Kenya Revokes Special Electricity Tariff for Olkaria-Kedong SEZ Industries
Kenya has ended a special discounted electricity tariff for the Olkaria-Kedong SEZ, affecting industries which previously benefited from a KSh 5 per kWh rate since 2020. The Energy and Petroleum Regulatory Authority has set a uniform rate of KSh 10 per kWh starting in 2023. This change may increase operational costs and potentially deter investment in the region.
Kenya has recently terminated the special electricity tariff previously offered to industries within the Olkaria-Kedong Special Economic Zone (SEZ) in Naivasha. This decision, communicated in a gazette notice from the Energy and Petroleum Regulatory Authority (EPRA), revokes the pilot KSh 5 per kWh tariff that was in place since 2020. This rate, significantly lower than the standard industrial rate of KSh 10 per unit, aimed to enhance competitiveness and attract investments in manufacturing.
The primary objective of the Olkaria-Kedong SEZ was to reduce production costs and promote Kenya as a desirable manufacturing hub. The special tariff was introduced to evaluate how lower electricity prices might influence investment decisions in this key economic area. Beneficially, the SEZ’s adjacency to geothermal power sources helped minimize electricity transmission costs, complimented by its proximity to the Standard Gauge Railway (SGR), facilitating logistics for industries.
As of 2023, EPRA has established a consistent electricity rate of KSh 10.00 per kWh across all units consumed, in addition to an Off-Peak Energy Charge of KSh 7.42 per kWh. The cancellation of the preferential tariff is likely to lead to increased energy costs for businesses operating within the zone. This rise in operating expenses may consequently affect production costs and deter potential investments in the SEZ.
The revocation of the discounted electricity tariff in the Olkaria-Kedong SEZ represents a significant shift in Kenya’s energy policy that may hinder investment in the region. By eliminating the KSh 5 per kWh rate, previously aimed at reducing production costs and attracting industry, businesses may now face higher energy bills that could impact their financial viability and decisions to invest in this Special Economic Zone.
Original Source: kenyanwallstreet.com
