Why Kenya must embrace Power purchase agreements to drive its solar future

Kenya has emerged as one of Africa’s clean energy leaders, with solar power playing an increasingly central role in the country’s energy mix. Power Purchase Agreements (PPAs) and the introduction of a net metering framework are reshaping the commercial and industrial sector by providing predictable, cost-effective alternatives to Kenya Power and Lighting Company (KPLC) tariffs.

On rooftops of factories, solar panels are quietly reshaping Kenya’s energy future. Yet for all their promise, one policy tool — the Power Purchase Agreement (PPA) — remains under-utilised, poorly understood, and insufficiently publicised, even as it drives renewable energy growth across the globe.

Across Europe, 2024 was a landmark year for PPAs. Corporations accounted for more than 80 per cent of renewable power contracts, with data centres and AI developers leading the charge. Spain alone signed 3.5 gigawatts of solar PPAs, while Germany pursued a balanced mix of solar and wind. Innovative structures, such as hybrid PPAs combining multiple renewable sources, and multi-buyer contracts that share risk across companies, are fast becoming the norm.

In Europe, regulation is catching up with innovation. The European Union’s Regulation 2024/1747 openly encourages PPAs, shielding them from price interventions and giving investors the predictability they crave. In Australia, index-linked PPAs are spreading, ensuring buyers aren’t locked into outdated rates.

These developments matter because they highlight how PPAs are becoming the backbone of the global clean energy transition, bridging the financing gap left by declining subsidies and giving companies a credible path to net-zero.

Back home, Kenya boasts some of the best solar resources in the world — with daily solar radiation averaging 4–6 kWh/m². The country has also made bold clean energy strides. By 2021, 81 per cent of our electricity came from renewables like geothermal, hydro, and wind. Yet solar, despite its growth — from 38 MW in 2017 to 169 MW in 2022 — is still scratching the surface of its potential.

Why? Because while Kenya Power continues to dominate supply, businesses and communities lack clear, accessible frameworks for PPAs and net metering. These tools could allow companies to lock in affordable solar tariffs (at Sh16–Sh18 per kWh) and export excess power to the grid, receiving credits that stabilise their energy bills. Instead, most consumers remain at the mercy of volatile KPLC tariffs, which range from Sh12 to Sh25 per kWh and fluctuate with fuel costs and forex rates.

Kenya’s 2025 framework for net metering — which credits exported power at 50 per cent of the retail tariff — is a step forward, but it is barely known outside policy circles. Properly publicised and implemented, net metering would make the grid the backup of first resort, with battery energy storage systems as the second resort. This shift could radically improve energy security for both households and businesses.

But without deliberate efforts from regulators and utilities to educate the public, demystify PPAs, and enforce quality standards, these instruments risk remaining confined to boardrooms and pilot projects, rather than empowering Kenyans at scale.

Kenya doesn’t need to reinvent the wheel. From Europe, we can learn how PPAs can be standardised and scaled. From Australia, we can adapt flexible structures that reflect real market conditions. From our neighbours in Africa, we can see how mini-grids and off-grid solar PPAs are transforming rural electrification.

The missing link is awareness and regulatory clarity. Investors and corporates need to know they can rely on stable rules, while small and medium-sized enterprises — the backbone of Kenya’s economy — need to understand that PPAs are not just for multinationals.

If Kenya is to achieve its target of 100 per cent clean energy by 2030, we cannot afford to treat PPAs and net metering as niche technical tools. They are central to making renewable energy bankable, affordable, and accessible.

It is time for government agencies, regulators, and Kenya Power itself to actively publicise these options. The public deserves to know that solar PPAs and net metering are not futuristic concepts — they are here, now, waiting to be unlocked.