Kenya may renegotiate power agreement with Ethiopia

Kenya may be forced to renegotiate its 25-year power purchase agreement (PPA) with Ethiopia if the deepening electricity crisis in the Horn of Africa nation persists. The Energy and Petroleum Regulatory Authority has cited concerns that the escalating energy situation in #Addis_Abeba poses a risk to Nairobi’s power supply, potentially necessitating a review of the agreement signed in July 2022.

Although Ethiopia has not yet notified any inability to meet demand as per contractual obligations, the regulator’s chief executive notes the crisis poses a potential risk to Kenya’s power security. If Ethiopia fails to deliver the agreed-upon power, Kenya may need to renegotiate the deal, despite paying damages for breach of contract. The earliest possible renegotiation is in 2027.

The power deal aimed to provide affordable electricity to meet Kenya’s peak demand by reducing reliance on expensive sources. However, concerns arise as Ethiopia grapples with a significant electrification deficit, causing widespread outages and weak access in rural areas.

To address this, the World Bank has launched a $1.4 billion program over 10 years to strengthen Ethiopia’s electricity network, improve sector viability, and boost renewable energy generation. The initiative aims to enhance access for the half of the population still lacking reliable