Kenya revives High Grand Falls Dam amid rising demand

From the newsletter

Kenya could add 700 MW of hydropower in the next few years, following the government’s plan to revive the High Grand Falls Dam project to meet rising demand. Once completed, the dam will be the third-largest in the East Africa region after Ethiopia and Tanzania and is projected to cost at least Ksh 340 billion ($2.62 billion).

• This comes a couple of weeks after the country’s peak demand rose to a record 2,392 MW in August, up from 2,149 MW, as more homes were connected to the grid, forcing it to rely on imports from Ethiopia to keep the system stable.

• Financing the dam will be the main challenge, and the government will likely have to rely on external lending or explore new avenues such as pension funds, which have recently been encouraged to diversify their investments into energy infrastructure.

More details

• The announcement was made by Energy Principal Secretary Alex Wachira on the sidelines of the Sustainable Energy Conference (SEC25) in Olkaria, Naivasha. He revealed that the ministry has already formed a technical committee on the proposed High Grand Falls Dam, with construction expected to begin within the next five years.

• The dam is expected to boost Kenya’s renewable energy capacity as the country rallies to achieve a 100% renewable-powered grid by 2050. With at least 80% of the current generation already coming from renewables, mainly geothermal and hydropower, Kenya is not far from its target. Electricity access now stands at 78%, with over a million households connected in the past two years, and demand is set to continue climbing. 

• While hydropower once dominated Kenya’s grid, recent underinvestment has allowed geothermal to take the lead. That dominance is set to grow further, with KenGen planning to add 1,500 MW from geothermal, wind, and solar over the next decade at an estimated cost of KSh 555 billion ($4.27 billion). Wind and solar are also expanding, though their intermittency remains a challenge. To address this, a policy under development proposes to prioritise renewable energy projects paired with battery storage systems to ensure a reliable supply during peak hours.

• Investment trends in Kenya have shifted toward new technologies such as solar and wind, while hydropower has mostly attracted small-scale funding. These smaller projects have typically targeted rural agricultural industries, particularly tea-processing zones. Large hydropower projects, however, continue to struggle with land acquisition hurdles, permitting delays, and high perceived risks that deter investors. In contrast, solar has proven less risky, more modular, and quicker to deploy, making it more attractive to developers.

• However, other African countries are proving that governments can rely on internal resources to fund mega projects. Ethiopia relied heavily on domestic revenue and diaspora remittances to build the $5 billion Grand Renaissance Dam, Africa’s largest at 5,150 MW. Tanzania used national budget allocations along with external loans and financial guarantees for the $2.9 billion Julius Nyerere Hydropower Plant. Kenya will likely pursue blended financing, public–private partnerships, and potentially tap into pension funds.

• Globally, hydropower is regaining prominence as countries seek firm, clean energy to complement intermittent wind and solar. In East Africa, Ethiopia has already positioned itself as a regional exporter, supplying Kenya, Sudan, and Djibouti through interconnection lines. With the Eastern Africa Power Pool expected to become operational before the end of the year, Kenya has a timely opportunity to expand its hydro and geothermal generation not only for domestic security but also for participation in regional power trade.

Our take

• The planning of such projects should integrate power transmission lines. This would add extra costs but ensure immediate evacuation of power once the project is completed, avoiding situations where the country pays for unused electricity.

• Ethiopia has shown that it is possible to build large infrastructure projects without external debt. Kenya may not replicate this fully, but could adapt the lesson, encouraging citizen investment vehicles or green bonds to strengthen public buy-in and reduce reliance on foreign borrowing.

• If Kenya lags in adding firm capacity, commercial and industrial consumers may accelerate their shift to captive generation. This would erode utility revenues and weaken the case for large-scale investments.