The Kenya Institute for Public Policy Research and Analysis (KIPPRA) has highlighted a significant financing deficit hindering Kenya’s goal of universal electricity access by 2030. The think tank’s recent policy brief reveals that the country faces an $8 billion (Sh1 trillion) shortfall in funding required for energy projects planned between 2018 and 2022.
Kenya’s electricity access currently stands at 75%, with rural areas lagging behind urban centres. Despite government efforts to expand connectivity, inadequate financing across generation, transmission, distribution, and off-grid electrification remains a major barrier.
Key Recommendations
- Adopt innovative financing models: KIPPRA urges moving beyond traditional funding to attract private investment and reduce foreign exchange risks.
- Use local currency Power Purchase Agreements (PPAs): To mitigate costs linked to exchange rate fluctuations affecting foreign currency-denominated projects.
- Expand private sector involvement: Through models like Build Own Operate Transfer (BOOT), long-term concessions, and merchant line arrangements proven effective in countries such as India, Brazil, and Australia.
- Promote Corporate Power Purchase Agreements (CPPAs): These agreements offer long-term revenue certainty for power producers and reliable electricity supply for businesses.
KIPPRA also emphasizes the necessity of strengthened regulatory frameworks, enhanced accountability, and institutional reforms to support these financing innovations. Land acquisition challenges, particularly delays in wayleave compensation, are identified as additional obstacles affecting infrastructure development and investor confidence.
The report underscores that bridging the financing gap is critical for Kenya to meet its commitments under the United Nations Sustainable Development Goal 7 and the national Energy Transition and Investment Plan (2023-2050).
