OLK02 wellhead plant of GEG at Olkaria in Kenya (source: Green Energy Geothermal)
Kenya’s Energy Ministry is seeking new tax exemptions to keep geothermal power tariffs below KES 9 per kWh, citing rising costs and investment pressure.
Kenya’s Ministry of Energy and Petroleum has proposed new tax exemptions aimed at keeping geothermal electricity tariffs below KES 9 per kilowatt-hour (as of Feb. 2, 2026 around USD 0.07/ kWh), as the country seeks to manage rising power generation costs while expanding capacity.
The proposal, reported by Business Daily Africa, forms part of a broader effort by the government to shield consumers from higher electricity prices while maintaining investor interest in geothermal development, a cornerstone of Kenya’s power mix.
Cost pressure on geothermal development
According to the ministry, geothermal projects face increasing cost pressures linked to drilling risks, imported equipment, and financing expenses. Officials argue that tax relief on key inputs would help reduce capital expenditure and prevent tariffs from rising beyond the targeted threshold.
The ministry is therefore seeking exemptions on selected taxes and levies applied during geothermal development and power generation, measures that would apply primarily to new projects under development.
Kenya is Africa’s leading geothermal producer, with geothermal accounting for roughly one-third of its installed power generation capacity. The technology plays a central role in stabilising the national grid and reducing reliance on hydropower and fossil fuel generation.
Balancing affordability and investment
The government has positioned the proposed tax measures as necessary to balance affordability for consumers with the need to attract long-term private investment into geothermal projects, which typically involve high upfront costs and long development timelines.
Kenya Electricity Generating Company (KenGen) and several independent power producers continue to expand geothermal capacity, particularly in the Olkaria field, while additional prospects are under evaluation in other parts of the country.
The proposed tax relief measures are still under review and would require approval through the relevant fiscal and legislative processes before implementation.
Source: Business Daily Africa