Five lessons from Kenya's energy access boom

Wednesday, 14 September 2016 07:10 GMT

U.S. President Barack Obama talks with a solar power businessperson at the Power Africa Innovation Fair at the United Nations compound in Nairobi, Kenya, July 25, 2015. REUTERS/Jonathan Ernst

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Kenya's market for decentralised renewables is the fastest-moving in Africa

Kenya’s market for decentralised renewables is the fastest-moving in Africa. Already 15 to 20 percent of Kenyan households use solar lighting, and the country is home to a pioneering green mini-grids programme, thousands of biodigesters and 3,000 megawatts (MW) of micro-hydro systems.

I was recently invited to share Kenya’s experiences on this rapid expansion with policy-makers in Zimbabwe, as both our countries work to achieve universal energy access by 2030. 

Here are five key lessons for success:

1. Change perceptions 

The first step is to change perceptions around decentralised renewable energy among policy makers and the nation at large. At a global level, solar lighting and solar home systems - just one subset of decentralised technologies - have already led to savings of $3.5 billion from reduced expenditure on kerosene and diesel, millions of which has been saved in Kenya.

Decentralised renewables are not second best to the centralised grid. They are a vital part of the energy mix and we must accelerate their adoption. We have already seen the benefits of communities moving up the energy ladder from solar lights to bigger energy solutions, and now ordinary rural households and businesses can own their own solar energy systems, water pumps and agricultural machinery.

From government ministers to community leaders, investors to entrepreneurs, it is important that people understand the many ways decentralised renewables can rapidly improve lives and help us move towards both our energy goals and our broader sustainable development goals.

2. Enable privatisation to increase investment in energy access 

Privatisation of the energy market has had a huge impact on energy access in Kenya, attracting investment into the decentralised renewables sector and opening it up to innovation and competition, and the emergence of independent power producers.

Rapid growth has led to wholesalers entering the market and making bulk order purchases of solar technologies, reducing the costs of shipment and logistics. Meanwhile, increased finance and competition have led to technology and business model innovations - all reducing cost and expanding choice for consumers.

Kenya is now the biggest market for solar home systems and lanterns in Africa, with 30 percent of the continent’s sales, and is home to pioneering companies energising communities with biofuels, mini-grids and micro-hydro.

3. Use fiscal levers to jumpstart the market

To encourage more private-sector companies to enter the market, and more families and businesses to switch from unhealthy kerosene and diesel, Kenya has exempted quality-assured solar and other renewable energy products from taxes and tariffs. The country has no kerosene or diesel subsidies (which can negatively impact the deployment of clean alternatives by making them less competitive), and recently introduced a tax on kerosene. These fiscal levers have helped to catalyse the sector and rapidly increase energy access.

4. Support enterprises and organisations that enable consumer financing

The ability for customers to purchase power in installments has enabled millions of people to purchase clean energy services which, despite smaller long-term costs compared to kerosene and diesel generation, often have a high upfront cost.

Over 70 percent of Kenyans are part of a Savings and Credit Co-operative and the country has a strong micro-finance sector, enabling thousands of households to gain access to micro-loans or finance schemes to purchase decentralised renewable technologies.

The country also leads the world in mobile money, with 15 million Kenyans using the service. The wide reach of mobile money in Kenya means that hundreds of thousands of families already access credit for solar home systems and other services using the platform. M-KOPA, one organisation which operates a mobile payment system, has alone helped around 300,000 homes and businesses gain access to energy, while mini-grid companies such as Steama.co are using mobile finance to power communities. 

5. Create a strong, transparent independent regulatory agency

Kenya has a single independent regulatory agency - the Energy Regulatory Commission (ERC) - which works to create a strong enabling environment for the energy sector. The agency is in charge of economic and technical regulation of electric power, tariff-setting and review, licensing, enforcement of compliance, dispute settlement and approval of power purchase and network service contracts.

With a mandate to increase energy access, the ERC plays a role in the negotiation of Power Purchase Agreements and recently granted its first decentralised utility concession to the micro-grid company Powerhive. It is vital to create a strong, clear framework for action in order to accelerate change and attract more investment into the sector. 

Muriithi Micheni is in charge of economic and trade-related matters at the Kenyan Embassy in Harare, and also the promotion and boosting of investments/trade between Kenya and Zimbabwe.