NEW ENERGY ACT EMBRACES RENEWABLE ENERGY

The importance of renewable energy sources in Kenya’s energy mix has received renewed recognition through the enactment of the Energy Act, 2019, signed into law on 12 March 2019 and now in force.

The Act repeals three pieces of legislation, namely the Energy Act, 2006, the Kenya Nuclear Electricity Board Order, 2013 and the Geothermal Resources Act, 1982. It sets out distinct functions for the national and county governments, promotes renewable energy and the exploration and commercial utilisation of geothermal energy, and provides for the regulation of hydrocarbon activities, production supply and the use of electricity and other energy forms. The Act brings a number of new structures and systems to the energy sector but is not without its challenges, some of which we discuss in this update.

A whole new regulatory regime

A core tenet of the Energy Act, 2019 is that it recognises the changing environment of energy regulation in Kenya. It does so by taking cognisance of the different sources of renewable energy and the creation of the corresponding licensing and regulatory agencies, as well as a dispute resolution tribunal. These new bodies are the Energy and Petroleum Regulatory Authority (EPRA), the Energy and Petrol Tribunal (EPT), the Rural Electrification and Renewable Energy Corporation (REREC) and the Nuclear Power and Energy Agency (NPEA).

EPRA replaces the Energy Regulatory Commission established under the Energy Act, 2006 while REREC will replace the Rural Electrification Authority. The EPT will be the successor to the Energy Tribunal, also established under the 2006 Energy Act, and the NPEA replaces the Kenya Nuclear Electricity Board under the Kenya Electricity Board Order, 2012. Management and staff will automatically transfer to each new entity.

We note that the powers of EPRA and EPT have been extended to include additional powers and functions in order to effectively regulate and deal with disputes within the petroleum and energy sectors. For instance, EPRA will now be established as an independent authority not subject to the control of any person or body except as provided in the legislation.  

Various existing energy sector entities continue with their mandate under the Act. These include Kenya Power and Lighting Company, Kenya Electricity Generating Company, Kenya Electricity Transmission Company, National Oil Corporation, Kenya Pipeline Company and Kenya Petroleum Refinery Limited, among others.

Renewable energy: A toast to the future

The Energy Act embraces the new developments in renewable energy sources and their contribution to the sustainability of the environment. The Act therefore crystallises the Feed-in Tariff Policy (2008) into law, and we expect further regulations to be enacted dealing with the modalities of the tariff. It was expected that a renewable energy auction system would be introduced but parliament preferred the Feed-in Tariff system.

All unexploited renewable energy resources are now emphatically vested in the national government, subject to written law rights granted or recognising renewable resources as being vested in any other person. This is in line with the duty vested in the government on the exploitation and protection of natural resources under the Constitution of Kenya.

The cabinet secretary responsible for energy will, within one year of the commencement of the Act, carry out a countrywide survey and a resource assessment of all renewable energy resources. Twelve months may arguably be too short a time to complete this exercise and map out resources but an early start could expedite the process. The findings will be critical as they will be used to prepare an 'energy resources inventory and resource map', which is to be updated biannually.  

This will set the stage for extensive exploitation of renewable resources to meet the country's energy needs and requirements.

National and county government functions

The Act has set out clear roles between the national government and the county governments in relation to energy infrastructure.

National government functions include national policy formulation, energy regulation and licensing functions and, operations and development of energy infrastructure, especially for natural resources-based energy. The county functions include county energy planning and regulation of energy operations such as gas reticulation, charcoal production, biomass and biogas licensing, among others. We expect that the clearly defined roles will avoid duplication and prevent double-permitting at both the national and county levels.

Downstream coal development

The Energy Act introduces a framework for the licensing and operation of downstream coal production and distribution for energy. Strict compliance is required with the environmental health, safety, planning and maritime laws. This will ensure the environmentally friendly exploitation of the vast coal resources in the country for the generation of energy to meet the growing energy needs of consumers and industry.

Care has been taken to address the biggest concerns raised by communities and individuals on the development of coal energy (as has been seen in the Lamu Coal plant project). With this in mind, the Act provides for licensing only upon consideration of the impact of the undertaking on the social, cultural or recreational life of the community. An environmental liability policy is required before a permit or licence is issued to develop coal production.