Indonesia, Kenya, Lebanon, Malaysia, Mexico, Moldova, Morocco, Peru, Philippines, Tanzania, Thailand, Trinidad and Tobago, Uganda, Vietnam and Zambia. The programme is supported through generous contributions from the European Commission, the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB), and the Government of Australia. More information can be found at www.lowemissiondevelopment.org Empowered lives. Resilient nations. 2 TABLE OF CONTENTS TABLE OF CONTENTS List of Figures 6 List of Tables 6 Abbreviations and Acronyms 8 Executive Summary 10 1. Introduction to NAMAs 12 1.1 Setting the Context 12 1.2 Nationally Appropriate Mitigation Actions 13 1.3 Clean Energy NAMA – An Opportunity for Kenya 13 1.4 Purpose and Objectives of the NAMA 15 2. Background to Kenya 16 2.1 Country Topography 16 2.2 Country Administration 17 2.3 Climate 17 2.4 Demography 17 2.5 Socio-Economic Situation 18 3. Background to the Energy Sector 20 3.1 Renewable Energy Potential in Kenya 20 3.2 Key Actors – Kenya Energy Sector 21 3.3 Rural Electrification Authority (REA) 22 3.4 Analysis of Household Energy 22 3.5 Current Fuel Use in Households 23 3.6 Use of Improved Cookstoves in Kenya 24 3.7 Solar PV Lighting in Kenya 24 3.8 Barriers to Adoption of Clean Energy Technologies 25 3.9 Key Drivers for Market based Approach 26 4. The Policy Environment in Kenya 28 4.1 Constitution of Kenya 28 4.2 Vision 2030 29 4.3 The Second Medium Term Plan (SMTP) 30 NATIONALLY APPROPRIATE MITIGATION ACTION ON ACCESS TO CLEAN ENERGY IN RURAL KENYA TABLE OF CONTENTS THROUGH INNOVATIVE MARKET BASED SOLUTIONS 3 4.4 National Climate Change Action Plan (NCCAP) 31 4.5 National Energy and Petroleum Policy 32 4.6 Other Programmes 33 4.7 Summary and Conclusion 33 5. NAMA Baseline Information 36 5.1 The NAMA Boundary 36 5.2 GHG Emission Reduction Baseline 37 5.2.1 Kenya: Access to Energy 37 5.2.2 Identified Approach for Determining GHG Emission Reduction 37 5.3 Sustainable Development Baseline 39 5.3.1 Kenya Status – MDG 39 5.3.2 The SD Tool: 40 5.4 NAMA Target 43 5.5 Alignment with the INDC 44 5.6 Alignment with Sustainable Development Goals: 45 6. NAMA Intervention – Private Sector-enabled Business Model 48 6.1 Energy Productivity Zones (EPZs)—The Change Agent 48 6.2 Intervention 1: Establish 28 EPZs in Kenya with their own PV Power Plant 49 6.2.1 Intervention 1—Outcome 1: 28 of EPZs Established 50 6.2.2 Intervention 1—Outcome 2: 500 kWp of Solar PV-based power plant implemented 51 6.3 Intervention 2: Distribute Clean Energy Technologies enabled through consumer finance 52 6.3.1 Intervention 2 – Outcome 1: 1 million PV lanterns distributed 53 6.3.2 Intervention 2 – Outcome 2: 1 million ICS distributed 54 6.3 Eligibility Criteria - Private Sector Engagement 55 6.4 Driving Interventions through Business Models 56 7. Capacity Development 60 7.1 Capacity Development Measures for Intervention 1 61 7.1.1 Technical Feasibility Study for pre-determined EPZ locations 61 7.1.2 Highlight Quality Standards 64 7.1.3 Capacity Development for the NCA and NIE 66 7.1.4 Private Sector Awareness Creation 67 7.1.5 Training of Staff and Workers 68 7.2 Capacity Development Measures for Intervention 2 69 4 TABLE OF CONTENTS 7.2.1 Public Procurement Scheme 69 7.2.2 Marketing and Awareness Creation 70 7.2.3 Capacity Development for Financial Entities (e.g. Banks). 71 7.2.4 Training of Staff and Workers 72 7.3 Summary on Capacity Development Measures 72 8. Implementation Structure 74 8.1 Governance and Management 74 8.2 Institutional Framework for NAMA Implementation and Management 75 8.2.1 National NAMA Approver/Focal Point 76 8.2.2 National Coordinating Entity (NCA) 76 8.2.3 NAMA Implementing Entity (NIE) 77 8.2.4 NAMA Executing Entities (NEEs) 80 8.3 Implementation schedule 81 9. NAMA Finance 84 9.1 Overview of NAMA Finance 84 9.2 NAMA Finance required for Intervention 1 85 9.2.1 Loans for EPZ Business Model 85 9.2.2 Grants for Solar PV Power Plant 87 9.3 Consumer Finance for Intervention 2 88 9.3.1 End Consumer – Equity Contribution 88 9.3.2 End Consumer – Revolving Loan Fund 90 9.4 NAMA Finance Required for Measures 93 9.4.1 Financial Measures for initiating NAMA Implementation 93 9.4.2 Finance for Public Procurement 95 9.4.3 Finance for NCA/NIE Staff 97 9.5 Summary of Financial Requirements: 97 10. NAMA MRV System 100 10.1 Measurement 101 10.1.1 GHG Mitigation 101 10.1.2 Sustainable Development Benefits 106 10.1.3 Measurement – SD Parameters 107 10.2 Reporting 111 10.3 Verification 112 NATIONALLY APPROPRIATE MITIGATION ACTION ON ACCESS TO CLEAN ENERGY IN RURAL KENYA TABLE OF CONTENTS THROUGH INNOVATIVE MARKET BASED SOLUTIONS 5 References 114 Annex es 116 NAMA Summary 116 Outputs, Activities and Measures 117 119 6 LIST OF FIGURES, LIST OF TABLES LIST OF FIGURES Figure 1: A Simple Overview of the NAMA Outcomes 14 Figure 2: Map of Kenya 16 Figure 3: Map of Kenya showing Population Density 36 Figure 4: Overview of the objectives, interventions and outcomes of the NAMA 59 Figure 5: Schematic Representation of Capacity development by Government Agencies 66 Figure 6: Schematic Representation of Institutional Structure for the NAMA 75 Figure 7: The Implementation Cycle of the NAMA 83 Figure 8: Schematic Representation of the Revolving Loan Fund 90 Figure 9: Schematic Representation of a Strategic CSA Model 96 Figure 10: Schematic overview of the MRV reporting structure 111 LIST OF TABLES Table 1: Renewable Energy Potential in Kenya (Ayieko, 2011) 20 Table 2: Number of Households by Fuel type for Lighting and Cooking in Kenya (KNBS, 2009) 37 Table 3: Kenya MDG Progress Snapshot (MoDP, 2013) 39 Table 4: The SD Tool and the indicators relevant to the NAMA 41 Table 5: NAMA targets for various indicators as shortlisted using the SD Tool 43 Table 6: Relevance of the NAMA to stated mitigation priorities in Kenya’s INDC 44 Table 7: Direct SD benefits from the NAMA in the context of SDGs 45 Table 8: Comparison between the two types of EPZs defined under the NAMA 50 Table 9: Two technology product categories for two distinct sets of end consumers 51 Table 10: Schematic representation of suggested approach 52 Table 11: Indicative number of units of PV lanterns manufactured across the lifespan of NAMA 53 Table 12: Indicative number of units of ICS `manufactured across the life span of NAMA 55 Table 13: Types of capacity development measure proposed under the NAMA 61 Table 14: Existing access to energy by County (No. of households rounded to nearest, 000) 62 Table 15: Summary table for Capacity development Measures 72 Table 16: Number of new business enterprises / NEEs by Business Model type 80 Table 17: Summary table for NAMA Finance – Interventions 84 Table 18: Summary table for NAMA Finance Measures 85 Table 19: Indicative start year for EPZ implementation 86 NATIONALLY APPROPRIATE MITIGATION ACTION ON ACCESS TO CLEAN ENERGY IN RURAL KENYA LIST OF FIGURES, LIST OF TABLES THROUGH INNOVATIVE MARKET BASED SOLUTIONS 7 Table 20: Summary table for Loans required for EPZ and Business Models 86 Table 21: Summary table for Grants required for PV Power Plant 87 Table 22: The proposed distribution of clean energy technologies by year (i.e.
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