July fuel price hikes could boost renewable energy

From the newsletter

Fuel prices tracked by Renewables Rising show a significant increase in petrol and diesel prices in Kenya for July. Petrol’s cost climbed by 6.45%, and diesel by 6.27%. Meanwhile, electricity prices for both residential and commercial consumers dropped by Ksh 0.43 and Ksh 0.40, respectively. Egypt, Nigeria and South Africa all registered slight variations.

• We monitor power price fluctuations in local currencies across four representative countries: Kenya, South Africa, Egypt and Nigeria. The data is collected from public sources every month.

• The decrease in electricity prices for consumers in Kenya can be attributed to increased hydropower generation following improved rainfall in key catchment areas, reducing reliance on costly thermal plants.

More details

• Kenya’s fossil fuel increases come after a period of stagnation. The increase in petrol and diesel was a result of the current higher global crude oil prices. As fuel prices went up, electricity prices eased by roughly Ksh 0.4.

• Nigeria’s electricity prices for both residential and commercial customers dropped marginally (around 2.7%) from June to July. This could be attributed to improved gas supply to power plants and renewable energy integration, particularly solar, under the Nigeria Electrification Project (NEP). At the same time, fuel prices increased, petrol by 0.02 Naira and diesel by 0.06 Naira, due to fluctuating global oil prices and partial subsidy adjustments by the Nigerian National Petroleum Company (NNPC).

• South Africa’s power prices for July also fluctuated. A negligible 0.002 ZAR increase in both commercial and residential electricity prices was recorded, likely due to Eskom’s marginal tariff adjustments approved by NERSA. Meanwhile, petrol prices dropped by 1.11 Rand, benefiting from a temporary strengthening of the rand and lower international oil prices in early June. However, diesel prices rose by 0.89 Rand, reflecting higher demand in winter and supply constraints.

• Egypt is the only country that retained its power prices from June in both electricity and fuel. Residential power consumers continue to pay 0.02 EGP/kWh, while commercial users pay 0.04 EGP/kWh. Fuel prices also remained stagnant, likely due to government price controls and stable domestic gas production, shielding consumers from global market volatility.

• These fluctuations show Africa’s vulnerability to global energy markets and the urgent need for renewable energy investments. Countries like Kenya and Nigeria are seeing modest benefits from renewables, but fossil fuel dependency remains high. South Africa’s slight electricity hike underscores Eskom’s financial struggles, while Egypt’s stability reflects strong state intervention.

Our take

• If anything, the July fuel hikes reinforce the urgency for Africa to accelerate renewable energy adoption. Countries relying on volatile fossil imports face economic instability, while those investing in solar, wind, and hydro reap modest benefits.

• While some governments employ temporary buffers to slow electricity price increases, these are not sustainable solutions. The drop in electricity prices for this cycle offers fleeting relief but does little to counteract the systemic risk of volatile fossil markets.

• Moving forward, the sector will benefit from continued regional energy partnerships and green financing. Coordinating regional energy markets, especially for hydropower and solar exchange, to hedge against shock will be critical.