Institutional influence on power sector investments: A case study of on- and off-grid energy in Kenya and Tanzania

With the recent decline of renewable energy technology costs-most notably solar photovoltaics -off-grid energy systems are becoming increasingly attractive alternatives to grid extension for advancing rural electrification in Africa. However, there are institutional challenges to wider adoption of off-grid solutions. Combining a multi-level perspective with project funding data from the Kenyan and Tanzanian energy sectors, we assess the extent to which these new off-grid technologies have been incorporated into the existing energy regimes in both countries. Using a qualitative assessment of academic literature and official documents, and a quantitative assessment of energy investments, we find that although international development agencies have provided financial support for niche, off-grid companies, both global donors and the regime electricity sector operators in Kenya and Tanzania continue to favor on-grid and grid extension activities. While landscape influences on both countries are similar, we find that differences within the institutional regimes result in different development pathways for off-grid niches. In Kenya, unbundling and privatization efforts have attracted private investment in both on- and off-grid projects. Tanzania has more relaxed regulations for off-grid power producers, and a clearer regulatory framework for allowing off-grid operators to impose cost-reflective tariffs, which creates a supportive environment for niche innovation.