KENYA Law and Practice Contributed by: Mary Waithiegeni Chege, Mary Anne Wachira and Joy Odhiambo, EMSI & Asssociates
1.8 Unique Aspects of the Power Industry A unique feature of Kenya’s power industry is its reli- ance on renewable energy sources, including geother- mal, wind, solar and hydro power, which comprise close to 85% of installed capacity, with a target of 100% by 2030. in particular, Kenya was the first and leading African country to tap into its geothermal resources, ranking as the 6th largest producer glob- ally, with over 988 MW installed capacity. Notably, the LCPDP records that all diesel and gas oil power plants are expected to be decommissioned by 2035. The Energy Act empowers EPRA, in consultation with the Ministry of Energy and Petroleum, to periodically review the electricity market to enhance competition, improve efficiency, strengthen reliability and security of supply, and ensure better quality of service among licensees. Under the Energy (Electricity Market, Bulk Supply and Open Access) Regulations, the electricity market is structured into wholesale and retail segments, each covering both capacity and energy markets. Market participants include the system operator, generators, transmission and distribution licensees, retailers, con- sumers, and eligible consumers, reflecting a multi- buyer, multi-seller framework. 2. Market Structure, Supply and Pricing 2.1 The Wholesale Electricity Market Electricity pricing in Kenya is still largely determined through long-term contractual arrangements, par- ticularly PPAs, which are subject to EPRA approval. These contracts typically include capacity payments on a take-or-pay basis and variable energy charges. While the regulatory framework provides for competi- tive energy and capacity markets, these remain at an early stage of development and have not yet evolved into fully competitive trading platforms. Transmission and distribution charges are regulated and applied through approved tariff methodologies, rather than nodal pricing.
• the adoption of competitive procurement mecha- nisms, particularly auctions for wind, solar and battery energy storage systems; • greater transparency in tariff-setting through regu- lar publication and review of indicative tariffs; and • mandatory legal review of PPA amendments by the Attorney General. The Committee also proposed more flexible curren- cy structuring to better match local and foreign cost components. The report placed strong emphasis on infrastruc- ture development, including prioritising transmission expansion and encouraging public-private partner- ships for both generation and transmission projects. Institutional reforms were also proposed, such as establishing an independent IPP procurement office and transferring electrification programmes to REREC, allowing Kenya Power to transition toward a more commercially focused model. Additional recommendations included: • accelerating off-grid electrification under the Kenya Off-Grid Solar Access Project (KOSAP); • introducing preferential tariffs for Special Economic Zones; • creating a land valuation index to reduce project delays; and • strengthening governance through legislative amendments and improved contractor oversight. Implementation was designed as a phased process, with actions spread across three, six, nine and 12 months, and longer-term measures extending up to 36 months, supported by semi-annual reporting. In parallel, EPRA introduced significant regulatory changes. In January 2026, it revoked existing guide- lines governing returns on equity (ROE), return on investment (ROI), feed-in tariffs and benchmark tariffs, removing standardised approaches to tariff-setting. Earlier updates in 2024 had already tightened tariffs while adjusting ROE benchmarks. This shift reflects a transition toward a market-oriented framework, rely- ing more on case-by-case approvals, competitive pro- curement and negotiated tariff structures.
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