Financing Renewable Energy

Public Finance

The Government of Kenya demonstrates its commitment to the promotion of the renewable energy projects through the enactment of enabling and facilitative policy instruments including the Feed-in Tariff (FiT) policy. This was first published in 2008 and subsequently updated in 2010 and 2012. By guaranteeing a technology based fixed price (in US$) for power feeding into the national gird, the government by extension provides income generating security to project developers which they can use to obtain project finance. FiT aims to oblige purchasing of generated power, to lower the barriers for renewable energy interventions compared to conventional electricity generation and to ultimately facilitate a sustainable market. In addition, the Government announced in January 2012 the intention to establish a Green Energy Fund to boost renewable energy generation. The fund is intended to “lend to viable projects at concessional rates” and provide a “trust fund for training and research” and to develop project proposals. Concessional loans were to be disbursed through commercial banks.

Development Finance

Kenya receives substantial support from international organizations toward supporting renewable energy development. This assistance is coordinated through the Kenya Joint Assistance Strategy (KJAS), consisting of over 15 major development partners including the World Bank, African Development Bank (AfDB) andAgence Française De Développement (AFD) among others. The KJAS partners have signed agreements with the Government on partnership principles that will coordinate the support. The KJAS Working Group on Energy, currently chaired by AFD, is an effective forum for enhancing the development impact of available resources through better alignment of assistance programs with Government‘s priorities and for dialogue with Government on the implementation of its energy strategy. Other partners under KJAS include European Investment Bank (EIB), United National Development Programme (UNDP), United Nations Environmental Programme (UNEP), German Development Bank (KfW), Japanese International Cooperation Agency (JICA), United Stated Agency for International Development (USAID). Notable programmes include the Regional CDM capacity building project for sub-Saharan Africa; Development and Implementation of a Standards and Labelling Programme in Kenya with Replication in East Africa; Cogen for Africa; Greening the Tea Industry in East Africa; LGGE (Low Green House Gas Emission Buildings) Promoting Energy Efficiency in Buildings in Eastern Africa; and Eastern Africa Rift Geothermal Development Facility Project (ARGeo) among others.

Climate Finance

Kenya has been selected as a pilot country under the Scaling-Up Renewable Energy Programmes in Low Income Countries Programme (SREP). SREP was established to scale up the deployment of renewable energy solutions and expand renewables markets in the world’s poorest countries.SREP financing supports technologies such as solar, wind, bio-energy, geothermal, and small hydro technologies. US$ 50 million has been allocated to Kenya under the programme and will be used to expand geothermal development and mini-grid capacities. SREP promotes both public and private sector actions to remove barriers that might otherwise inhibit scaled-up private sector investments. SREP is country-led and builds on national policies and the activities of other existing energy initiatives.

Commercial Finance

Kenya’s banking system includes a large number of local and international banks which may be interested in funding renewable energy projects although their engagement has been modest up to date. In April 2011, Agence Française De Développement (AFD) unveiled a €2.6 million project providing technical assistance to renewable energy and energy efficiency investment in Kenya, Uganda and Tanzania. An additional €30 million was made available as a line of credit administered through CFC Stanbic and the Cooperative Bank.