Renewable Energy Power Purchase Agreement (Kenya)

A Renewable Energy Power Purchase Agreement in Kenya sets out the consideration, warranties and completion steps for the purchase it documents.

The Energy and Petroleum Regulatory Authority (EPRA) under the Energy Act No. 1 of 2019 has issued the Energy (Electricity Licensing) Regulations 2012 (as amended) and the Draft Renewable Energy Feed-in-Tariff Policy, which set out the licensing, tariff-setting, and technical standards applicable to renewable energy projects in Kenya. EPRA's predecessor, the Energy Regulatory Commission (ERC), approved feed-in tariffs for various renewable energy technologies under the Kenya Feed-in Tariffs Policy 2012, which established differentiated tariff rates for solar, wind, biomass, biogas, small hydro, geothermal, and wave/tidal energy sources.

KenGen (Kenya Electricity Generating Company PLC), a state corporation listed on the Nairobi Securities Exchange (NSE), is Kenya's largest electricity generator. Kenya Power and Lighting Company PLC (Kenya Power) is the principal electricity distributor and is the counterparty in most bulk PPAs with independent power producers (IPPs) under the Bulk Supply Agreement framework. However, with the liberalisation of Kenya's electricity market under the Energy Act No. 1 of 2019, direct bilateral PPAs between private generators and large commercial or industrial offtakers — known as 'direct access PPAs' or 'wheeling arrangements' — are increasingly common.

The Kenya Electricity Grid Code, issued by EPRA under Section 116 of the Energy Act No. 1 of 2019, regulates the technical requirements for connection to the national grid. Wheeling of electricity — transmitting power generated at one point across the Kenya Power distribution network to a remote offtaker — requires a wheeling agreement with Kenya Power and approval from EPRA. Offtakers and generators entering a PPA that involves wheeling must account for wheeling charges, losses, and the technical requirements of the Grid Code.

The National Environment Management Authority (NEMA) under the Environmental Management and Coordination Act No. 8 of 1999 (EMCA) requires Environmental and Social Impact Assessments (ESIAs) for renewable energy projects above specified thresholds. Large solar and wind projects require a full ESIA under the Second Schedule to the Environmental (Impact Assessment and Audit) Regulations Legal Notice No. 101 of 2003 before EPRA will issue a generation licence. The PPA typically contains representations and warranties by the generator confirming ESIA approval and all required licences.

The Climate Change Act No. 11 of 2016, administered by the Ministry of Environment and Climate Change, provides a framework for Kenya's Nationally Determined Contribution (NDC) to the Paris Agreement. Kenya has committed to generating 100% of its electricity from renewable sources by 2030 under the NDC. This policy environment makes renewable energy PPAs a strategically important commercial instrument in Kenya's energy transition, and commercial banks — including Equity Bank, KCB, and Co-operative Bank — actively finance renewable energy projects supported by long-term PPAs.

A Renewable Energy Power Purchase Agreement in Kenya is required in several commercial and regulatory contexts.

A PPA is required when an independent power producer (IPP) licensed by EPRA under the Energy Act No. 1 of 2019 wishes to sell electricity generated from a solar, wind, small hydro, biomass, or biogas facility to Kenya Power under a bulk supply agreement. The standard Kenya Power PPA template, based on EPRA-approved terms, must be negotiated and executed before construction financing can be secured, as lenders require a signed PPA as a condition of financial close.

A PPA is needed when a commercial or industrial electricity consumer — such as a manufacturing plant, a large retail centre, a hospital, or a hotel — wishes to source electricity directly from a private renewable energy generator rather than from Kenya Power. Under the Energy Act No. 1 of 2019, EPRA has issued the Energy (Electricity Licensing) (Amendment) Regulations 2023 permitting direct bilateral supply by licensed generators to large consumers. A bilateral PPA documents the tariff, the contract period, the supply point, and the arrangements for wheeling across the Kenya Power distribution network.

A PPA is required when a developer finances a rooftop solar or ground-mounted solar facility on a commercial or industrial premises under a third-party ownership model. The building owner or occupier enters a PPA with the solar developer to purchase all electricity generated at the facility at an agreed rate per kilowatt-hour (kWh) over the project life — typically 15 to 25 years. The PPA is the primary commercial document securing the developer's revenue stream and enabling project finance from institutions such as the Kenya Climate Fund or the Africa Finance Corporation.

A PPA is needed when a county government or a public water utility in Kenya intends to power its facilities from a dedicated renewable energy plant funded under a public-private partnership (PPP) framework. The Public Private Partnerships Act No. 15 of 2021, administered by the PPP Unit under the National Treasury, requires a bankable PPA as a core project document in the PPP procurement process. The PPA must be approved by the PPP Committee and the Cabinet Secretary for Energy before the project reaches financial close.

A PPA is required when a Kenya-based carbon credit developer wishes to document the energy output of a renewable energy facility that supports a carbon offset programme registered under the Voluntary Carbon Standard (VCS), the Gold Standard, or the Kenya Carbon Markets Programme administered by the Ministry of Environment. Carbon credit revenue is typically linked to verified energy generation, and the PPA serves as a primary data source for monitoring, reporting, and verification (MRV) of greenhouse gas emission reductions.

A Kenya Renewable Energy Power Purchase Agreement under the Energy Act No. 1 of 2019 must contain the following essential elements to be bankable, EPRA-compliant, and commercially enforceable.

Parties and Project Description: Full legal names and EPRA licence numbers of the generator and the offtaker; the location and installed capacity (in kilowatts, kW, or megawatts, MW) of the generating facility; the technology type (solar PV, wind, small hydro, biomass, or biogas); and the GPS coordinates of the facility site and the supply point.

Licensing and Regulatory Compliance: Confirmation that the generator holds a valid generation licence from EPRA under Section 116 of the Energy Act No. 1 of 2019; confirmation that an ESIA has been approved by NEMA under the Environmental Management and Coordination Act No. 8 of 1999; and a covenant to maintain all licences, permits, and approvals throughout the contract term.

Contract Term: The commencement date (typically linked to commercial operations date, COD); the contract duration (commonly 15, 20, or 25 years for renewable energy projects); provisions for extension by mutual agreement; and early termination rights.

Energy Delivery and Metering: The agreed annual contracted energy quantity (CEQ) in megawatt-hours (MWh); the measurement point; the type and specifications of the revenue meter installed at the supply point; meter reading frequency; and the process for meter testing and dispute resolution under EPRA's Electricity Grid Code.

Tariff and Payment: The tariff rate per kilowatt-hour (KES/kWh) — whether fixed, escalating by CPI, or linked to the Kenya Power retail tariff; the payment currency (Kenya Shillings or USD, where applicable under the Capital Markets Authority or Central Bank of Kenya foreign exchange rules); the billing cycle; the payment period; and default interest on late payments.

Performance Obligations and Curtailment: Minimum performance guarantees by the generator (availability factor, degradation curve for solar); curtailment provisions — where Kenya Power or the offtaker reduces offtake below contracted levels due to grid constraints — and the compensation mechanism for curtailed energy under EPRA's curtailment policy.

Force Majeure: Events of force majeure specific to Kenya's renewable energy sector — prolonged drought affecting hydro output, grid failure, acts of the Government of Kenya or EPRA — and the notification period, mitigation obligations, and entitlement to suspend performance without liability.

Security and Credit Support: Performance bonds, letters of credit, or parent company guarantees provided by the generator to secure construction milestones and operational performance; payment security provided by the offtaker — particularly important for Kenya Power, whose payment obligations to IPPs have historically been delayed.

Dispute Resolution: Disputes to be referred to expert determination for technical and metering disputes, and to arbitration before the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995 for commercial disputes. EPRA's dispute resolution jurisdiction under Section 37 of the Energy Act No. 1 of 2019 should also be acknowledged. The forms-legal.com Kenya Renewable Energy PPA template is structured to meet EPRA's documentation requirements and the bankability standards applied by lenders financing Kenyan renewable energy projects.

Additional compliance elements for a Renewable Energy Power Purchase Agreement (Kenya) used in Kenya include: Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Forms-legal.com provides this template as a starting point for Kenya-compliant documentation.