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KENYA COUNTRY STUDY 2020 CLEAN CAPTIVE INSTALLATIONS FOR INDUSTRIAL CLIENTS IN SUB‑SAHARA AFRICA 120 kW grid tied, Burn Manufacturing, Factory. Lidia Daskalova/Shutterstock.com AUTHORS ACKNOWLEDGEMENTS Dennis Kibira (FS‑UNEP Collaborating Centre) Francoise d’Estais (UNEP) Hind Il Idrissi (UNEP) This report is a joint publication by the United Madhumitha Madhavan (FS‑UNEP Collaborating Centre) Nations Environment Programme (UNEP) and the Frankfurt School‑UNEP Collaborating Centre for Maria Baez (FS‑UNEP Collaborating Centre) Climate & Sustainable Energy Finance (FS‑UNEP). Matthew Woods (FS‑UNEP Collaborating Centre) The report is based on UNEP’s and FS‑UNEP’s Meseret Teklemariam Zemedkun (UNEP) assessment of Kenya’s electricity market and policies. UNEP and FS‑UNEP would like to thank the Steering Timothy Cowman (FS‑UNEP Collaborating Centre) Committee for their guidance and all of the authors Tobias Panofen (FS‑UNEP Collaborating Centre) and reviewers for their respective contributions. This publication may be reproduced in whole or in part and in any form for educational or non‑profit EDITING purposes without special permission from the copyright holders, provided acknowledgement Lisa Mastny of the source is made. UNEP and FS‑UNEP would appreciate receiving a copy of any publication that uses this publication as a source. DESIGN AND LAYOUT No use of this publication may be made for resale or for any other commercial purposes whatsoever without prior permission in writing from UNEP and Fabrice Belaire FS‑UNEP. The electronic copy of this report can be downloaded SUGGESTED CITATION at www.captiverenewables‑africa.org United Nations Environment Programme and Frankfurt School‑UNEP Collaborating Centre (2020). Clean captive DISCLAIMER installations for industrial clients in sub‑Sahara Africa – Kenya Country Study. UNEP, Nairobi and FS‑UNEP, Frankfurt. The views expressed in this report do not necessarily represent those of FS‑UNEP, UNEP or their individual SUMMARY OF PUBLICATION member countries, nor does citing of trade names or commercial process constitute endorsement. UNEP and FS‑UNEP do not make any representation This country report presents the state of the clean captive or warranty, express or implied, in respect of the installations market in Kenya as of year‑end 2019, with a focus on report’s contents (including its completeness or the commercial and industrial market and solar photovoltaic (PV) accuracy) and shall not be responsible for any use of, technology. or reliance on, the report. This report and any map The project team collected stakeholders’ views on their experiences included herein are without prejudice to the status of with: a) the current clean captive installations for the commercial or sovereignty over any territory, to the delimitation and industrial sector; b) the perceived barriers for its development; of international frontiers and boundaries and to the c) potential synergies between their activities and the project; name of any territory, city or area. The designations and d) industry sectors and technologies to be targeted under employed and the presentation of the material in this this project (for modelling support and to initiate a pilot project). report do not imply the expression of any opinion For the purposes of confidentiality, the names of persons and/or whatsoever on the part of the authors, UNEP or institutions have not been included in this report. FS‑UNEP, concerning the name or legal status of any country, territory, city or area, nor of its authorities, The information presented in this report was collected during the nor concerning the delimitation of its frontiers or last quarter of 2019 and is valid as of that date. The Kenyan energy boundaries. and captive market and its regulatory framework are changing rapidly. Readers are invited to consider any evolution that may have © 2020 United Nations Environment Programme taken place since year‑end 2019. TABLE OF CONTENTS 1/ ABBREVIATIONS AND ACRONYMS 5 8. OVERVIEW OF EXISTING CAPTIVE POWER FACILITIES 38 2. INTRODUCTION 6 8.1. LICENCED CAPTIVE POWER PLANTS .....................38 8.2/ SOLAR PV ...................................................................40 3/ KEY FINDINGS 8 8.3. OTHER RENEWABLES ...............................................41 4. KENYA KEY SOCIO‑ECONOMIC INDICATORS 10 8.4. THERMAL BACK‑UP POWER ....................................43 8.5. CONCLUSION ............................................................43 5. ELECTRICITY MARKET 11 9. KENYA MARKET POTENTIAL FOR CAPTIVE 5.1. ELECTRICITY GENERATION .....................................12 POWER 44 5.2. ELECTRICITY TRANSMISSION AND DISTRIBUTION ...........................................................13 9.1. INDUSTRIAL SECTOR OVERVIEW ............................44 5.3. ELECTRICITY DEMAND OF COMMERCIAL 9.2. INDUSTRIAL SECTORS EXCLUDED FROM AND INDUSTRIAL CLIENTS ......................................15 FURTHER SCREENING ..............................................46 5.4. GRID DOWNTIME ......................................................19 9.3/ MANUFACTURING SECTOR .....................................47 5.5. CONCLUSION ............................................................20 9.4. CONCLUSION ............................................................53 6. ELECTRICITY TARIFFS 21 10. FINANCING CAPTIVE POWER 54 6.1. BASE TARIFF ..............................................................21 10.1. BANKING SECTOR OVERVIEW ................................54 6.2. ADJUSTMENTS, LEVIES AND SURCHARGES ..........22 10.2. CAPTIVE POWER FINANCING LANDSCAPE ...........55 6.3. TIME‑OF‑USE TARIFFS ..............................................23 10.3. FINANCING MODELS FOR CAPTIVE POWER DEPLOYED IN KENYA ................................................60 6.4. ELECTRICITY REBATES ..............................................24 10.4. CONCLUSION ............................................................61 6.5. HISTORICAL ELECTRICITY TARIFFS .........................25 6.6. PROJECTED ELECTRICITY TARIFFS .........................26 11/ CONCLUSION 63 6.7. CONCLUSION ............................................................27 12. ANNEX 66 7. ENERGY POLICY AND REGULATORY 12.1. STAKEHOLDER MAPPING ........................................66 FRAMEWORK 28 12.2. ELECTRICITY LICENCING REQUIREMENTS 7.1. ENERGY POLICIES AND LAWS .................................28 AND FEES ...................................................................72 7.2. ENERGY REGULATIONS AND CODES RELEVANT FOR CAPTIVE POWER ...........................31 7.3. NON‑ENERGY REGULATIONS AND CODES RELEVANT FOR CAPTIVE POWER ...........................33 7.4. CURRENT REGULATORY UNCERTAINTIES REGARDING CAPTIVE POWER ................................34 7.5. INSTITUTIONAL FRAMEWORK ................................35 7.6. CONCLUSION ............................................................37 LIST OF TABLES Table 1: Table 10: Table 18: Table 27: Key energy indicators ........... 11 Time‑of‑use tariff Overview of List of main captive off‑peak hours ..................... 24 main industrial sectors PV financing / ESCO firms Table 2: in Kenya, 2016 ..................... 45 active in Kenya .................... 58 Extent of transmission and Table 11: distribution lines in Kenya ...... 13 Feed‑in tariff values for Table 19: Table 28: small renewable projects Top 10 counties Key government entities ....... 66 Table 3: up to 10 MW plant size ......... 29 by industry size .................... 46 Number of customers Table 29: in CI tariff categories, Table 12: Table 20: Key commercial banks and 2014‑2018 .......................... 15 Summary of regulatory Number of businesses related institutions ............... 67 uncertainties regarding by manufacturing sub‑sector Table 4: captive power ..................... 34 in Kenya, 2016 ..................... 47 Table 30: Distribution of CI tariff Key industry associations ...... 67 customer consumption by Table 13: Table 21: electricity supply region, Other key public entities Manufacturing Table 31: 2017/2018 ........................... 16 in the electricity sector sub‑sectors index of List of main captive in Kenya ............................. 37 production (per cent change), PV financing / ESCO firms Table 5: 2014‑2018 .......................... 49 active in Kenya .................... 68 CI tariff category customer Table 14: average annual consumption Captive power plant Table 22: Table 32: and demand ....................... 17 electricity licence holders Energy consumption Key solar PV as of February 2019 .............. 39 and intensity in selected captive power developers, Table 6: manufacturing sub‑sectors, ESCOs and EPCs ................. 69 Electricity grid outages Table 15: 2013 .................................. 51 and back‑up power among Existing captive Table 33: firms in Kenya ...................... 19 PV systems above 15 kWp Table 23: PV and related equipment in Kenya by user type ........... 40 Potential top 10 and genset suppliers Table 7: manufacturing sub‑sectors and installers in Kenya .......... 70 Back‑up generator Table 16: for captive power in Kenya .... 52 ownership and losses of sales Existing captive small Table 34: due to electrical outages ....... 20 hydropower, bioenergy and Table 24: Estimated number of geothermal systems ............. 42 Co‑operative Bank male and female Table 8: disbursements under employees in selected Electricity tariff categories Table 17: SUNREF, 2016 ..................... 55 captive power entities .......... 71 and structure