Kenya mulls raising Sh2.4 trillion to power green energy deals by 2030

Kenya's green energy drive powers race for global climate investment.[Courtesy]

Kenya aims to mobilise in excess of Sh2.4 trillion largely through public private partnerships to build power infrastructure in its bid to power the national grid with renewable energy by 2030.

Alex Wachira, Principal Secretary Energy, said projects including power transmission lines and power production plants would be financed largely through private sector funds with energy sector entities increasingly being required to present such projects as bankable.

He advised that recent changes in the law allow private sector players to put up infrastructure and power generating plants.

“By the year 2030, Kenya targets to have 100 per cent clean energy generation by expanding the installed capacity, significantly supported by battery energy storage. This means that we must mobilize approximately $19 billion in public and private investments,” said Wachira at the AmCham business summit last week.

The majority of electricity generated in Kenya is from renewable sources, with thermal electricity accounting for 18.7 per cent of the country’s installed capacity. Kenya has been pushing for the phasing out of the thermal power plants that produce costly power but are also harmful to the environment.

This has however, not always worked as plants whose PPAs have expired have been recalled from electricity production under new arrangements, even as Kenya Power's production capacity is unable to meet growing demand.

Wachira said the government, with limited room to borrow, is moving away from traditional financing structures and adopting policies that enable the power sector entities to fund projects through public private partnerships or event raise funds through issuance of infrastructure bonds.

“Ketraco, for example, has been building transmission lines using government-to-government loans,” he said.

“With the shrinking of the headroom for borrowing, we must enable Ketraco to have a cost-reflective tariff that will ensure that whatever electrons are transmitted using Ketraco’s transmission lines are paid for in a way that will ensure the company can then be able to go to the market, either commercial bank or issue an infrastructure transmission bond, and build more transmission lines to ensure more reliability and more stability of power.”

Ketraco has already started working with private sector players to put up power infrastructure. In December last year, Ketraco signed an agreement with the consortium of Africa50 – owned by AfDB and 32 African countries – and Power Grid of India for the construction of the 180-kilometre high-voltage transmission line between Lessos and Loosuk and another 72-kilometre transmission line from Kibos through Kakamega to Musaga. The project also entails construction of substations and switch stations along the new lines.

Ketraco said the Africa50-Power Grid project is valued at $311 million (Sh40.4 billion).

In July this year, it said it is reviewing Privately Initiated Proposals (PIPs) for the construction of power lines totaling 380 kilometres and substations in different parts of the country. The proposals have been presented by a consortium of Pabari Investment Limited, ENCOMM and AEE Power.

The firms are proposing to design, finance and build the power infrastructure. On completion, they will operate the infrastructure while power utilities will pay them a fee referred to as wheeling charge for use of the infrastructure to transmit electricity from power plants to to the rest of the grid and to consumers premises.

Ketraco estimates that the project will require an investment of up to Sh65 billion.

An earlier proposal by Adani was kicked out in 2024 after Kenyans rejected the deal citing failure by the government to undertake public participation and the indictment of the firm in the US over bribery and fraud, although the charges against Gautum Adani have since been dropped.