Kenya will soon follow South Africa in adopting competitive auctions as a process to award renewable energy projects.
According to media reports, the government will soon replace the existing feed-in tariff program with competitive auctions. The Energy Regulatory Commission (ERC) is currently working on a regulation to enable this change which should be ready for implementation within 3 months.
ERC believes that competitive auctions will force project developers to reduce tariffs, which would ultimately benefit the end consumers. At present, the feed-in tariff program awards projects to developers at fixed rates with built-in profit margin. Competitive auctions will force the developers to give away some of that margin.
One of the largest renewable energy companies that benefitted from the feed-in tariff program was SkyPower Global. SkyPower had announced plans to invest $4.4 billion in Kenya’s solar power market. The Canada-based developer will likely set up around 2 GW solar power capacity and distribute millions of solar power kits to households.
Competitive auctions have yielded record-low tariffs in the solar power market across the world. Reverse auctions have reduced solar power tariffs to levels competitive with coal and gas-based power plants.