Tax Incentives and Green Energy Investment in Migori County, Kenya

Abstract

Kenya has made notable progress in renewable energy, with over 75% of its electricity generated from geothermal, hydro, wind, and solar sources; however, the spread of green energy investments remains uneven across counties. In Migori County, despite abundant solar exposure, perennial rivers, and proximity to Lake Victoria, renewable energy investments have remained relatively low, raising concerns about the adequacy of fiscal incentives in stimulating local projects. This study assessed the effect of tax incentives on green energy investment in Migori County, focusing on the influence of green bonds and value-added tax (VAT) exemptions. The study adopted an explanatory research design, considered appropriate for examining the causal connections between tax incentives and green energy investments in Migori County. The target population comprised 540 stakeholders actively involved in green energy development, namely investors, financial institutions, government tax policy officials, and energy sector experts, from which a stratified random sample of 230 respondents was drawn. Primary data were collected through structured questionnaires administered via drop-and-pick and online methods, while analysis involved descriptive statistics, correlation, and multiple linear regression. Regression analysis revealed that tax incentives had a statistically significant and positive effect on green energy investment: VAT exemptions (β = 0.296, p = 0.001) and green bonds (β = 0.251, p = 0.003). The study concluded that tax incentives play a vital role in promoting renewable energy in devolved units such as Migori County and recommended simplification of tax exemption procedures, enhanced investor awareness, and stronger implementation of fiscal policies.