Reform Signal #005 - Kenya Breaks the Single-Buyer Model
Kenya’s new open-access wheeling rules split off-taker risk, unlocking a 3GW stranded pipeline and a new merchant market.
What changed
Kenya just broke the on-grid single-buyer model. Generators can now sell directly to large consumers that are not co-located. The monopoly that defined Kenya’s on-grid investment risk profile for 30 years has ended.
The Regulation
Kenya enacted the Energy (Electricity Markets, Bulk Supply and Open Access) Regulations, 2026 (the “Regulation”) in May, 2026. This Regulation continues the aspirations of the Energy Act 2019, of an open electricity market, by setting the base for a domestic wholesale electricity market, cementing the resale of electricity through bulk metering, and most impactful, allowing for open non-discriminatory access to the transmission system.
Market mechanics: Wheeling
The most significant aspect of the Regulation in the short-term is open access.
Before: Private companies have been able to sell power directly to large consumers under the captive power framework. This saw 603 MW of capacity built in Kenya using various technologies.
Limitation: Co-location. These have however been limited to co-located power plants.
Now: The open access provisions allow generators to wheel power through the transmission and distribution system to a consumer who is not co-located. A wheeling fee is charged.
Wheeling is allowed in the distribution and transmission system for loads of greater than 1 MVA and 10 MVA respectively.
Mitigating offtaker risk
Off-taker risk in Kenya has been the most cited, most priced barrier to private capital. That calculus is now splitting in two: new entrants face a structurally better risk environment; existing PPA holders face a counterparty (Kenya Power) under accelerating fiscal stress.
Once open access is operationalised, new entrants will have the option of alternative offtake in the wheeling market backed by corporate PPAs. This creates an opportunity to spread risk over multiple offtakers for the investors and for Kenya Power to have wiggle room in termination discussions with generators.
Investors who have been stuck in the utility PPA process can now seek out bilateral deals with consumers and wheel power. This is significant as the Regulation effectively unlocks a 3GW pipeline of proposed renewable energy projects that were stranded while waiting for a Kenya Power PPA route-to-market.
Double play
Opportunities are open for supply for high resource projects located far from potential offtakers.
A related development is the welcoming of private transmission projects. Open access improves the economics of transmission lines by allowing additional income to grid operators through wheeling fees.
Watch
The existing commitments in long-term PPAs and prioritisation of their access to the transmission system will likely limit the quantum of wheeling.
This signal was co-authored by the AERS Team, and George Aluru, PhD., Chief Executive of the Electricity Sector Association of Kenya