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published on 17 December 2019
Our intention in this article is to discuss some of the main issues that must be considered as Kenya prepares to roll out its net-metering program.
This article is supplemental to our first article on this subject titled ‘Net – Metering Kenya’ that was published in the August, 2019 issue of the e|News newsletter.
To briefly recap, while net-metering was made available to some institutions in arrangements entered into with the Kenya Power the national utility, net-metering only received official legislative recognition through its introduction in the Energy Act, 2019, (the Act). The provisions relating to net-metering in the Act are skeletal and require the passing of complimentary subsidiary legislation in order to provide the necessary legislative framework for the roll-out of a net-metering program to the public.
This subsidiary legislation will be developed by the government entities involved in energy production, primarily the Energy and Petroleum Regulatory Authority (EPRA), the Ministry of Energy and Petroleum (MoEP) in consultation with other key stakeholders such as Kenya Power.
Below, as we have mentioned we will look at some of the factors that will have to be considered during the drafting of these regulations and look at an example of a developed net-metering system from Italy.
One half of the net-metering arrangement is Kenya Power who will have the responsibility of providing the net-metering system to consumers. It is often claimed that utilities are the least invested in offering net-metering services as it has the potential to affect their bottom line. Kenya Power a public company has an obligation to maximize shareholder value and to provide a return to them on their investment. Kenya Power also has long term financial obligations such as loans, PPA’s, its projects and other recurrent costs that it must meet.
Ensuring that the Kenya Power’s interests are protected will affect in significant ways the manner in which the net-metering service will be structured.
The impact of this may be seen for example in attempts being made to limit the maximum capacity that may be admissible for the net-metering program. This may be done in several ways including the setting of a capacity cap for all distributed generators, by requiring them to be net energy importers by setting a limit on the proportion of their bill that may be offset by their exported electricity or alternatively by setting self-consumption thresholds for eligibility which will remove the incentive for distributed generators to install out-sized generation systems.
It will certainly result in there being a large differential between the tariff set for electricity exported to the grid and that imported, with the exported electricity attracting a lower tariff. This is necessary for amongst other things to recompense Kenya Power for its costs in distributing the exported electricity to other consumers, however it should be made a mandatory requirement that the export tariff be always above zero.
It will be important in any case for the interests of Kenya Power to be accounted for as the net-metering program will not take off unless Kenya Power is either interested or at least neutral about the provision of a net-metering service.
At the heart of the net-metering service will be the metering system adopted by Kenya Power which will determine the product design and its attractiveness to consumers.
The metering system may provide for either the provision of credits for electricity exported to the grid which will be netted-off against the energy consumed by the consumer in the particular billing cycle. Excess credits that are unused may be rolled over to the next billing-cycle. It may be necessary to place a limit on the extent to which the credits may be rolled over. Many jurisdictions limit roll-overs to an annual cycle, with no roll-over of excess credits to succeeding years. Kenya may however allow for a longer period, say two years, to allow consumers an opportunity to realize the full benefit of their generation systems and to allow a return on their investment within a shorter period.
An alternative would be to pay consumers cash for any excess credits they may have at the end of the billing cycle. This system is not likely to be favored by Kenya Power, if not for the extra payment obligation that it creates, but simply the additional administrative and accounting challenges it may present.
The tariff structure will also be a key point for the drafters of the regulations. While it will almost certainly provide for a lower export tariff as compared to the import tariff it may also be structured to include a variable component based on the time of use, which if adopted, will certainly be dependent on the technology used for the generation of electricity.
Net-metering is intended to be made available to all consumers who request it provided they have generation systems of a qualifying capacity. The Act provides a relatively high limit of 1MW as the capacity of generators that may be used in a net metering system.
Consumers who may request the service will range from householders to those in the commercial and industrial sectors. Householders are likely and in most cases would only require low capacity systems with single digit KW capacities due to their limited needs while commercial and industrial customers would only benefit from the installation of systems with capacities in the 10s and 100s of KW.
It may be necessary or practical for the regulations to treat these two types of consumers differently by for example having reduced requirements for householders in order to facilitate the subscription and uptake process. Differentiation may also be done in order to provide a means for the provision of different tariffs for these two separate market segments to provide an adequate incentive level to each dependant on market considerations.
The interconnection of the consumers generation system and the utilities may pose challenges. This may arise from the use of substandard, incompatible or even unsafe generation systems and components by users considering the use of net-metering service. The market for renewable generation systems is for all intents and purposes open with consumers having a wide variety of choices available to them on the products to use. It is probable that sub-standard components will be available in the market and they may be used in generation systems which may cause faults when connected to the utility’s, Kenya Power, distribution network.
In order to ensure the seamless interconnection of the two systems, it will be necessary to provide for the specifications of the systems that may be used in a net-metering system and the qualifications that will be required of the technicians that will do the installation works. From a practical perspective, the regulations may provide that only generation systems that are certified as meeting the required specifications may be used in a net-metering service. The EPRA and Kenya Power may then assess the products available in the market against the specifications that will be defined for use in net-metering and communicate their suitability for use to members of the public by for instance the use of a certification mark. This will provide an easy way for consumers, who are considering the installation of a generation system to identify the products that they should purchase if they intend to apply for a net-metering service.
The specification process will also allow for the requirement that generation systems have the required safety features such as surge protection and anti-islanding features in inverters that prevent the back-feeding of electricity to de-energized lines. Other measures may be prescribed such as the requirement that circuit breakers have either automatic circuit breakers or manual ones placed in the open and within easy reach of Kenya Power staff to enable them disconnect the systems in case of need. Further the specifications will provide for the required quality of electricity that may be accepted for export.
Given the technicality of these specifications, the understanding of how to identify compatible systems will be beyond the knowledge of most consumers. Currently Kenya does have in place a Grid Code that specifies in detail the requirements for connection to the grid. However its applicability to small capacity generations may be limited. It may be necessary to create a tailored code which may be easily understood and complied with by this section of the market.
Penninah Munyaka
Associate Partner
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