The government has turned to the newly established National Infrastructure Fund (NIF) to finance most of the Sh30.9 billion earmarked for key energy projects in the financial year beginning July 1, following the suspension of a planned electricity tariff review that had been expected to generate additional funds for the sector.
The move places the new fund at the centre of efforts to modernise the country's power infrastructure and support growing electricity demand.
Treasury Cabinet Secretary John Mbadi said the allocation includes Sh7.5 billion for upgrading the national electricity grid, a project aimed at addressing transmission and distribution challenges that have emerged as more households and businesses are connected to the power network.
The planned improvements come at a time when the national grid is facing increasing pressure from rising electricity consumption and a growing customer base. Concerns over ageing infrastructure and limited capacity have been cited as major obstacles to reliable electricity supply across the country.
“Most of these energy sector projects will be funded by the National Infrastructure Fund,” said Mbadi last evening when presenting the budget for the financial year starting July 1.
Apart from the grid upgrade programme, the Sh30.9 billion allocation includes Sh20.2 billion for expanding electricity access to homes and public institutions in rural areas. The government has also set aside Sh3.2 billion for alternative energy technologies, including geothermal, wind and solar power projects.
The decision to rely on the National Infrastructure Fund follows the government's move to halt Kenya Power's application for a review of electricity tariffs. The proposal, which had been submitted on behalf of the energy sector in March, was expected to help raise billions of shillings for major projects, including improvements to the national grid.
The suspension of the tariff review created uncertainty over how some of the planned investments would be financed, particularly at a time when the energy sector requires substantial funding to expand and modernise its infrastructure.
Kenya Power has been working to address persistent challenges linked to high transmission losses and the grid's limited ability to absorb sudden increases in demand. Upgrading the network has been viewed as a key step towards improving service reliability for the utility's 10.2 million customers.
Frequent power supply challenges have also pushed many homes and businesses to seek alternative sources of electricity, mainly through solar and biomass systems, to reduce their dependence on the national grid.
The withdrawal of the tariff application signalled the government's intention to look for alternative financing options for critical energy projects rather than pass additional costs to electricity consumers.
The National Infrastructure Fund has now emerged as one of the government's main vehicles for financing large-scale projects, particularly in the energy and transport sectors. Officials expect the fund to support the implementation of capital-intensive developments while reducing the need for additional borrowing.
The fund is anchored in the Infrastructure Fund Act 2026, which was enacted in March this year and provides the legal framework for financing major infrastructure projects across the country.