Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

Under the Energy Act, any person who wishes to generate, import or export, transmit or distribute electrical energy is required to obtain a licence or permit from the ERC. This requirement is further enumerated under the Energy (Electricity Licensing) Regulations, 2012 (Licensing Regulations) which set out the application process for various permits and licences.

Under the Licensing Regulations, no permit or licence is required to generate electricity where the electricity generated does not exceed 1,000kW and is generated for own consumption. A permit is required for the generation and supply of electrical energy not exceeding 3,000kW and a licence is required for generation, transmission, distribution or supply of electrical energy exceeding 3,000kW.

Where a project is to be undertaken under the FIT Tariff Policy regime, the project will require prior approval from the Ministry of Energy and Petroleum. The FIT Tariff Policy - Application and Implementation Guidelines provide that an applicant will have to submit an expression of interest to the Ministry of Energy and Petroleum together with a FIT Project Application Form. If the application is approved, the applicant can begin negotiations on the power purchase agreement with KPLC.

It is also worth noting that there are a number of other licences and permits required under other national and county laws that an applicant would be required to obtain in order to operate a generation facility, including an environmental impact assessment licence issued by the National Environmental Management Authority, approval of development permissions and building plans by the relevant county government and registration of the project site as a workplace with the Director of Occupational Safety and Health under the Occupational Safety and Health Act, 2007.

Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

Kenya enacted a new grid code in May 2017 comprising of:

  • the Kenya National Electricity Transmission Grid Code, May 2016, developed to improve the ability of Kenya’s power system to be used by multiple independent parties while being planned and operated safely, reliably, efficiently and economically in a non-discriminatory manner; and
  • the Kenya National Distribution Code May 2016, developed to define the rules and regulations for various users for accessing and using the distribution system.

The grid code is the primary technical document stipulating rules and regulations that various players in the electricity production chain are expected to abide by for efficient operation of the transmission system.

It is also the government’s current policy for all new transmission infrastructure to be constructed, owned and operated by KETRACO. This policy is in line with the unbundling of the energy sector in Kenya which provides for all existing transmission infrastructure to be held by KPLC, but for all new transmission infrastructure to be developed by KETRACO.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

Government policy and legislation in Kenya encourages the use of renewable sources of energy to generate power.

From a policy point of view, the Energy Policy highlights the role of the government in promoting the use of renewable sources of energy such as designing incentive packages to promote private sector investments in renewable energy and other off-grid generation and government support in research and development in emerging technologies like wind energy generation. The FIT Policy also provides the framework for renewable sources of energy that may be used in the generation of electricity. The FIT Policy requires power producers to sell renewable energy generated electricity to KPLC, which is the single offtaker currently operating in the Kenyan market and provides qualifying tariffs for a set period of time.

The primary legislation for the energy sector, the Energy Act, provides for the development of renewable sources of energy including biomass, biodiesel, bioethanol, charcoal, fuel wood, solar, wind, tidal waves, hydropower, biogas and municipal waste.

In addition, there are several other regulations enacted to promote the use of renewable energy sources, such as the Energy (Solar Water Heating) Regulations, 2012, which require all existing premises with hot water requirements of a capacity exceeding 100 litres per day to install and use a solar heating system.

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

Kenya has in place a number of policies and laws aimed at addressing the challenges brought about from climate change. In particular, Kenya recently enacted the Climate Change Act, 2016, which aims at improvement of efficiency and reduction of emissions through the uptake of technologies that support low carbon, and climate-resilient development. This is in addition to the National Climate Change Response Strategy, the National Climate Change Action Plan (NCCAP) and the Paris Agreement to which Kenya is a signatory.

Under the NCCAP, Kenya has pledged to cut its carbon emissions to 30 per cent below ‘business-as-usual levels’ by 2030, by expanding solar, wind and geothermal power, and bringing forest cover to up to 10 per cent of the country while reducing reliance on wood fuel. This has seen Kenya focus on diversifying her energy sources from thermal power to geothermal power. The use of geothermal power has steadily grown from 20 per cent of the total electrical energy produced in June 2013 to 40 per cent as at December 2016.

Storage

Does the regulatory framework support electricity storage including research and development of storage solutions?

Not applicable.

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

Kenya is exploring the possibility of setting up nuclear power plants. In this regard, the Kenya Nuclear Electricity Board (KNEB) was established to help promote the development of nuclear electricity generation in Kenya.

KNEB works under the guidance of the International Atomic Energy Agency (IAEA), which is the international body that promotes unified cooperation in nuclear energy for countries across the world. Its main aim is to promote safe and secure use of nuclear technologies in various countries. KNEB, with the assistance of the IAEA, has developed a Draft National Nuclear Regulatory Bill, 2017 (the Draft Nuclear Bill) and a draft Nuclear Policy. Concurrently, the Energy Bill, 2017, which has been published and will soon be before Parliament for debate, provides for the establishment of the Energy and Petroleum Institute, which will promote the development and generation of nuclear energy in Kenya.

KNEB has already conducted pre-feasibility studies in Kenya for the proposed development of a nuclear power plant.