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| (Courtesy CIA.gov) |
A new Energy Bill – which completed its public consultation phase in February 2018 – may result in a significant shake-up of Kenya’s geothermal segment. Significantly, the draft legislation lays out a royalties schedule. The raft of laws has been passed by the National Assembly but was still awaiting Senate approval as of September 2018. The bill will see geothermal firms pay fees of between 1% and 2.5% of the revenues generated from the energy source during their first decade of operation and 5% thereafter.
The proposed royalty on profits is a standard model in the international geothermal market. For example, the US has deployed a similar framework for decades, applying a modest rate of 1.75% for the first 10 years of production, before moving companies to a royalty rate of 3.5% thereafter. Nevertheless, establishing the precise rates constitutes a challenging undertaking. Geothermal resources of Kenya’s size are strategically vital to economic development; ensuring energy security, generating employment and providing income, in the form of rent, for landowners.
