With regards to its domestic energy requirements, Kenya is in a very interesting development phase. In the past decade the country has grappled with the challenge of unreliable, expensive and unsustainable energy use supporting a stagnating industrial and manufacturing base. This is mainly due to an aging energy infrastructure that can no longer meet the modern day requirements as envisaged in the country’s economic blueprint, the Kenya Vision 2030. The country has recently made some welcome discoveries in the form of coal, oil and gas deposits that could significantly change the structure of the economy, with major contributions to public revenue as well as impact on other economic sectors. This poses a unique challenge to policy makers, the private sector, and to those who utilise our energy resources the most. How can an economy which relies heavily on wood fuel and biomass as its largest energy source, achieve sustainable energy use through the gradual increase in the use of renewable energy sources that are often expensive due to the technology deployed, in the face of oil and coal discoveries that could be more readily accessible in spite of its known effects on the environment. This challenge requires a very careful implementation of energy sector reforms that not only develops the newly discovered energy sources but also puts in place an investment framework that ensures diversification of energy sources with focus on making renewable sources competitive in the energy matrix. The development of such a strategy requires a clear understanding of Kenya’s energy demand and supply structure. This study aims at providing a situational analysis of the energy sector in Kenya by examining the composition, sources and strategies in the sector, as well as by conducting scenarios based on the different policy paths that Kenya as a nation might consider.