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Kenyan companies are increasingly investing in their own power plants, adding 71.3 MW of capacity in the past year, as the national grid's installed capacity experienced a slight decline. This shift is driven by a desire for reduced energy costs, improved reliability, and sustainability goals amidst fluctuating national supply.
Kenyan businesses are significantly increasing their investment in captive power plants, adding 71.3 megawatts (MW) of capacity in the year leading to June 2025. This 13.4 percent surge brings the total installed captive capacity to 603.8 MW, up from 532.6 MW in 2024. The move comes as Kenya's national grid experienced a marginal dip in installed electricity generating capacity, falling to 3,192 MW in June 2025 from 3,199 MW in June 2024, according to a report by the Energy and Petroleum Regulatory Authority (EPRA).
This growing trend of self-generation is primarily motivated by companies seeking to reduce energy costs, enhance reliability, and meet their sustainability objectives by reducing emissions. Approximately half of the newly installed captive capacity is derived from solar power plants, reflecting a strong push towards renewable sources within the industrial sector.
Kenya's national electricity demand has been on an upward trajectory, hitting a historic peak of 2,363.41 MW on August 5, 2025, and previously 2,362.28 MW on July 23, 2025. This escalating demand is attributed to accelerating industrial activity, rapid urbanisation, and increased household consumption. Despite this, the installed capacity for major power plants feeding the national grid has seen a slight decrease.
The Energy and Petroleum Regulatory Authority (EPRA) noted that if the captive power capacity were integrated into the overall national installed capacity, it would push the total to 3,840 MW, accounting for 15.72 percent of the installed capacity. Kenya Electricity Generating Company (KenGen), the leading power producer in East Africa, generates over 60% of the electricity consumed in Kenya, primarily from hydro and geothermal sources.
Recent reviews in the regulatory framework now permit companies to export excess power generated from their captive plants to the national grid and later draw it back for their own use when their plants are not producing. This policy aims to improve grid stability and optimise energy utilisation. Kenya's Net Metering Regulations, introduced in 2020, also facilitate this by allowing consumers to feed surplus power back into the grid, encouraging the adoption of rooftop solar installations.
The Energy Act of 2019 provides a framework for promoting renewable energy, including Feed-in Tariff (FiT) policies that guarantee fixed prices for renewable energy producers. However, the implementation of FiT and net-metering policies has been slow. A moratorium on new Power Purchase Agreements (PPAs) in the first quarter of 2021 also slowed investments in new power plants, contributing to a reliance on imports from neighbouring countries.
Industrial consumers, particularly large companies, are increasingly opting for self-generated electricity due to concerns about power reliability, quality, and the pursuit of cheaper, more sustainable energy sources. For instance, Mombasa Cement recently commissioned a 10MW solar plant at its Vipingo site in Kilifi County to reduce reliance on the national grid, cut costs, and lower its carbon footprint. This highlights a growing trend in industrial self-generation as manufacturers prioritise energy security and sustainability.
Analysts suggest that this development could significantly influence public debate and policy execution in the near term, with stakeholders calling for greater clarity on timelines, costs, and safeguards related to energy policy.
The increasing adoption of self-generation by large consumers poses potential challenges to the established structures of the energy sector. With reduced sales to these key industrial customers, utilities like Kenya Power and Lighting Company (KPLC) may face pressure to pass on higher system maintenance costs, Power Purchase Agreement (PPA) obligations, and the expenses of operating idling capacity to remaining customers through increased tariffs. KPLC has historically faced challenges including system losses, under-investment, and unmet customer expectations. The utility has also been scrutinised for escalating power tariffs and financial woes.
The long-term impact of widespread self-generation on the national grid's stability and financial viability of Kenya Power remains to be fully understood. While current regulations allow for excess power export, the mechanisms for seamless integration and equitable compensation require continuous evaluation and refinement. The pace of implementation for policies like Feed-in Tariffs and net-metering will be crucial in shaping the future energy landscape.
Observers will be keenly watching how the government and energy regulators respond to the increasing trend of self-generation. Future policy decisions regarding grid access, tariff structures, and incentives for renewable energy adoption will be critical. The continued investment by private firms in captive power plants, particularly solar, signals a significant shift in Kenya's energy landscape, potentially leading to a more decentralised and diversified power sector. The ongoing rehabilitation of existing power plants, such as KenGen's Olkaria I geothermal plant, which aims to boost capacity from 45 MW to 63 MW by 2026, will also be important in meeting national demand.
Kenya's energy sector continues to grapple with challenges such as an aging infrastructure, insufficient generation capacity to meet rapidly growing demand, inadequate maintenance, and financial constraints faced by the primary distributor, KPLC. Theft and vandalism also contribute to revenue loss and compromise safety within the power sector. Despite these challenges, Kenya aims for 100% renewable electricity generation and universal electricity access by 2030.
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