Quantifying the local economic supply chain impacts of renewable energy investment in Kenya

Abstract

Improved electricity access in developing countries can offer an array of economic and environmental benefits. In Kenya, much attention has been devoted to the array of end-user benefits from electrification; however, there are also potential supply-side benefits from building and operating electricity generating units (EGU). This study focuses on the latter by examining supply chain impacts of recent renewable energy construction projects in Kenya tracked by the U.S. Agency for International Development's (USAID) Power Africa program and construction projected in Kenya's Least Cost Power Development Plan (LCPDP). By combining construction cost estimates with information on expenditure shares across economic sectors combined with data on wages and jobs, this study provides an assessment of the direct and indirect wage and job benefits of past and future EGU construction and operations. On-grid electrification projects tracked by Power Africa have increased domestic spending in Kenya by $1.3 billion and increased direct and indirect wages by $344 million over the ten years from 2012 to 2021. This impact could expand to $18.9 billion in domestic spending and $5 billion in nominal wages from 2022 to 2040 if the Kenyan government's LCPDP projected capacity and operations goals are met. The direct jobs required to support new LCPDP power sector construction out to 2040 could be 177,000 jobs in an average year, or 3.5 times higher than the average over the past ten years (2012−2021). Meanwhile, direct and indirect jobs supporting new power plant operations and maintenance would be 46,000 jobs in an average year, or 7 times the average over the past ten years. These findings suggest the high potential of renewable energy projects for supporting employment in Kenya, and thus the importance of creating an enabling environment that allows these projects to succeed.