The Energy and Petroleum Regulatory Authority (Epra) is finalizing its review of a groundbreaking deal that could reshape East Africa’s power trade. The agreement involves transporting 100MW of electricity from Ethiopia to Tanzania, with Kenya’s transmission infrastructure playing a pivotal role in the transit. If approved, the deal will mark another milestone in the region’s drive toward a more integrated and resilient energy market.

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A Landmark Cross-Border Energy Deal

In a recent announcement, Epra’s Director-General Daniel Kiptoo revealed that the regulator is nearing the conclusion of its approval process for the deal. The proposal involves the Ethiopian Electric Power (EEP) selling 100MW of power to the Tanzania Electricity Supply Company Limited (Tanesco). The arrangement is unique in that it leverages Kenya Electricity Transmission Company’s (Ketraco) extensive transmission network to serve as the transit route for the electricity.

“We received a request for moving power from Ethiopia between EEP, Ketraco—who manages the transmission line—and Tanesco for the moving of 100MW of power from Ethiopia to Tanzania,” Kiptoo explained during a media roundtable held at the Sarova PanAfric Hotel in Nairobi on May 23, 2024. “We are processing the application. We’ve done a preliminary analysis, and we’re taking it through the rigors of obtaining full approval.”

The regulatory review, which examines both technical and economic parameters, is expected to conclude by the end of March 2025. This timeline underscores the urgency with which regional stakeholders are pursuing improved energy connectivity, especially as nations in the region seek to bolster their electricity supply amidst growing demand.

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The Key Stakeholders

Ethiopian Electric Power (EEP)

EEP, the national electricity generator of Ethiopia, is one of Africa’s largest power producers. The deal leverages Ethiopia’s surplus generation capacity, largely thanks to investments in major projects like the Grand Ethiopian Renaissance Dam (GERD). The GERD, which has dramatically increased Ethiopia’s production capacity, now positions the country as an emerging power exporter within the region.

Tanzania Electricity Supply Company Limited (Tanesco)

Tanesco is Tanzania’s primary electricity distributor. With northern parts of the country facing persistent supply challenges, Tanesco sees the import of 100MW from Ethiopia as a strategic move to alleviate shortages and promote regional development. The additional power is expected to spur industrial growth, enhance service delivery, and ultimately improve the quality of life in areas where energy demand has outpaced supply.

Kenya Electricity Transmission Company (Ketraco)

Ketraco is at the heart of this deal. As the custodian of Kenya’s critical transmission infrastructure, the company provides the essential transit route for the power flowing from Ethiopia to Tanzania. Ketraco’s network—bolstered by recent investments—has proven instrumental in connecting diverse power markets in the region. The company will charge a wheeling fee for the use of its transmission lines, a cost that reflects both the operational expenses and the strategic value of facilitating cross-border electricity trade.

Energy and Petroleum Regulatory Authority (Epra)

Epra is responsible for ensuring that energy transactions and infrastructure use adhere to national regulations and policies. The authority’s rigorous review process covers technical compatibility, economic viability, and compliance with energy laws. Epra’s final decision will set a critical precedent for future cross-border power transactions, emphasizing the importance of regulatory oversight in fostering a safe, reliable, and integrated regional energy market.

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The Transmission Infrastructure: Linking the Region

Kenya-Tanzania Interconnector

In 2024, Kenya and Tanzania commissioned a 510-kilometre electricity interconnector line running from Isinya through Namanga to Arusha. This state-of-the-art transmission line is a vital component of the regional power pool. It not only facilitates the immediate trade of electricity between Kenya and Tanzania but also lays the groundwork for broader regional integration. The interconnector is instrumental in enabling power utilities to buy and sell electricity, thereby promoting energy security and market efficiency.

Kenya-Ethiopia Interconnector

Another critical asset is the Kenya-Ethiopia interconnector. Spanning over 1,000 kilometres from Woloyta-Sodo in Ethiopia to the Suswa Substation in Kenya, this link has been operational since 2022. It has allowed Kenya to import electricity generated from the GERD, highlighting the region’s ability to share resources across borders. The successful operation of this interconnector serves as both a model and a catalyst for similar projects, including the current deal under Epra’s review.

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Technical and Economic Considerations

Rigorous Regulatory Scrutiny

Epra’s review process involves an in-depth examination of both technical and economic parameters. On the technical front, the regulator is assessing the transmission capacity, grid stability, and compatibility of the power systems involved. This includes ensuring that the power generated by EEP can be efficiently and safely integrated into Tanzania’s grid once it traverses Kenya’s infrastructure. Detailed analyses of voltage levels, phase synchronization, and load management are integral parts of this evaluation.

Economically, the review considers the cost implications for all parties. Ketraco’s wheeling fee, for instance, must be balanced against the overall benefits of the deal. The fee structure will determine how the cost of using Kenya’s infrastructure is shared between Ethiopia and Tanzania. Additionally, the economic review examines the financial viability of the transaction for Tanesco, ensuring that the imported power will help reduce the cost of electricity and spur economic development in northern Tanzania.

Preliminary Analysis and Stakeholder Consultations

According to Director-General Kiptoo, Epra has already completed a preliminary analysis of the proposal. This initial review covered key factors such as transmission losses, grid stability, and the overall feasibility of using Kenya’s infrastructure as a transit route. Stakeholder consultations with EEP, Tanesco, and Ketraco have further refined the understanding of both technical challenges and economic benefits. The collaborative approach ensures that the decision, when finalized, reflects a consensus among the main parties involved and aligns with regional energy policy objectives.

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Regional Significance and Broader Implications

Enhancing Energy Security in East Africa

The deal is significant not only for the immediate stakeholders but also for the broader East African region. As countries increasingly face challenges related to energy supply and demand, cross-border electricity trade emerges as a vital strategy for enhancing energy security. Tanzania, in particular, stands to benefit substantially. By importing 100MW of power from Ethiopia, the country can alleviate chronic shortages, especially in regions where power demand has historically outstripped supply. Improved energy access is a key driver for economic growth, industrial development, and social progress.

A Catalyst for Regional Integration

The use of Kenya’s transmission infrastructure in this deal underscores the country’s emerging role as an energy transit hub in East Africa. Kenya’s strategic location and well-developed infrastructure position it as a critical link between energy-rich countries like Ethiopia and energy-importing nations like Tanzania. This interdependence fosters greater regional integration and cooperation. The success of this deal could pave the way for additional cross-border projects, further solidifying the East African Power Pool (EAPP) as a model for integrated energy markets.

Supporting the Vision of the East African Power Pool

The East African Power Pool (EAPP) is a collaborative initiative designed to create a regional electricity market that transcends national borders. The goal is to allow power utilities to buy and sell electricity, thus optimizing resource utilization and reducing the risk of supply shortages. The current deal aligns perfectly with the EAPP’s objectives. By demonstrating that electricity can be reliably and efficiently traded across borders, the project contributes to the broader vision of an interconnected and robust regional power market.

Economic and Social Development Benefits

Reliable electricity is a cornerstone of economic development. In Tanzania, improved power supply in the northern regions is expected to have far-reaching effects. Industries will benefit from lower production costs and fewer disruptions, while households will enjoy a more stable and affordable power supply. Enhanced energy security can drive industrialization, create jobs, and stimulate local economies, thereby contributing to overall socio-economic development. In the long term, such projects can help reduce energy poverty and improve living standards across the region.

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The Role of Regulatory Frameworks in Cross-Border Trade

Epra’s Mandate and Regulatory Processes

Epra’s role in this transaction is pivotal. As the national regulator for Kenya’s energy and petroleum sectors, Epra ensures that all energy transactions comply with established laws and policies. The authority’s mandate includes safeguarding consumer interests, ensuring reliable power supply, and promoting fair competition in the energy market. The review process for this deal involves a careful balance between facilitating regional trade and maintaining national regulatory standards.

Harmonizing Technical and Economic Standards

One of the key challenges in cross-border power trade is harmonizing technical standards across different national grids. Differences in voltage, frequency, and grid management practices can pose significant obstacles. Epra, along with its counterparts in Ethiopia and Tanzania, is working to establish common standards that will ensure the smooth transfer of electricity. Such harmonization is essential not only for the current deal but also for future projects that seek to integrate regional power markets.

Transparency and Accountability

The regulatory process is designed to be transparent and accountable. Epra’s review includes public consultations, stakeholder meetings, and detailed technical assessments. This openness helps build trust among all parties and ensures that the final decision is based on comprehensive evidence and analysis. Transparent regulatory practices are critical in fostering investor confidence and attracting further investments in the energy sector.

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Challenges and Risks: Navigating the Complexities of Cross-Border Trade

Technical Challenges

While the use of Kenya’s infrastructure provides a viable transit route for the electricity, it also brings technical challenges. Maintaining grid stability over long distances requires advanced monitoring systems and robust maintenance protocols. Any disruptions in the transmission line—whether due to technical faults or external factors—could impact the reliability of power delivery. Addressing these technical challenges is paramount to ensuring the success of the deal.

Economic and Financial Risks

The financial structure of the deal involves various economic risks. The wheeling fee charged by Ketraco must be balanced against the cost savings expected by Tanesco and the revenue prospects for EEP. Fluctuations in energy prices, unexpected increases in operational costs, or changes in regulatory policies could alter the financial dynamics of the deal. Epra’s review process is designed to identify and mitigate these risks, ensuring that the transaction remains economically viable for all stakeholders.

Regulatory Coordination Across Borders

Another critical challenge is the coordination of regulatory frameworks across three different countries—Ethiopia, Kenya, and Tanzania. Each nation has its own set of regulations, policies, and priorities when it comes to energy trade. Harmonizing these frameworks requires strong diplomatic engagement, legal coordination, and mutual trust. The success of this deal could serve as a blueprint for future cross-border projects, highlighting the importance of regional regulatory cooperation.

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Future Prospects: Paving the Way for Greater Regional Integration

Setting a Precedent for Future Deals

If approved, the current deal will set a significant precedent for future cross-border electricity trade in East Africa. The successful integration of Ethiopia’s power supply into Tanzania’s grid—via Kenya’s transmission infrastructure—will demonstrate the feasibility of such projects. This could encourage other countries in the region to explore similar arrangements, further integrating the regional power pool and enhancing energy security for all involved.

Expanding the Regional Power Pool

The East African Power Pool is poised for expansion as more countries recognize the benefits of shared energy resources. Future projects may involve larger power transfers, more sophisticated transmission networks, and advanced grid management technologies. As infrastructure improves and regulatory frameworks become more harmonized, the potential for regional energy trade will continue to grow. Such developments could transform the energy landscape in East Africa, making it one of the most integrated and dynamic regions in the world.

Enhancing Energy Security and Economic Growth

Reliable electricity is a key driver of economic growth. By ensuring a stable and efficient power supply, cross-border deals like this one can help stimulate industrial development, improve service delivery, and enhance overall quality of life. For Tanzania, the import of 100MW from Ethiopia is expected to boost electricity supply in the northern regions, thereby supporting local industries and promoting socio-economic development. In turn, this will contribute to broader economic stability and growth across the region.

Leveraging Technological Innovations

Advances in technology are playing an increasingly important role in modernizing energy infrastructure. Digital monitoring systems, smart grid technologies, and enhanced transmission management tools can help mitigate technical risks and improve the overall efficiency of power trade. By embracing these innovations, the involved stakeholders can ensure that the system remains reliable, cost-effective, and scalable for future needs.

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Conclusion

The review of the deal to transport 100MW of power from Ethiopia to Tanzania—using Kenya’s robust transmission infrastructure—marks a pivotal moment in East Africa’s journey toward energy integration. As Epra nears the final stages of its approval process, the project stands as a testament to regional cooperation and the transformative potential of cross-border electricity trade.

By leveraging the strengths of key stakeholders such as Ethiopian Electric Power, Tanesco, and Ketraco, and by navigating the technical, economic, and regulatory challenges inherent in such a complex transaction, the deal is poised to deliver significant benefits. These include enhanced energy security, improved power supply for Tanzania’s northern regions, and a strengthened position for Kenya as a regional energy transit hub.

Furthermore, this project aligns with broader regional initiatives such as the East African Power Pool, which aims to create a more integrated, efficient, and resilient electricity market across the continent. The successful implementation of this deal could serve as a catalyst for additional cross-border projects, driving economic growth and fostering sustainable development throughout East Africa.

As stakeholders continue to work through the final regulatory steps, the coming months will be critical. A favorable decision by Epra will not only validate the technical and economic analyses conducted but also reinforce the commitment of regional governments to advance integrated energy solutions. With this deal, East Africa moves closer to realizing a future where shared resources, harmonized policies, and cutting-edge technologies converge to create a stable and prosperous energy landscape.

In summary, the ongoing review by Epra represents more than just an administrative process—it is a crucial step toward unlocking the full potential of regional energy trade. By connecting Ethiopia’s abundant power generation capacity with Tanzania’s growing energy needs, and by utilizing Kenya’s state-of-the-art transmission infrastructure, this project sets a new benchmark for cross-border cooperation in the energy sector. The anticipated approval by the end of March 2025 could pave the way for a series of similar initiatives, ultimately contributing to a more secure, sustainable, and integrated energy future for East Africa.

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As East African countries continue to confront energy challenges and harness emerging opportunities, projects like this illustrate the transformative power of regional integration. They highlight how coordinated efforts, sound regulatory practices, and strategic infrastructure investments can collectively drive economic progress and improve lives. With reliable electricity at the core of industrial growth and social development, the successful execution of this deal will undoubtedly be a milestone not only for the countries involved but also for the entire region.

In the long run, as the East African Power Pool expands and more cross-border agreements are realized, the region is expected to witness a significant improvement in energy reliability and economic resilience. Such developments will foster an environment conducive to investment, innovation, and sustainable growth—benefiting millions of people and positioning East Africa as a leader in integrated energy solutions on the global stage.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

13th March, 2025