Recent reports (published by the Business Daily Africa, ESI Africa's Power Journal and Standard Media Kenya) show that Kenya’s Energy Regulatory Commission (ERC) is in the process of drafting new regulations, which are expected to be implemented by the end of Q1 2017. The new regulations are expected to introduce competitive auctions for awarding renewable energy projects in Kenya, shifting from the current feed-in tariff regime under the Feed-in Tariff Policy 2012 (revised in December 2012) which offers tariffs for small renewable projects up to 10MW and for large renewable projects above 10MW.
Currently, the feed-in tariff system offers project developers and investors pre-determined rates for wind, geothermal, solar, biogas, hydro and biomass energy power projects without any requirement for tendering. As is typical in renewable energy programmes in other developing markets, the feed-in tariff system offers reliability, transparency and equality to developers.
The main argument to move away from feed-in tariffs and adopt a competitive auction system is to introduce competition amongst project developers and investors in order to achieve lower pricing. The ERC believes that this new approach will encourage project developers and investors to reduce tariffs which ultimately benefits the end consumers.
Some commentators have said that the shift to a competitive auction process will spur growth in the solar sector in Kenya. Despite Kenya’s substantial solar potential there are currently no operational solar plants with a grid connection, although several projects are in the development phase.
More than 60 countries to date use auctions to develop renewable energy projects including South Africa, Morocco, and Zambia.