Kenya's local electricity tariffs remain among the highest in the Eastern and Central African region, at an average of $0.26 (Sh33.60) per kilowatt-hour (kWh). The price is significantly higher compared to some of its neighbors such as Ethiopia, Tanzania, and Uganda, according to a new report by the Parliamentary Budget Office (PBO). The difference in electricity tariffs has been at the center of heated discussions, especially with the cost of energy still a big burden for Kenyan households.
Comparative Regional Electricity Prices
The PBO report identifies the massive difference in electricity costs in the region. While Kenyans pay $0.26 per kWh, the neighboring countries have significantly lower prices:
- Uganda: $0.17 per kWh
- Tanzania: $0.09 per kWh
- South Africa: $0.12 per kWh
- Ethiopia: $0.006 per kWh
This price difference underscores the economic barrier for Kenyans, even more in comparison to lower electricity in Ethiopia at very minimal rates due to its enormous hydropower generating potential.
Why Kenyan Electricity Prices Are High
Kenya's high electricity prices are a result of a combination of several issues. Leading among them are the Power Purchase Agreements (PPAs) that Kenya Power has signed with independent power producers (IPPs). These contracts, signed several years ago, have expensive wholesale prices that are making it difficult for Kenya Power to lower retail prices without incurring losses. Despite the recent attempts by the government to renegotiate the contracts, most of the power producers—whose majority have foreign investors backing them—have resisted price cuts, citing financial sustainability.
In addition to the PPAs, the overall cost of electricity is increased by various taxes and charges levied on every unit of electricity consumed. They include:
- Four taxes
- A foreign exchange charge
- A fuel surcharge
- A consumption charge
These charges contribute significantly to the overall cost paid by households, which makes electricity even more expensive to ordinary Kenyans.
Power Purchase Agreements and Their Impact
The Power Purchase Agreements (PPAs) cannot be overstated in the rising cost of electricity. The agreements lock into long-term contracts with independent producers at prices that exceed market prices in most cases. Kenya Power, which distributes electricity, has not been able to negotiate for lower prices with the producers.
In 2022, the Kenyan government made an effort to pressure power producers into reducing the wholesale prices at which they sell power to Kenya Power. This would have allowed the utility company to pass savings onto consumers. This move was, however, resisted by power producers, the majority of whom were not ready to reduce their prices. This has placed Kenya Power in a difficult position, being unable to reduce consumer prices without incurring a significant blow to its profitability.
The Role of Hydropower in the Neighboring Nations
In contrast to Kenya, neighboring nations like Ethiopia and Uganda have lower electricity prices primarily because they are major producers of hydropower energy. Hydropower is less expensive and cleaner compared to thermal or fossil fuel-based electricity generation, which remains the principal source of electricity in Kenya.
Ethiopia, for example, has invested heavily in hydropower infrastructure and has a high level of dams that provide a steady low-cost source of power. Ethiopia's government also owns the majority of electricity generation in the country, keeping prices low for customers. Uganda, as well, relies on hydropower and has a lower-cost and more reliable electricity grid.
Reliability of Electricity Supply
Whereas countries like Ethiopia and Uganda have lower-priced electricity, they also have a more reliable supply of power, at least in urban areas. Kenya, on the other hand, suffers from frequent power outages and inconsistent distribution of electricity, largely due to the complexities of its larger, more spread-out power grid. Although the country is in the process of expanding the grid and improving reliability, the frequent blackouts are a significant issue.
In countries like Tanzania and South Africa, lower electricity tariffs come at the cost of unreliable supply. Frequent power disruptions and supply interruptions can negate the benefits of low electricity tariffs, making the cost of electricity a secondary issue for households that experience frequent power blackouts.
Recent Trends in Kenya's Electricity Consumption
Despite the expensive electricity, Kenya Power has posted increased growth in electricity sales in recent months. Data from the Kenya National Bureau of Statistics (KNBS) shows that electricity sales rose by 8.5% in January 2025 to a level of 956.76 million kWh. This is the sixth consecutive month that the company has sold over 900 million kWh, except in December 2024, when the usage declined slightly to 882.09 million kWh.
This growth results from a combination of factors, including increased industrial activity and the expanding number of businesses in the country. Industrial and commercial customers consumed about 55% of the total electricity sales, reflecting the increased demand for power with the ongoing growth of Kenya's economy.
The Evolution of Power Generation in Kenya
To meet the heightened demand, domestic power producers such as the Kenya Electricity Generating Company (KenGen) have ramped up production. In January 2025, Kenya's power production reached 1,085.14 million kWh, the highest since February 2024, the last time production fell below the 1,000 million kWh mark.
Kenya Power's annual electricity sales exceeded 10,000 gigawatt-hours (GWh) in 2023, closing the financial year ending June 2024 at 10,516 GWh. This is a trend that is bound to continue, with the company projecting that peak demand will have exceeded 2,800 MW in four years' time as more consumers are connected to the grid.
The Future of Kenya's Energy Sector
The future of Kenya's energy sector is being shaped by ongoing efforts to reduce the cost of electricity and improve the reliability of power supply. Both Kenya Power and the government have made progress in expanding the national grid and increasing the contribution of renewable energy to the country's energy mix. Kenya has also accelerated the expansion of geothermal energy, a clean and relatively affordable source of power, in a bid to stem overdependence on expensive thermal generation.
However, significant challenges remain, especially in terms of negotiating with power producers to reduce wholesale prices and confronting the high incidence of blackouts that continue to blight the lives of many Kenyans.
Conclusion
Kenya's electricity prices are among the highest in the region, and the country continues to struggle to provide affordable, reliable power to its citizens. While neighboring countries like Ethiopia and Uganda have lower costs of electricity as they rely on hydropower, Kenya's use of expensive PPAs and fossil fuels maintains higher prices.
As Kenya goes forward, the government and Kenya Power will need to work together in devising long-term solutions for lowering the cost of electricity and improving reliability of supply. This will be necessary in facilitating Kenya's energy sector to support the country's growing economy while making energy affordable to all consumers.
External Links for Further Reading:
- Kenya Power's Annual Report 2023 - Kenya Power
- Kenya National Bureau of Statistics - Energy Consumption Data
- Energy and Power in Ethiopia - African Development Bank
By making sense of the intricacies involved in Kenya's electricity cost, consumers, investors, and policymakers alike can effectively deal with the changing environment and advocate for adjustments that will favor all.