Kenyan businesses ready to electrify, but grid constraints slow progress

Businesses link electrification to lower long-term operating costs and greater protection from future energy price shocks. [File, Standard]

Walk through Nairobi’s Industrial Area on any weekday morning and you will hear it before you see it.

Behind factory walls and warehouse compounds, diesel generators rumble into life, providing backup power to businesses that cannot afford to stop production when the grid fails.

The sound has become a familiar part of doing business in Kenya.

But increasingly, it is a sound that many companies would rather leave behind.

A new survey of business leaders has found that Kenyan firms are overwhelmingly ready to electrify their operations, viewing clean electricity not as an environmental obligation but as a pathway to growth, lower costs and greater competitiveness.

The findings come from Powering Up Business: The Case for Clean Electrification, a survey of senior executives across 18 countries that examined how businesses view the transition from fossil fuels to electricity-powered operations.

The findings challenge a long-standing perception that businesses resist climate action because it is expensive.

Instead, the survey suggests that Kenyan companies are eager to move away from fossil fuels but are being held back by an electricity system struggling to keep pace with their ambitions.

According to the report, 98 per cent of Kenyan business leaders say electrifying their operations would help their companies grow, while 96 per cent believe it would make them more competitive. Almost all respondents also link electrification to lower long-term operating costs and greater protection from future energy price shocks.

Yet despite this enthusiasm, 87 per cent of executives say government preparations to upgrade the power system are not keeping pace with their own efforts to electrify. More than eight in ten report having delayed or shelved electrification projects because of market barriers.

The result is a growing disconnect between policy ambition and business reality.

Kenya has spent years building a reputation as one of Africa’s renewable energy success stories.

Nearly 90 per cent of the country’s electricity is generated from renewable sources, largely geothermal, hydropower and wind.

The government’s National Energy Policy aims to connect all Kenyans to electricity within the next eight years, with the additional power expected to come from renewable sources.

Yet many businesses say access to electricity is only part of the challenge.

Reliability, affordability and infrastructure capacity remain major concerns.

At manufacturing plants, cold-storage facilities and processing factories, power interruptions often mean turning to diesel generators, significantly increasing operating costs.

For many firms, the transition to clean electricity has become less about environmental responsibility and more about economic survival.

The report notes that reliable access to affordable electricity can lower operating costs, improve productivity and strengthen access to export markets.

That matters for businesses operating in an increasingly competitive regional market.

Manufacturers already face high production costs, rising taxes, expensive financing and competition from imported goods. Energy costs add another burden.

One executive quoted in the report warned that unreliable power continues to undermine productivity and profitability, despite Kenya’s impressive renewable energy achievements.

Business leaders say the stakes have become even higher following recent global energy shocks.

The survey found that 83 per cent of Kenyan executives believe the country is too dependent on fossil fuel imports, while 80 per cent expect geopolitical instability to increase future energy costs, the highest level of concern among all 18 countries surveyed.

Those fears are rooted in recent experience.

When global oil prices surged following Russia’s invasion of Ukraine, Kenya’s fuel import bill soared. Transport costs rose, food prices increased and businesses faced growing pressure from higher energy expenses.

For companies, electrification increasingly represents a hedge against future volatility.

Nearly all executives surveyed said moving operations to electricity would provide greater price stability during external shocks.

Wangari Muchiri, a renewable energy engineer, noted that renewable energy shields businesses from the price spikes often triggered by wars and global instability.

Yet if the business case for electrification appears increasingly clear, many firms say the practical obstacles remain daunting.

Executives identified inadequate transmission infrastructure as one of the biggest barriers to faster progress. An overwhelming 94 per cent said investment in transmission infrastructure is essential for Kenya’s electrification journey, while 97 per cent pointed to energy storage solutions as critical. Another 94 per cent believe such investments would lower long-term energy costs.

The challenge reflects a broader shift in Kenya’s energy story.

Over the past two decades, the country has dramatically expanded electricity access. According to World Bank data cited in the report, connection rates have increased almost fivefold, reaching 76 per cent of the population.

The next phase, however, is proving more complex.

Muchiri noted that connecting homes to the grid is one thing. Building a power system capable of supporting electric factories, electric vehicle fleets, cold-chain logistics and energy-intensive industries is another.

Businesses argue that the country’s infrastructure has not evolved quickly enough to meet these new demands.

The report also points to bureaucracy and policy uncertainty as major obstacles.

Forty-four per cent of executives say clearer long-term policy planning would help accelerate electrification, while an equal proportion cite the need for faster grid-related approvals.

Those findings suggest that many companies are not simply looking for financial incentives.

They want certainty, predictable regulations and faster decision-making.

The survey found that government grants or subsidies to help cover the upfront cost of switching equipment remain the most popular policy intervention among Kenyan businesses, supported by 64 per cent of executives, the highest level among all countries surveyed.

That reflects a common challenge in the energy transition.

While electric technologies often reduce costs over time, the initial investment can be substantial, particularly for small and medium-sized enterprises that form the backbone of Kenya’s economy.

For policymakers, the findings present both an opportunity and a warning. The opportunity is that businesses appear ready to embrace electrification at a scale rarely seen in many developing economies.

The report warned that delays in upgrading infrastructure, streamlining approvals and providing clear policy direction could slow investment and weaken Kenya’s competitive advantage.