Kenya Lifts the IPP Moratorium

Last Updated 3 hours ago by Kenya Engineer

On 12 November 2025, the National Assembly made a decision that is set to redefine Kenya’s electricity landscape: the lifting of the moratorium on new agreements with Independent Power Producers (IPPs).

For nearly three years, Kenya had halted the signing of new Power Purchase Agreements (PPAs) as concerns mounted over rising electricity costs, opaque contracts, and the financial strain on the national utility, Kenya Power and Lighting Company (KPLC). The freeze was intended to create space for reforms—reforms that have now been formally unlocked.

The reopening of the generation market comes at a critical time. Kenya’s peak demand has been edging dangerously close to available supply, forcing increased reliance on imports during certain hours. Transmission and distribution constraints have further complicated delivery. The decision by Parliament signals a renewed commitment to addressing these challenges through a re-energised, more transparent, and more competitive investment framework.

Why the Moratorium Was Imposed

The moratorium was introduced following a period of intense scrutiny into the cost of electricity and the structure of long-term PPAs. Several issues drove the pause:

• High cost of IPP-generated power, often denominated in foreign currency, making tariffs vulnerable to exchange-rate swings.
• Governance concerns, including lack of clarity on project ownership and the nature of certain negotiated deals.
• Financial pressure on Kenya Power, which was struggling under take-or-pay obligations and rising wholesale costs.
• Need for sector recalibration, particularly as Kenya moved toward integrating more renewables and introducing competitive procurement.

The intervening years saw a series of investigative reports, public hearings, and sector-wide reviews. The lifting of the freeze is therefore not a return to the old regime—it is the beginning of a new one.

What Parliament Changed on 12 November

With the lifting of the moratorium came a package of reforms aimed at restoring confidence and protecting consumers:

1. Full ownership transparency

The Business Registration Service has been directed to publish the beneficial owners of all IPPs within six months. This is meant to eliminate hidden interests and rebuild trust in private-sector participation.

2. Currency flexibility in future PPAs

New agreements may now be denominated in Kenyan Shillings, foreign currency, or a hybrid structure. This flexibility is intended to reduce foreign-exchange exposure—one of the key drivers of high retail tariffs.

3. Competitive procurement as the norm

Future generation projects will primarily be procured through open, competitive processes such as auctions. This aligns Kenya with global best practice and is expected to introduce downward pressure on wholesale prices.

4. Price discipline

New PPAs will be subject to clear pricing benchmarks to prevent runaway costs. While Kenya must still attract capital, Parliament has emphasized affordability as a core principle.

5. Strengthened oversight

All future contractual variations or amendments will require legal review by the Attorney General. This closes loopholes that once allowed escalation of terms after initial signing.

Why the Sector Needed This Decision Now

In recent years, Kenya has had a paradox: significant renewable potential and installed capacity, yet episodes of tight supply and localized shortages. Generation expansion slowed sharply during the moratorium, even as industrial and urban demand continued to rise.

Several trends created pressure for action:

• Rapid industrialization in key manufacturing zones.
• Urban growth driving up household consumption.
• Electrification of transport, including e-mobility pilots.
• Emerging data-center developments, which require reliable baseload power.

Energy planners faced an uncomfortable prospect: without new generation and investment—particularly in flexible, low-cost technologies—the country risked reliability challenges that could undermine economic growth.

The lifting of the moratorium therefore restores momentum at a moment when Kenya cannot afford to stall.

Opportunities and Implications for the Engineering Sector

A revived pipeline of projects

The decision is likely to unlock new solar, wind, geothermal, biomass, and hybrid mini-grid investments. Engineering firms—civil, electrical, mechanical, and consultancy—should expect an uptick in feasibility studies, EPC contracts, quality assurance assignments, and O&M contracts.

Demand for advanced technology and grid solutions

Growing variable renewables will increase the need for:

• battery energy storage systems (BESS)
• SCADA upgrades
• reactive-power compensation
• modern switchgear and substation automation
• new transmission corridors and reinforcement projects

This is where Kenya’s technical workforce and suppliers will play a decisive role.

Industrial consumers stand to benefit

Large power users may gain access to more competitive tariffs as new capacity comes online under a reformed framework. The shift also opens possibilities for corporate PPAs, behind-the-meter generation, and energy-efficiency retrofits.

Procurement and spare parts markets will expand

A generation ramp-up translates directly into greater demand for transformers, control equipment, protection systems, meters, cabling, and specialized spare parts. Platforms like Kenya Engineer’s procurement assistance service will play a growing role in connecting industry buyers with global suppliers.

Challenges That Still Require Engineering Solutions

Lifting the moratorium is only step one. As new capacity is introduced, Kenya must confront several unresolved engineering challenges:

• Transmission bottlenecks that delay evacuation of renewable power.
• Aging distribution infrastructure, particularly in high-growth urban centers.
• Grid stability issues associated with high renewable penetration.
• Need for stronger regional interconnections to leverage power-pooling opportunities.

These challenges demand professional expertise, investment, and technology—areas where Kenyan engineers and technologists will be central.

Looking Ahead

The end of the IPP freeze marks a pivotal moment. Kenya is not merely reopening the door to private generation; it is redefining the terms of engagement.
If the new framework is implemented faithfully—transparent procurement, disciplined pricing, sound governance, and strategic grid investment—Kenya can accelerate toward a cleaner, more reliable, and more competitive electricity system.

For engineers, technicians, project developers, and industrial stakeholders, this new chapter offers both opportunity and responsibility. The sector now has a chance to shape Kenya’s energy future with integrity, innovation, and technical excellence.