RENEWABLE ENERGY OPPORTUNITIES IN KENYA A SNAPSHOT Prepared By for CONTENTS The market ................................................................................................................................................... 3 The report ..................................................................................................................................................... 3 Country overview ................................................................................................................................... 4 The energy market ................................................................................................................................. 5 The renewable energy market ...................................................................................................... 6 Feed-in tariff ................................................................................................................................................. 8 Notable Renewable Projects and Success Stories............................................................ 9 Key drivers of renewable energy development ............................................................... 10 Key challenges ............................................................................................................................................. 11 About us ............................................................................................................................................................ 12 Contact the Author ................................................................................................................................... 12 Appendix I - List of completed and pending renewable energy projects ... 13 Cover image: warrenski/Flickr page 2 THE MARKET Kenya’s renewable energy potential is unquestionable. Excellent wind, solar and geothermal resources alongside a government and business community committed to continuing industrial growth mean Kenya possesses the necessary attributes to pioneer large scale renewables in Sub-Saharan Africa. Without the fossil fuel resources of many fellow African countries, and with renewables contributing significantly to existing installed capacity, Kenya’s forthcoming electrification is one in which renewables look set to drive. Supporting electricity demand and proven renewable resources are a stable, pro-renewable and ambitious regulatory regime, as well as an investment community willing to back Kenyan renewable energy projects. Factors highlighted by an attractive feed-in-tariff of 20 years for renewables as well as the 3.6 Billion US Dollars invested into Kenya’s clean energy space from 2009-14. 3.6 BILLION US $ INVESTED INTO KENYA’S CLEAN ENERGY SPACE FROM 2009-14. THE REPORT Ahead of the inaugural Kenya International Renewable Energy Congress to be held in Nairobi, Green Power Global have prepared this report to give a snapshot into the exciting opportunities provided by Kenya’s renewable revolution. page 3 COUNTRY OVERVIEW Estimated at $66 Billion USD Kenya has the largest GDP in East and Central Africa and the 7th biggest on the African continent, whilst its capital city Nairobi is widely recognised as the commercial hub of East Africa. Kenya has a population of 48 million people, the majority of which come from Bantu sub-groups and for whom agriculture is the major employer. Recent years have however seen a growth in the Kenyan service sector and a marked increase in the role of manufacturing, telecommunication and finance in driving GDP growth which sits at a steady 5-7% per year. 48 MILLION PEOPLE NAIROBI CAPITAL US$ 66 BILLION GDP The Kenya Vision 2030 launched on 10th June 2008 by then President Mwai Kibaki is the country’s development programme covering the period 2008-2030. The Vision’s goal is to realise Kenya’s objective to become a “newly industrialising, middle income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment”. Energy is one of 8 key sectors involved in the vision and critical to its fulfilment. page 4 THE ENERGY MARKET Kenya’s current installed electricity capacity is estimated at 2.4 GW, 1.5 GW of which is grid connected and 500mw of which has come on line since mid-2014. Approximately 75% of current installed capacity comes from renewable resources with hydro and geothermal power dominant. The Least-Cost Power Development Plan 2013-33 has seen the setting of an ambitious target to raise installed electricity capacity to 22.7GW by 2033. The Ministry of Energy and Petroleum controls energy policy, whilst approximately 70% of electricity is generated by quasi state company KenGen which is 70% state owned. Independent Power Producers in Kenya account for 28% of generating capacity. Since 1997 there have been 8 key players in Kenya’s electricity market: 3 The Ministry of Energy and Petroleum (electricity policy) 3 KenGen (Kenya Electricity Generating Company) (Publicly listed 70% state owned power producer) 3 Kenya Power and Lighting Company (KPLC) (owns and operates the transmission and distribution systems – 50.1% state owned) 3 Electricity Regulatory Commission (ERC) (deals with permits, licensing and recommendations on regulation) 3 Kenya Electricity Transmission Company (KETRACO) (constructs and operates the transmission infrastructure) 3 Geothermal Development Corporation (GDC) (SPV formed by the government to explore and realise geothermal power potential) 3 Rural Electrification Authority (REA) (concerned with electrifying Kenya’s off-grid and remote communities) 3 Independent Power Producers Recent focus in the electricity market has centred on connecting more of Kenya’s population to the grid, of which it is estimated 50% currently have access. Notably KETRACO are currently constructing over 4,000 KM of high voltage transmission lines. Costing $1.3 Billion USD over the next 3-4 years the project will deliver electricity access to a sizeable number of Kenyan’s for whom affordable, readily accessible electricity was once a dream. 27 lines are involved in the electricity scale-up project, whilst it is also said that initial moves to develop infrastructure enabling the importing and exporting electricity at significant scale are being made. Most indicative of a clear and active campaign to improve grid infrastructure and access to electricity, as well as growing electricity demand and effective government support, has been KPLC’s 11.24% rise in pre-tax profits for year ending June 2015. KPLC cited increased sales as a result of improved distribution efficiency and tariff reviews starting in 2013 as the key factor in its profit rise. page 5 THE RENEWABLE ENERGY MARKET Ranked second behind only South Africa for clean energy investment in Africa and sixth globally Kenya’s renewable energy potential is vast. Already the world’s 8th largest producer of geothermal energy, Kenya too possesses ideal conditions to exploit wind and solar resources for electricity generation. Vast resources and available capital for project development are supported by a pro-renewable political climate where renewable energy policy is both favourable and stable. With a 20 year feed-in-tariff for renewable resources established, as well as a zero rating of export duty and a removal of VAT on renewable equipment, the Kenyan government are actively facilitating renewable energy growth at utility scale, C&I scale and as an off-grid solution. Geothermal power has long been synonymous with Kenya’s renewable energy sector and this shows no sign of changing any time soon. The Geothermal Development Company (GDC) is a government founded SPV designed to fast-track geothermal power development. With $2.68 Billion USD of funding over 10 years the GDC will remain critical to Kenya’s aims to realise its geothermal potential. These aims are lofty too - the National Energy Policy estimates Kenya’s geothermal potential at 10GW and is targeting 5.5GW of this to be on-line by 2030. Plagued with corruption allegations in recent years it is now hoped that the GDC is turning itself around to become a positive force in Kenya’s geothermal development. Kenya is one of the global rising stars for wind power development. Home to Africa’s largest wind power project (the *Source: UNEP: Kenya Country Report 310mw Lake Turkana Wind Farm) page 6 as well as a further 900mw in development or online, Kenya is striving to ensure its good wind resources play a significant role in its energy growth. Though recent projects have faced delays and barriers to development in the shape of resistant local communities (e.g. the 60mw Kinangop Wind Farm), the National Energy Policy is expecting 3GW of wind to be realised by 2030 and 1GW by 2020. Kenya’s solar industry is in many respects more in its infancy than that of wind and geothermal, yet is also arguably that with greatest potential. In particular with regards to its ability to deliver cost-effective electricity to those off the grid as well as supplying the grid. Solar mini-grids, home solar kits and solar – diesel hybrid systems are all being actively promoted as electricity solutions for Kenya’s more remote communities. Meanwhile the first solar system with a PPA to supply electricity to the grid under the current FiT was realised in 2015 in the shape of the 600kW project at Strathmore Business School in Nairobi. 8th LARGEST PRODUCER OF GEOTHERMAL ENERGY IDEAL CONDITIONS TO EXPLOIT WIND AND SOLAR RESOURCES page 7 FEED IN TARIFF The current FiT for renewable energy can be viewed