As East Africa enters the 2025/2026 fiscal year, the regions energy sector is facing a crucial
period of growth and transformation but does face challenges.
Geopolitical influences investor appetite and economic growth in the region are all playing a
pivotal role in shaping the future of the energy landscape on the continent.
With increasing demand for power, significant investments and innovative projects across sectors like renewable energy, oil and natural gas, East Africa is poised to be a key player in the global energy market in the coming year.
However, the region faces various headwinds, including political instability, infrastructure gaps and climate change, which will significantly influence power production, distribution and consumption.
The Economic Climate in East Africa
As East Africa enters the 2025/2026 fiscal year, the regions energy sector is facing a crucial
period of growth and transformation but does face challenges.
Geopolitical influences investor appetite and economic growth in the region are all playing a
pivotal role in shaping the future of the energy landscape on the continent.
With increasing demand for power, significant investments and innovative projects across sectors like renewable energy, oil and natural gas, East Africa is poised to be a key player in the global energy market in the coming year.
However, the region faces various headwinds, including political instability, infrastructure gaps and climate change, which will significantly influence power production, distribution and consumption.
Geopolitical and Regional Challenges
The geopolitical landscape in East Africa remains complex, with regional conflicts, political
instability and international tensions playing a significant role in shaping energy investments.
Countries like Sudan, South Sudan, Ethiopia and the Democratic Republic of Congo (DRC)
have all faced internal challenges in recent years, which have sometimes spilled over into the
energy sector.
One key project affected is the Ruzizi III Hydropower Project, a joint venture involving Rwanda,Burundi and the DRC. This $760 million project aims to generate 206 megawatts of electricity, addressing power shortages in the three countries. However, the ongoing conflict in the DRC and political instability in Burundi have led to delays in securing financing and could further impede the project’s timeline. The European Investment Bank, a major financier, has already signalled the potential reassessment of its funding due to the unstable political climate in the region.
Another significant challenge to the East African energy market is security concerns in northern Mozambique, where insurgent groups have targeted natural gas facilities, particularly in the gas-rich Cabo Delgado province. Despite this, the region holds enormous potential for gas exports, with multinational companies like TotalEnergies investing heavily in liquefied natural gas (LNG)projects. The U.S. government recently approved nearly $5 billion in funding for TotalEnergies’ LNG project, signalling a positive shift in the region’s energy investment.
The geopolitical landscape will continue to influence energy investment decisions in East Africa. Political stability and security will remain crucial factors in attracting foreign investment into the energy sector. Multinational corporations will closely monitor these issues, adjusting their strategies and funding levels depending on the evolving security situation.
Landmark Projects of note and Investment in Renewable Energy
Despite these challenges, East Africa remains an attractive region for renewable energy investment. Several key projects are already under development and are expected to shape the future energy landscape.
Solar Power
Solar power has been and remains one of the most promising renewable energy sources due to the region’s abundant sunlight and expediency of electrification. As of 2023, Kenya had become one of the leading countries in solar energy in East Africa, with a significant number of large- scale solar projects underway. The Ituka Solar Power Station, for example, is a 24 MW solar farm under construction by AMEA Power, set to be commissioned in late 2025. This project will help meet Kenya’s growing energy needs while reducing dependence on fossil fuels.
Further north, Uganda is also capitalizing on its solar potential, with projects like the Xsabo Lira Solarline 50 MW solar plant, which is expected to begin operations by the end of 2024. Such large-scale projects are vital in reducing the region’s reliance on hydropower, which is susceptible to drought conditions.
Geothermal Power
Geothermal energy is another crucial renewable resource for East Africa, especially in countries like Kenya and Ethiopia, which lie within the East African Rift Valley, a hotspot for geothermal activity. In Kenya, the Menengai II Geothermal Power Station, with an investment of approximately $108 million, is expected to add 35 MWto the national grid by the end of this year.
Hydro power
East Africa also has significant hydropower potential, particularly in the Nile River basin. The Grand Ethiopian Renaissance Dam (GERD) is one of the most ambitious projects in the region, with a projected capacity of 6,450 MW, potentially reshaping the region’s energy market.However, the project has faced tensions between Ethiopia, Egypt and Sudan over water rights, complicating its development.
Similarly, the Kenya Electricity Generating Company (KenGen) is progressing with the development of Ngong Hills Hydropower Plant, which will add 100 MW of electricity to the grid.
Regional Electricity Markets and Power Pooling Initiatives
In response to the increasing demand for electricity and to enhance the efficiency of power generation, distribution and trade, the East Africa Power Pool (EAPP) has been working on creating a more integrated regional electricity market.
One of the most notable initiatives is the introduction of a centralised Day-Ahead Market in 2025, designed to streamline electricity trading among member countries. This will help mitigate the effects of energy shortages and promote energy sharing among East African nations, improving the reliability and stability of the regional power supply.
Investment Trends and Opportunities
The energy sector continues to attract significant foreign investment, particularly in renewable energy, oil and natural gas. With global players such as TotalEnergies, General Electric and Siemens investing in energy infrastructure, the region is on track to become one of the top destinations for energy projects in Africa.
Additionally, the African Continental Free Trade Area (AfCFTA) agreement, which came into effect in 2021, is expected to further boost investment by easing trade barriers and encouraging cross-border energy infrastructure projects. Government policies are also becoming more favourable toward private sector participation in energy development.
Countries like Kenya, Uganda and Tanzania are implementing regulatory frameworks that incentivise private investment in renewable energy projects, including tax breaks, guaranteed purchase agreements and government-backed financing for large-scale infrastructure.
Looking Ahead: The Energy Future in East Africa
As we look towards 2025/26, East Africa’s energy landscape is set to undergo significant transformation. The increasing focus on renewable energy, alongside growing investments in oil and gas, will help meet the region’s energy needs. However, the success of these projects will depend on the geopolitical situation which still remains volatile in several parts of the region. Political stability, improved governance and stronger regional cooperation will be essential to unlocking the full potential of East Africa’s energy resources.
