Kenya Draft Net-Metering Regulations Published

Net metering is defined in the Energy Act, 2019 in section 162 as follows:

a system that operates in parallel with the distribution system of a licensee and that measures, by means of one or more meters, the amount of electrical energy that is supplied—

• by the distribution licensee or retailer to a consumer who owns the renewable energy generator, and
• by the consumer who owns the renewable energy generator to the distribution licensee or retailer.
  
  

The Energy and Petroleum Regulatory Authority (EPRA) has recently published the draft Energy (Net-Metering) Regulations, 2022 for public review.

The draft regulations give a first look at how the net-metering regime is intended to operate. Given that the regulations are only in draft form, they will be subjected to stakeholder review and there may be changes introduced in the finally gazette regulations. 

 

Draft Energy (Net-Metering) Regulations, 2022 (Regulations)

We will highlight some of the key provisions in the Regulations.

The net-metering program is expected to be rolled out in phases. The first phase will last three years. In the first phase the maximum aggregate generation capacity of net-metering systems will be capped at 100MW. EPRA may review this limit following the end of the first-phase.

Eligibility for net metering is restricted to residential, industrial or commercial consumers with renewable energy generators of a capacity not exceeding 1MW primarily intended for self-consumption (Prosumers) and to a distribution or retail licencee in the consumer’s area of supply (Licensee).

It is important to note that only renewable energy generation systems are eligible under these regulations. Solar  is the most common renewable energy source in use amongst residential, industrial or commercial customers, however biomass, geothermal, small hydropower, wind, solid urban waste and biogas are eligible. Fossil fuel sources will not be eligible.

In order to participate in net-metering, the Prosumer and Licensee must enter into a net-metering system agreement. The Licencee is obliged under the Regulations to offer these arrangements on a non-discriminatory first come first serve basis.

A Prosumer is intended to make the application to the Licensee through the EPRA who has a supervisory role in the process. The application should be accompanied by a feasibility study and system power flow studies in the area of distribution.

The application is to be reviewed by the Licensee and a decision given within 60 days from the date of application. If the application is refused, the Prosumer can appeal the decision to the regulator EPRA.

If the application is approved then the Prosumer is notified of the same together with any conditions attached to the approval. The Prosumer and Licensee can then enter into the net-metering system agreement.

A draft of the net-metering agreement is provided for in the second schedule to the Regulations (Agreement).

Under the Regulations and the Agreement the responsibility for all the costs of interconnection and metering lies with the Prosumer. Under the Agreement the Prosumer is also responsible for obtaining all necessary governmental or statutory approvals before connecting to the distribution network.

The Agreement is for a term of 10 years but it can be terminated earlier by the Licensee by giving 30 days’ notice for breach of contract or other valid reason. The Prosumer can terminate the agreement by giving 30 days-notice without reasons. It ca also be terminated if the ‘energy supply agreement is terminated’. To our understanding this means that a Prosumer must be a consumer of the Licensee’s electricity supply as a condition of the Agreement.

Prosumers are provided with a credit for each unit exported in a billing period. Under the Regulations they do not receive any monetary compensation for the electricity exported or other benefits their systems provide. During Licensee network downtimes, the Prosumer will not be entitled to any deemed generation.

Each exported unit is granted a net-metering credit of 50% of the exported unit. The Prosumer’s electricity bill will be discounted by the number of net-metering credits in the billing period. If the Prosumer is a net-exporter of electricity then they shall not be charged for electrical supply in that period, with excess credits to the next period. Credits expire at the end of the Licensee’s financial year. 

With the publication of the Regulations, net-metering is one step closer to becoming formally available in Kenya.

Net-metering will greatly benefit Prosumers who will be able to export excess capacity to the grid. This means that they can save on purchasing storage solutions and/or wasting generated electricity. A further benefit is that they can save on the cost of the electricity supplied to them from the national grid.

National electricity supply is dominated by the Kenya Power and Lighting Company (KPLC). One concern would be the need to protect KPLCs revenues as it has been loss making in the past few years only managing to change course recently. A further concern would be to ensure that it is still able to meet its obligations under the several PPAs and other long term commitments.

However the net-metering capacity limit of 100MW for the first phase will help stem those losses. Perhaps this will be reviewed downwards in the final regulations.

We shall wait to see what changes are made to the Regulations as they are further developed and continue to provide updates in future newsletters.

 

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