Energy costs, such as the cost of electricity and fossil fuels, directly contribute to the aggregate output of a country. Energy costs affect manufacturing, agriculture, transport, domestic, and commercial sectors by contributing to the operating costs. Higher costs translate to a reduction in profits and or an increase in the prices of goods and services. Low-middle-income countries like Kenya, which are working towards upper-middle-income status, should establish measures to lower the cost of energy. Energy efficiency processes can reduce the cost of energy. In Kenya, the Energy and Petroleum Regulatory Authority (the Authority) has the mandate to entrench energy efficiency and conservation in the energy market. The Authority executes this through two major programs: energy management and standards and labeling programs. In February 2025, the Energy (Energy Management) Regulations 2025 were published, with the aim of improving energy efficiency in designated facilities.
The Energy (Energy Management) Regulations 2025 require that any facility (commercial, industrial or institutional) that consumes more than 180,000 kWh of thermal and electrical energy should institute energy management programs. The designated facilities are required to conduct energy audits at least once every four years. Thereafter, the facilities are expected to implement the energy audit recommendations to achieve at least fifty (50) percent of the recommended energy savings.
In addition, the regulations require designated facilities to embed energy management practices into their day-to-day activities. These practices include appointment of a licensed energy manager; development of an energy management policy; undertaking energy audits; and preparation of an energy investment and implementation plan to prioritize and guide the implementation of the identified energy conservation measures.
Establishment of energy performance benchmarks for various sectors is another energy efficiency initiative that has been instituted by the regulations. Designated facilities will be expected to meet their sectors’ energy performance benchmarks as published by the Authority. Designated facilities that meet the energy performance benchmarks may apply to the Authority for an energy savings certificate. The certificate will indicate the tradable energy savings credits that can be sold to facilities that do not meet their benchmarks.
The regulations will also facilitate the licensing of Energy Service Companies (ESCOs) in Kenya. The ESCOs are expected to unlock the potential for the implementation of energy efficiency projects through the provision of structured financial products and technical expertise to the facilities. ESCOs will therefore play an important role in boosting private investments in the implementation of energy efficiency projects. In addition, the establishment of a Super ESCO by the African Development Bank will foster the growth of the ESCO industry in Kenya. It is expected that the Super ESCO will facilitate the development and implementation of energy efficiency projects (including the financing) but subcontract implementation to private-sector ESCOs. The public sector entities have generally lagged its private sector peers in undertaking energy efficiency projects and the super ESCO could play an important role by establishing a revolving fund to support the implementation of these projects.
The Authority expects that the resulting reduction in the cost of production, from the energy savings realized, will be passed on to consumers through reduced prices of products. This could enhance Kenya’s competitiveness both regionally and globally. Furthermore, the attendant reduction in GHG emissions will contribute to the achievement of Kenya’s Nationally Determined Contributions (NDCs).
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By Eustace Njeru, Ronald Keter and Dr. Eng. Fenwicks Musonye are energy efficiency specialists at the Energy and Petroleum Regulatory Authority
