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Advancing Bioethanol and Biodiesel Production in
Kenya: Challenges and Opportunities
Marina Visintini
December 2024
Executive Summary
This essay examines the history, current state, and future prospects of bioethanol and biodiesel production in
Kenya, with a focus on their production processes, usage, and policy frameworks. Bioethanol and biodiesel are
Kenya’s main liquid biofuels, offering opportunities for energy sustainability and economic growth. These
industries have very different histories and value chains, yet face similar challenges in their development.
Kenya’s National Innovation System (NIS) for biofuels is fragmented, characterized by weak linkages between
research institutions, industry, and policymakers. This fragmentation limits the accumulation, adaptation and
diffusion of technology to local contexts and raises concerns about knowledge appropriability, particularly in
biodiesel, where foreign firms dominate the value chain. Similarly, the bioethanol industry suffers from
inefficiencies in process innovation and constrained industrial capacity within domestic sugar mills.
To address these structural bottlenecks, more strategic policies are required. These should focus on
strengthening the industry across the entire value chain, encouraging knowledge transfer between institutional
and industrial players, and fostering collaboration among fragmented firms to build a cohesive and sustainable
innovation system. By adopting this approach, Kenya can unlock the full potential of its biofuel sector and
drive sustainable economic growth.
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History and status of bioethanol and biodiesel production in Kenya
In recent years, liquid biofuels (fuels derived from plants and other organic materials (Bartocci, 2020)) have
garnered significant attention, largely due to the growing focus on climate change. Among the various types of
liquid biofuels, the most widely used are bioethanol and biodiesel. Bioethanol is an alcohol produced through
the fermentation of sugars and starches, while biodiesel is derived from vegetable oils or animal fats (Datta,
2019). Emerging economies in regions such as Latin America, the Caribbean, Africa, and Asia hold the
greatest potential for biofuels, driven by their increasing demand for sustainable energy and available land
(Mendes Souza, 2023). Kenya presents a particularly compelling market for biofuel production, thanks to its
diverse climate and soil conditions, which enable a wide range of biofuel feedstocks (Ndegwa, 2011), and to the
existence of policy frameworks that support and promote biofuel production (Muok, 2008).
Liquid biofuel in Kenya is primarily used as transportation fuel (blended with gasoline) (Africa Sustainability
Matters, 2022) and for household energy, particularly among communities not connected to the electricity grid,
where it serves mainly as a cleaner alternative for cooking (Datta, 2019). Bioethanol, which is used for both
purposes, is the most common type, and can be produced from sugarcane, cassava, and sweet sorghum, among
others (Kedir, 2022). However, Kenya currently produces bioethanol exclusively from sugar molasses, which
are processed by sugar mills (Ministry of Energy, 2020). Of the 16 sugar mills in Kenya, only two are currently
producing bioethanol (Kedir, 2022), alongside the Agro Chemical and Food Company (Ministry of Energy,
2020). According to the Ministry of Energy, the market for fuel ethanol presents significant opportunities in
terms of both volume and profitability (ibid.). Biodiesel production, on the other hand, relies on crops such as
jatropha, castor, croton, and canola. Data on their cultivation in Kenya is limited, as these crops are typically
found growing in scattered locations (Kedir, 2022), but it is estimated at 44,000 tons yearly (MASE, 2024).
Besides being produced directly from feedstock, biodiesel can also be derived from waste cooking oil.
Currently, a few foreign-owned companies, such as Eni and Avalon Energy Group, are involved in producing
biodiesel from feedstock, although most of this output is exported for refining (Eni, n.d. Avalon Energy Group,
n.d.). Local companies, such as GilOil, focus on production from waste oil (Africa Sustainability Matters,
2022). Despite these efforts, biodiesel usage in Kenya remains limited, primarily targeting the transportation
sector (ibid.). Table 1 provides a comparative summary of the two biofuel technologies discussed.
Category Sugar Bioethanol Oilseed Biofuel
Feedstock Sugar molasses. Jatropha, Castor, Croton and Canola
Producers Sugar mills Local and foreign-owned companies, domestically
and abroad (Eni, Avalon Energy Group, GilOil)
Usage Domestic usage for cook stove energy production
and, more limitedly, for fuel blending
Fuel blending
Amount produced 1.2M liters of ethanol (Ministry of Energy, 2020) Limited data available. Oilseed production
destined for biofuel is estimated at 44,000 tons
yearly (MASE, 2024).
Production capacity Estimated at 289.28 million liters/year based on
current context, with better equipment (Kedir,
2022).
Target production is 500,000 tons of oilseed
destined for biofuel (MASE, 2024).
Main challenges •Shortage of molasses due to mills performance
•Increased competition from foreign producers
•Decline in farm productivity
•Lack of policy
(Ministry of Energy, 2020)
•Competition for land between energy crops and
food crops
•High cost of raw material and production
•Lack of standards and regulations
•Low market demand
•Lack of knowledge and awareness
(Ministry of Energy, 2020)
Table 1: Comparative data for Sugar Bioethanol and Oilseed Biofuel.
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From a policy perspective, biofuels in Kenya first gained formal attention with the promulgation of the Energy
Act of 2006, which led to the establishment of the National Biofuels Committee by the Ministry of Energy
(Muok, 2008). The committee developed a biofuels strategy, primarily focused on biodiesel, while relatively
little attention was given to bioethanol (ibid.), despite its production being active in Kenya since the 1980s
(Deenanath, Iyuke, and Rumbold, 2012). The strategy spurred significant investments in feedstocks like
jatropha and other biodiesel crops during the early 2010s. However, according to a report from the African
Forest Forum, these investments proved largely unprofitable, leading to the abandonment of many projects,
with the last being terminated in 2016 (Kedir, 2022). The Energy Policy of 2018 (Ministry of Energy, 2018)
and Energy Act of 2019, which replaced the previous 2006 act (Parliament of Kenya, 2019) both emphasize
the role of biofuels in enhancing energy access and reducing reliance on fossil fuels by 25% by 2030 through
sustainable biofuel production (Diaby, 2011). Furthermore, in November 2020, Kenya launched a new
Bioenergy Strategy, reaffirming its commitment to biofuel production alongside research and development
initiatives (Ministry of Energy, 2020). Most recently, in 2024, Kenya removed high VAT and import duties on
green energy technologies to encourage production and usage of renewable energy (Odhiambo, 2024).
The Kenyan government has also initiated significant programs: for bioethanol, in 2021, the government, in
collaboration with Germany’s International Climate Initiative, introduced the Ethanol Cooking Fuel (ECF)
Industry Masterplanaiming to create rural employment by investing in sugarcane- and cassava-producing
regions to improve incomes for smallholder farmers (Soko Directory, 2021); for biodiesel, in 2024, the
government, the Italian Climate Fund, Italian fuel multinational Eni, and the International Finance
Corporation entered a major partnership to scale up the country’s oilseed production on degraded lands
unsuitable for food production or in rotation with food crops to improve soil fertility. The project aims to
provide farmers with access to processes, technology training to support their participation in the value chain
(MASE, 2024).
Table 2 provides a high-level overview of actors involved in the global value chain for molasses-based
bioethanol and oilseed-based biodiesel in Kenya. Bioethanol production is grounded in domestic value chains,
while biodiesel production is characterized by growing dependence on foreign actors.
Stage Bioethanol Biofuel
Feedstock production,
harvesting & collection
Smallholder farmers and cooperatives. Smallholder farmers and cooperatives.
Processing Processing and fermentation by Kenyan sugar
mills such as Mumias Sugar Factory and Kibos
Sugar & Alled Industries, and by Agro
Chemical and Food Company (Kedir, 2022).
Foreign-owned companies such as Eni Kenya,
Kenya Jatropha Energy Ltd and Avalon
Energy Group, collect the feedstock and
produce oil in Kenya, while refinement
normally occurs abroad (Avalon Energy Group,
n.d. Eni, n.d.). Local refineries such as GilOil
focus on the production from waste.
Distribution & Sales Kenyan Companies such as KOKO Networks
and Vivo Energy distribute bioethanol for
household consumption (Osiolo, Marwah, and
Leach, 2023).
Foreign-owned companies sell internationally
(Eni, n.d.).
Table 2: Main actors in the value chain for bioethanol and biofuel production from feedstock in Kenya.
Strengthening Innovation Systems for Kenya’s Biofuel Production
Biofuels are classified as scale-intensive industries due to their dependence on large-scale chemical or
biochemical processing systems (Bell and Pavitt, 1993). This classification highlights their capital-intensive
nature, which arises from the need to establish processing plants, develop efficient and integrated supply
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chains, and enable technology transfer; these processes require local operational learning, adaptation, and
optimization to improve efficiency, reduce costs, and overcome context-specific challenges. In summary, a
robust National Innovation System (NIS) (Freeman, 1995), defined by Christopher Freeman as ”the network of
institutions in the public and private sectors whose activities and interactions initiate, import, modify and
diffuse new technologies” (Freeman, 1987), is vital for ensuring the long-term sustainability of the biofuel
industry.
Furthermore, a well-developed NIS has the potential to unlock Kenya’s biofuel sector potential for green
leapfrogging, integrating renewable energy sources to drive sustainable development. Leapfrogging refers to the
ability of latecomers to bypass established technologies and instead adopting emerging technologies to catch up
with or even surpass advanced economies in new markets (Lee, 2020). In the context of biofuels, the ”green”
aspect emphasizes climate-friendly solutions. By leapfrogging, countries can chart their own development
paths, avoiding path dependency in innovation (Teece, 2012); this has the potential to bypass lock-in of
technologies that are harmful to the planet, in favor of cleaner alternatives. However, achieving this vision
requires a robust NIS is in place to bridge the gaps between research, industry, and policy (Freeman, 1995).
Central to a strong National Innovation System is a robust education system that develops skilled experts,
alongside a well-connected network of institutions, academia, and firms engaged in Research and Development
(R&D), supported by policies and institutions that facilitate knowledge sharing and collaborative innovation.
The purpose of such a system is to facilitate the dissemination of knowledge, promote experimentation, and
adapt production technologies to local contexts, thereby fostering technology accumulation, diffusion,
appropriability and, ultimately, economic growth (ibid.).
Within biodiesel production, the existence of a knowledge-creating and knowledge-sharing system is unclear:
organizations like the Kenya Forestry Research Institute and the Jomo Kenyatta University of Agriculture and
Technology have conducted research on feedstocks and biodiesel potential, but greater investment and stronger
links with industry are needed to translate research findings into practice (Kedir, 2022). Furthermore, the
significant involvement of foreign players in the biodiesel value chain raises questions about the extent of
spillover effects from enterprise-level R&D. For instance, in the biodiesel program supported by the IFC, Eni
and the Italian Climate Fund, there is a stated commitment to fostering technology accumulation in feedstock
cultivation and oil production (MASE, 2024). While this is promising, it is crucial that, beyond being
imported, technology is adapted to local needs, and processes facilitating knowledge accumulation necessary
for long-term sustainability are in place (Bell and Pavitt, 1993). Without such adaptation, imported
technologies may fail to address specific challenges within Kenya’s biofuel context, including challenges that
have hindered the growth of the industry in the past, such as the high cost of raw materials and production
(Ministry of Energy, 2020). These high costs translate into elevated prices for biodiesel, reducing its
competitiveness against fossil fuels and hindering broader adoption. Policy interventions, such as the removal
of import duties and VAT, could, in theory addressing these challenges, by lowering prices and making
biodiesel more competitive with fossil fuels. However, unless paired with policies that support innovation in
domestic firms, they could also increase competition by attracting foreign firms, which may prioritize
technology import over adaptation (Bell and Pavitt, 1993). On the other hand, challenges with knowledge
accumulation raise concerns about technology appropriability, particularly as foreign firms exercise a high
degree of control on the value chain, and they the export biodiesel for refinement abroad.
In the bioethanol sector, advancing production technology to address inefficiencies and increase output is an
urgent priority. Productivity and technological enhancements are critical for scaling up bioethanol production,
with advancements expected to improve yields, minimize wastage during processing, and ensure reliable power
supply (Kedir, 2022). However, greater investment in R&D is necessary to build the knowledge base required
for transforming technological capabilities into tangible technical changes that drive industrial output and
production capacity (Bell and Pavitt, 1993). While all sugar mills in Kenya remain publicly owned - following
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the abandonment of privatization plans in 2023 - five are now operated through leasing arrangements with
private investors (East African Herald, 2023). Although the localized nature of the bioethanol value chain
offers opportunities for inter-firm collaboration, as evidenced by past partnerships among sugar mills (Simiyu,
Namusonge, and Sakwa, 2017), ongoing financial distress within the sector (Kenyan Wall Street, 2020) raises
concerns about whether innovation will be prioritized. On the other hand, a key advantage of the current
system is the established, integrated, and locally-owned distribution network operated by KOKO Networks,
which currently mostly distributes imported bioethanol (Osiolo, Marwah, and Leach, 2023). This network
provides critical market feedback loops, which play an essential role in fostering innovation and adaptation
within an effective NIS (Freeman, 1995).
Conclusions and recommendations
The history and current state of bioethanol and biodiesel production in Kenya reveal significant opportunities
for growth and innovation but underscore persistent challenges in industrial capacity and in technology
accumulation and adaptation. While the country’s diverse resources and growing demand for renewable energy
create a strong foundation for growth, the effectiveness of these efforts ultimately hinges on policy. Ultimately,
Kenya’s biofuel policies must prioritize the creation of a robust NIS. Current policy frameworks seem to lack
the coherence needed to address structural bottlenecks, and must adopt a more strategic approach.
First, policy should focus on building the industry across the value chain. In bioethanol, where
policy has primarily focused on farming, there is a need to shift toward more balanced support across the
entire value chain, including production and industrial capacity-building. For biodiesel, policy should
prioritize effective technology transfer from foreign firms. While VAT and levy reductions have lowered initial
barriers and attracted foreign investment, these measures alone do not inherently foster technological
capabilities or ensure the sustainability of local industries.
Second, policy should encourage knowledge transfer across institutional and industial players.
While significant R&D occurs in Kenyan universities, successful policy must incentivize the transfer of
innovations into firm. For biodiesel, the linkage will facilitate the adaptation of imported technologies to
Kenya’s local conditions by incorporating local research. For bioethanol, decades of experience in
learning-by-doing present significant potential for process innovation, where institutionalizing this knowledge
has the potential to can drive investments in efficiency and cost reduction.
Finally, policy should aim to build a cohesive innovation system among fragmented firms.
Kenya’s biofuel industry is still in its infancy, with many small and scattered firms operating independently.
To foster technological accumulation, policies must try to push for systemic linkages between firms. For
bioethanol, this means encouraging collaboration among firms to pool investments and share knowledge. For
biodiesel, the focus should be on fostering cohesion within the early stages of the value chain, which currently
operate locally.
By adopting a more strategic, and innovation-driven approach, Kenya can position itself as a leader in the
biofuel industry, driving economic growth and setting a successful example of green leapfrogging.
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