Kenya’s green hydrogen policy and regulatory environment

It is interesting to note that the lightest and most common element on earth^[1] is now considered to be the ultimate solution in the race towards carbon neutrality. Parties to the Paris Agreement have taken relevant steps towards limiting the global temperature to 1.5°C above pre-industrial era levels and the hydrogen solution appears to be the most dependable in the long term^[2]. Hydrogen is now being referenced as the missing piece in the climate puzzle^[3]. Unlike many sources of energy, hydrogen does not produce carbon dioxide during combustion but instead produces water. It is felt that while we have had a serious drive in the renewables sector in many countries globally, the increasing carbon emissions and wanting sustainability have largely remained a major concern in most of the sources of energy.

Hydrogen rarely exists on its own and is largely found in its compound form for example in water or as hydrocarbons in fossil fuels^[4]. It is therefore largely important that the mode of extraction adopted is carefully considered as the same process could contribute to the unwanted carbon emissions. The available modes of extraction have resulted into a colour code classification of hydrogen. There does not seem to be one stable convention on the classification aforementioned but largely hydrogen has been considered as brown, grey, blue or turquoise when coal and natural gas are used for purposes of its extraction. Brown and grey hydrogen are undesirable as the extraction leads to the release of greenhouse gases into the atmosphere. Blue hydrogen is considered more suitable since the process of extraction includes carbon capture and storage thus protecting the environment. The process of extracting turquoise hydrogen results into a solid carbon that is less damaging to the environment^[5].

Green hydrogen is the most desired form of hydrogen from an environmental perspective since its process of extraction involves minimal or zero release of greenhouse gasses. The extraction of green hydrogen is reliant on renewable sources of energy such as solar, wind and geo-thermal.

The Energy & Petroleum Regulatory Authority (EPRA), the Kenyan authority tasked with the duty to regulate matters relating to electrical energy, has in its annual report covering the period upto June, 2023 reported that 84.65 percent of the energy supplied to the national grid was renewable. Kenya is a leader in Africa while holding the 7 position in the generation of geothermal energy globally. For the period ending June, 2023 EPRA reported an installed generating capacity of 940MW resulting in a 45.41 percent contribution to the interconnected grid^[6].

Fig 1: Share of renewable energy contribution to Kenya's energy mix^[7]

Given the highlighted statistics, it is clear that the potential of green hydrogen in Kenya remains huge in light of the existing strong presence of the renewable energy resource. Huge financial investment is however required to unlock this potential for Kenya. So far extraction of green hydrogen demands huge capital investment that is prohibitive for developing countries. A stable regulatory framework that avails lucrative incentives is necessary in order to attract local and foreign investors in the production of green hydrogen. Since green hydrogen is still relatively new and the applicable technology is in its research and development stages to improve its efficiency at reasonable costs, there is not much set regulation to use as a bench mark. Due to this gap, Kenya has adopted a practical approach that enables it to rely on existing legislation and existing authorities to regulate the industry as it continues to develop. One of the items on its agenda is the delivery of a stable legal and regulatory framework.

Kenya is one of the few countries that have demonstrated their commitment in the development of a hydrogen industry. The Green Hydrogen Strategy and Roadmap for Kenya was launched on 5 September, 2023 during the Africa Climate Summit. Green hydrogen in Kenya is expected to improve agriculture through production of fertilizers, support refineries, transport, steel and chemical industries and for power generation and synthetic fuel production. The said hydrogen is expected to be used in the local industries at first and is expected to develop and expand into export markets^[8]. 

Kenya has identified its main agenda items as it sets out to develop a hydrogen industry. In line with the Guide to Policy Making Report by International Renewable Energy Agency (IRENA), Kenya is at the Demonstration and Governance Stage. At this stage the policies under development should seek to attract investment by offering commercial incentives and demand for the product^[9]. One of the items on its agenda is the delivery of a stable legal and regulatory framework.

Fig 2: Building block of Kenya's green hydrogen vision^[10]

As is the case in most countries, Kenya is yet to generate specific legislation for the production, storage, transportation and distribution of hydrogen. As the regulatory framework develops, the hydrogen industry is to be governed by existing regulation. So far there is in place a Green Hydrogen Coordination Committee (GH2-PCC) that is composed of representatives from various sectors related to the green hydrogen industry. This secretariate is expected to manage project approval processes while ensuring close engagement or consultation with investors and other industry participants.

Subsequent to the hydrogen strategy launch in September, 2023, EPRA circulated to stakeholders draft green hydrogen guidelines for comments and feedback. It is to be noted that both the hydrogen strategy and guidelines remain quite conservative at this stage. It is hoped that the final hydrogen guidelines will contain notable detail and commercial incentives that have the potential to fast track availability of capital in the hydrogen industry. So far the guidelines provide that investors in the green hydrogen are available to apply for the incentives available in the Export Processing Zones (EPZ) and the Special Economic Zones (SEZ). If indeed the generation of green hydrogen has the potential of transforming the Kenyan economy as laid out in Kenya's hydrogen strategy, it would be expected that more commercial incentives will be provided while ensuring that the legal framework in Kenya remains stable, predictable and capable of nurturing a new industry.