National Energy Policy - Final Draft - 14 Nov 2013

1.0 – INTRODUCTION1.1 THE ROLE OF ENERGY IN ECONOMIC DEVELOPMENT1. The level and the intensity of energy use in a country is a key indicator of economic growth anddevelopment. The Kenya Vision 2030 identified energy as one of the infrastructure enablers ofits social economic pillar. Sustainable, affordable and reliable energy for all citizens is a keyfactor in realization of the Vision.2. Since 2008 the Kenyan economy has remained resilient, growing at 4.6% in 2012 up from 4.4%in 2011. This is as a result of implementing appropriate broad-based policies leading to highgrowth momentum. Despite this outcome, low productivity in agriculture, weak manufacturingsector and weak transport system in the face of rising imports and stagnating exports and highelectricity cost remain major concerns.3. The Government has since then been addressing these challenges brought about by highinflationary pressures through tightening of fiscal and monetary policies and containing of thedepreciation of the shilling. These efforts have yielded positive results as experienced byeasing of food prices, declining inflation rate and relatively stable exchange rate.4. Other factors responsible for this positive momentum include falling international oil prices, thenew Constitution, East Africa Community (EAC) integration, Information CommunicationTechnology (ICT) innovations, strong macroeconomic management and recent investments ininfrastructure5. Real GDP is expected to continue to improve, largely because of expansion in tourism,telecommunications, transport, construction, investments in the energy sector and recovery inagriculture.6. The principal taxation policy pursued by the Government of Kenya (GoK) in the energy sector isbased on the need to create a sustainable balance between fiscal revenue generation andensuring accessibility of energy by the low income segments of the population at reasonableprices. GoK also uses taxation as a prudent policy instrument to discourage wastefulconsumption of energy, and by extension, to encourage its efficient utilization in a cost effectivemanner.7. Given this policy regime, the energy sector has continued to play its role as a significantcontributor to fiscal revenues through taxes, levies and duties imposed on various petroleumproducts, electrical energy and materials sourced by service providers for operations,maintenance and infrastructure expansion.8. Energy shortages and supply disruptions coupled with high cost remain serious obstacles toeconomic activity. Tax and other concessions are planned to encourage investment in fossilfuel exploration, geothermal energy, hydroelectric power and other forms of renewable energysuch as wind, solar and biomass.9 1.0 – INTRODUCTION