Energy efficiency in the Kenyan manufacturing sector

Abstract

As one of the highest energy-consuming sectors, Kenya’s manufacturing sector share of electricity consumption in 2019 was 50.16%. That of fuel consumption was 12%, the second-highest after the transport sector. It is therefore important to analyze the sector’s energy efficiency and its determinants. A stochastic frontier analysis based on the assumption of a translog production function at the sub-sector level is estimated by employing a pooled model covering the years 2007, 2013 and 2018 in the analysis of electricity efficiency and 2007 and 2013 in the analysis of fuel and total energy efficiency. The sub-sectors of interest are: chemicals, pharmaceuticals and plastics, food, textile and garments and the other manufacturing sub-sector. The results show significant potential to enhance electricity, fuel and total energy efficiency across all the sub-sectors. The findings further reveal that exporting status, research and development, top managers’ experience and female ownership enhance energy efficiency. The effect of these variables is, however heterogeneous by sub-sector and energy form. Labor productivity negatively influences electricity, fuel and total energy efficiency while the effect of firm age and size is ambiguous. Finally, the study provides policy implications for the design of policies to improve energy efficiency.