CLIMATE FINANCING AND GROWTH OF RENEWABLE ENERGY IN KENYA
CLIMATE FINANCING AND GROWTH OF RENEWABLE ENERGY IN KENYA
Owano Ochola Jashon - PhD Fellow, Doctor Of Philosophy in Business Administration (Finance), School of Business, Economics and Tourism, Kenyatta University, Kenya
Prof Ambrose O. Jagongo (PhD) - Associate Professor, Accounting and Finance Department, Kenyatta University, Kenya
ABSTRACT
Kenya’s renewable energy sector has expanded rapidly over the past decade, with total installed electricity capacity rising from approximately 1,300 MW in 2010 to over 3,300 MW by 2024, and renewable sources accounting for nearly 85–90% of installed capacity. Geothermal capacity alone exceeds 950 MW, positioning Kenya as Africa’s leading geothermal producer. Despite this growth, renewable energy expansion remains structurally uneven. While grid-connected geothermal and wind projects have scaled significantly, disparities persist in rural renewable access, decentralized off-grid penetration, and sustained infrastructure investment. This uneven growth raises concerns regarding the determinants of renewable energy expansion and the effectiveness of financial interventions intended to accelerate the energy transition. Over the same period, climate finance commitments to Kenya have increased substantially. However, the extent to which climate financing translates into measurable renewable energy growth outcomes remains empirically underexamined. Existing studies largely treat climate finance as a direct driver of renewable expansion, with limited attention to the internal capital formation processes and policy conditions that shape this relationship. This study examines the effect of climate financing on renewable energy growth in Kenya over a ten-year panel period. Climate financing is disaggregated into financing mechanisms, financing uptake rate, and financing volume. Renewable energy growth is measured using installed renewable capacity, household renewable energy access, and off-grid consumption rate. The study introduces renewable energy capital formation, operationalized through renewable infrastructure capital expenditure and grid expansion investment, as a mediating variable. Green policy instruments, comprising feed-in tariffs, tax incentives, and tradable green certificates, are modelled as moderating variables. Adopting a positivist philosophy and a quantitative longitudinal design, the study employs panel regression techniques, including fixed effects and random effects estimations, to test direct, mediating, and moderating relationships. By integrating capital formation and policy conditioning effects into the climate finance–renewable energy nexus, the study provides structured empirical evidence to inform climate finance deployment, infrastructure planning, and green policy design in Kenya.
