Experts Raise Fresh Concerns Over Kenya’s Plans to Lower Electricity Tariffs

Kenyans may not see lower electricity bills despite the government’s plan to massively increase power generation, energy experts have warned.

The warning comes as the government targets 5,500 megawatts of generation capacity from the current 1,500 MW to meet rising demand and support industrialisation.

Mugwe Manga, climate finance lead at FSD Kenya, told AFP that the problem goes beyond how much electricity Kenya can generate.

“The answer to this conundrum is not as straightforward as it may seem,” Manga said, calling for a review of the entire electricity supply system.

A major concern is the amount of power lost before it reaches consumers, as more than 20 per cent of electricity is lost through technical failures and unlawful connections, compared with a global average of between 8 and 10 per cent.

Manga said cutting these losses would offer Kenya a relatively quick opportunity to improve efficiency and create room for lower tariffs.

The cost of financing new power projects presents another challenge, which the experts have flagged. Developers in Africa often borrow at higher interest rates because investors perceive the projects as riskier.

Those additional financing costs are eventually reflected in the price consumers pay for electricity.

At the same time, Kenya’s power purchase agreements have also come under scrutiny, particularly contracts containing take-or-pay clauses that require payments even when all the contracted electricity is not consumed.

Currently, independent power producers account for about 40 per cent of Kenya’s total power capacity under long-term contracts signed after electricity generation was liberalised.

Albert Nganga, senior regulatory manager at CrossBoundary Energy, said Kenya’s strong renewable energy base was an advantage but did not automatically translate into cheaper electricity, according to AfricaNews.

“Electricity prices are determined by the whole system, not only by the cost of power generation,” Nganga said, pointing to contracting, transmission, distribution, and recovery as other factors.

The concerns come as Parliament pushes for cheaper electricity. Last month, MPs directed Energy CS Opiyo Wandayi to develop a policy for renegotiating electricity supply agreements with major power producers.

The planned expansion includes 2,000MW of nuclear power, 700MW of hydropower, and additional geothermal projects. Kenya already generates about 93 per cent of its electricity from renewable sources.