Kenya Proposes New Incentives to Attract Private Investment in Geothermal Energy

Kenya Geothermal

Kenya’s government is proposing a suite of incentives aimed at drawing private investors into the country’s geothermal energy sector, a strategy officials say is vital to meeting the nation’s growing power demand and reducing reliance on imported electricity.

Under a draft National Geothermal Strategy for 2026–2036, the Energy Ministry outlined measures that would offer tax exemptions, longer-term contracts and revised pricing structures to make geothermal projects more financially attractive to private developers. The changes are intended to “de-risk” investments in a sector that has, until now, been heavily dependent on state funding and public utilities.

Kenya’s geothermal potential, estimated at more than 10,000 megawatts, far exceeds its current installed capacity, which stands at about 984 megawatts. More than three-quarters of that capacity is operated by the state-owned Kenya Electricity Generating Company, KenGen.

Despite that promise, development has lagged because of high upfront costs, limited access to financing and regulatory hurdles that have made investors wary, according to the ministry’s strategy paper. The proposed incentives would include tax breaks on drilling and equipment, standardized long-term power purchase agreements and easier licensing procedures, officials said.

One major challenge, the strategy notes, is that private developers typically seek off-take guarantees of at least 25 years to secure financing for costly exploration and drilling activities, conditions that many existing contracts have not offered. The government also wants to ensure that retail electricity prices remain stable even as geothermal exploitation expands.

Kenya’s power demand has been increasing rapidly. In the year to June 2025, the country imported about 10.6% of its electricity from neighboring states, up from 8.8% a year earlier, according to the Energy and Petroleum Regulatory Authority. The ministry warned that without major new investments, Kenya risked becoming increasingly dependent on imported power as domestic capacity struggles to keep pace with demand.

Officials also highlighted structural obstacles that have dampened geothermal development, including protracted approval processes, skills shortages and financing challenges, all of which have discouraged broad private participation.

Geothermal energy, which taps heat from deep beneath the Earth’s surface to produce reliable, continuous electricity, has long been a centerpiece of Kenya’s clean-energy strategy. Unlike solar or wind power, geothermal plants can generate electricity consistently, making them especially valuable in a region where demand is outstripping existing supply.

The proposed reforms come as Kenya works to expand its renewable energy mix and strengthen grid stability. If enacted, proponents of the strategy say, the package of incentives could accelerate exploration and development, bringing new investment and broadening participation beyond the state sector.