Effects of power sector reforms in Kenya

Abstract

The energy sector plays a crucial role in economic development of any country in the world. In recognition of the usefulness of the energy sector, Kenya undertook reforms in the sector in the 1990s to ensure efficiency in terms of increased electricity production. This was with a view to meet the ever increasing demand for power. This study empirically investigated the effects of power sector reform in Kenya using the data from Government publication, World Bank Indicators and World Governance Indicators for the period 1980 to 2013. The main objective was to establish the factors that affect electricity generation in Kenya after and before reforms, and suggest policy (ies) measures that can help accelerate electricity production in the country. To be able to identify the effects of power sector reforms in Kenya, the study employed ECM fitted in annual time series data. The findings showed that GDP, government debt and industry value added were significant determinants of electricity generation. The variables were statistically significant and had the expected signs. GDP and industry output had positive signs and were significant. In the long run, GDP purchasing power parity, debt share and industry were significant with their expected signs. In addition, it was found that electricity generation increased after reforms due to the increased demand from industries and households. Therefore, the study recommends that sufficient investments be made in the sector by all players to ensure sufficient supply of electricity to meet both household and industry consumption