Kenya Revokes Discounted Electricity Tariff for Olkaria-Kedong SEZ

Kenya has revoked the discounted electricity tariff for industries in the Olkaria-Kedong SEZ, which may negatively affect investment. The KSh 5 per kWh tariff was originally implemented as a pilot in 2020, aimed at reducing production costs and enhancing competitiveness. EPRA’s new uniform rate of KSh 10.00 per kWh will likely lead to higher operational costs for businesses in the zone.

Kenya has recently annulled the specially discounted electricity tariff for industries located within the Olkaria-Kedong Special Economic Zone (SEZ) in Naivasha. This decision, published in a gazette notice by the Energy and Petroleum Regulatory Authority (EPRA), signifies a major shift for one of the country’s initial SEZs, raising concerns about future investment prospects.

The revoked tariff of KSh 5 per kWh was a pilot initiative introduced in 2020, offering significant savings as it was set at half the KSh 10 per unit charged to other SEZs and large industries. The Olkaria-Kedong SEZ was intended to reduce production costs and position Kenya as a competitive location for manufacturing.

Initially, the low electricity cost was justified by the SEZ’s strategic location near geothermal power fields, which minimized transmission expenses. The area’s proximity to the Standard Gauge Railway (SGR) was also highlighted, simplifying the transportation of raw materials and finished goods.

In 2023, EPRA instituted a uniform electricity rate of KSh 10.00 per kWh for consumption, coupled with an Off-Peak Energy Charge of KSh 7.42 per kWh. The removal of the discounted tariff will result in increased electricity costs for businesses in the Olkaria-Kedong SEZ, thereby affecting their production expenses and investment strategies.

The revocation of the specially discounted electricity tariff in the Olkaria-Kedong SEZ represents a significant change in the local investment landscape. While intended to promote manufacturing in Kenya, the removal of this subsidy could hinder industrial growth by elevating operational costs for businesses. Continuous adjustments to electricity tariffs will directly influence investment decisions and the SEZ’s overall appeal as a competitive economic zone.

Original Source: kenyanwallstreet.com