Kenya’s Energy and Petroleum Regulatory Authority (EPRA) has together with stakeholders developed Draft Energy (Net-Metering) Regulations, following the adoption of a new Energy Act in 2019. As defined in Section 162 of the Act net-metering is “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.” It is estimated that the combined installed capacity of captive power plants in the country is more than 100MW at present.[1] This capacity is concentrated in the commercial and industrial segment which has largely adopted solar PV technology to manage high electricity costs of grid supplied electricity.
The provisions related to net-metering in the Act were not adequate to provide a concise legislative framework and as a result, the provisions in the Act require the adoption of complimentary subsidiary legislation to provide the necessary legislative framework for the roll-out of a net-metering program. This Policy brief highlights key provisions of the Draft Regulations and the implication on Kenya’s Electricity Sector.
HIGHLIGHTS OF THE PROPOSED KENYAN NET-METERING REGULATION.
The Draft Regulations are divided into 15 sections and Four Schedules providing directives on differing aspects to net metering in Kenya’s energy sector.
1. Application: The provisions in the Draft Regulations are proposed to apply to:[2]
(i) Consumers who own Renewable Energy Generators with a capacity not more than 1 MW installed primarily for self-consumption. These consumers may enter a Net-Metering System Agreement with a distribution licensee or retailer.
(ii) Distribution or retail licensees in the consumer’s area of supply who have an obligation to offer net-metering arrangement to the Prosumers who intend to install grid connected renewable energy system, provided the Prosumers meet certain stipulated requirements. A Prosumer is defined as “a residential, commercial or industrial customer supplied by a licensee and generates electricity, on the customer’s side of the meter, using a Renewable Energy source whose capacity does not exceed 1MW”;
The 1MW limit placed on the capacity of renewable energy generators for net-metering may be viewed as a way of ensuring grid stability which must be carefully monitored, particularly where there is a significant amount of variable renewable energy generation embedded at different points in the distribution grid.[3]
2. Provision of Net-metering arrangements to Prosumers
The Draft Regulations state that the Distribution or retail licensee is required to offer the provision of a net-metering arrangement to Prosumers[4] who intend to install a grid-connected Renewable Energy system, in the licensee’s area of supply on a non-discriminatory and first-come first-served basis, provided that the Prosumer is eligible to install the grid-connected Renewable Energy system at the rated capacity as specified under the Regulations.[5] Beyond the advantage of advancing a decarbonised economy and promoting energy security, the prosumers predominant benefit of keying into a Net-Metering Arrangement is the antecedent net-electricity billing. To key into Net-Metering, the Prosumer takes up the cost of investing in renewable energy technologies for power generation. Where it is perceived that there is some element of discrimination in the distribution licensee’s manner of applying the Net-Metering Arrangement, consumers are likely to show a lack of enthusiasm towards Net-Metering and consequently towards renewable energy utilisation. As such, this provision is an ideal inclusion in the Regulations because a discriminatory application of Net-Metering Arrangement has the potential of defeating one of the regulator’s intentions which is upscaling renewable energy sources and technologies within Kenya.
3. Eligibility for Net-metering
The Regulation provides that all renewable energy technologies are eligible for net-metering and all residential, commercial, or industrial customers supplied by a distribution licensee or retailer are eligible to enter into net-metering agreements subject to the draft Regulations and other relevant laws.[6] The opening up of the net metering to all forms of Renewable Energy technologies is commendable as it encourages the adoption of a diverse set of renewable technologies beyond solar energy technologies which include and are not limited to biomass, geothermal, small hydro, solar, wind, solid urban waste and biogas.
4. Limits to Generation Capacity
The installed capacity for Prosumers, fixed at 1 MW, must not exceed the maximum load demand in kW used in the 12 months preceding the application for net metering.[7] In the first Phase (Phase One) of the Net-metering Programme, the maximum aggregate generation capacity of Net-metering is limited to 100 MW, subject to review by the Energy and Petroleum Regulatory Authority (EPRA).[8] The limit on the maximum aggregate generation capacity in the initial period is linked to the need to monitor the impact of the embedded generation from renewable energy generation sources on distribution systems.
5. Net-Metering Procedure
The operation of a Net-metering system must be preceded by a Net-Metering System Agreement with a Licensee.[9] A person desiring to operate an net-metering system is also required to make an application to EPRA in the form set out in the First Schedule of the draft Regulations, after the payment of a non-refundable fee.[10] Upon approval of the application, a Net-Metering Agreement is to be executed in a proposed format set out in a Schedule to the Regulations
This inclusion of a format for the Net-Metering Agreement may be viewed as a commendable addition to the regulation as it ensures uniformity of prosumers’ obligations and a standardised model agreement. It further discourages indirect discrimination in the application of Net-Metering Arrangement by licensees who may want to apply unfavourable discriminatory mechanisms, by crafting Net-Metering Agreements with onerous provisions, thus making it undesirable for an intending prosumer to proceed with a Net-Metering Arrangement.
6. Determination of License Applications
The Distribution or Retail Licensee must examine the application referred to above, within sixty (60) days and in a non-discriminatory basis, considering; (a) the applicant’s submitted feasibility study; and (b) system power flow studies in the distribution area.[11] The Licensee’s decision on the Prosumer’s application must be communicated in writing within that period.[12]
The written notice by the Licensee will specify: (a) in the case where the application is approved, the fact of such approval and any condition attached to such approval, and (b) in the case where the application is rejected, the fact of such rejection and the reason for the rejection.[13] An aggrieved applicant may, within thirty (30) days of being notified of the decision, appeal to the EPRA as provided for under the Energy (Complaints and Disputes Resolution) Regulations, 2012 or any other subsequent or replacement regulations.[14]
Upon approval, the Prosumer enters into a Net-metering System Agreement which cannot be assigned[15] or transferred to any other person subject to the Prosumer having paid the prescribed Net-metering fees.[16] A copy of the signed Net-metering System Agreement is subsequently filed by the Licensee to the EPRA within thirty (30) days.[17]
The provision for a time limit for considering applications and filing of Net-Metering System Agreement allows for efficiency in the process and further discourages indirect discriminatory measures that distribution licensees may be tempted to employ to limit net-metered customers.
[1] A Study on the Regulatory Impact of Net Metering in Kenya - Draft Report, Energy & Petroleum Regulatory Authority (EPRA), June 2022.
[2] Section 2
[3] Solar Energy Industries Association, Net Metering. Available at https://www.seia.org/initiatives/net-metering
[4] A Prosumer is an individual who both consumers and produces energy. See Office of Energy Efficiency & Renewable Energy, Consumer vs Prosumer: What’s the Difference? May 11, 2017. Available at https://www.energy.gov/eere/articles/consumer-vs-prosumer-whats-difference
[5] Section 4(1)
[6] Section 5
[7] Section 6(1)
[8] Section 6(2)
[9] Section 7(1)
[10] Section 7(2)
[11] Section 8(1)
[12] Section 8(2)
[13] Section 8(3)
[14] Section 8(4)(1)
[15] Section 8(4)
[16] Section 8(4)(2)
[17] Section 8(4)(3)
[18] Section 9(1)
[19] Section 9(3)
[20] Section 9(6)
[21] Section 9(7)
[22] Section 9(7) (a)-(c)
[23] The Electric Power (Electrical Installation Work) Rules, 2006
[24] Ibid
[25] Section 10(1)
[26] Section 10(2-3)
[27] Section 10(5)
[28] A Study on the Regulatory Impact of Net Metering in Kenya - Draft Report, Energy & Petroleum Regulatory Authority (EPRA), June 2022
[29] Section 10(6)
[30] Deemed Generation means the energy which a generating station was capable of generating but could not generate due to conditions of grid or power system, beyond the control of the generating station.
[31] Section 10(7)
[32] Section 11
[33] Section 12
[34] CPP Investments Insight Institute <https://www.cppinvestments.com/insights-institute/carbon-credits>
[35] Section 13
[36] Section 15(1)
[37] Section 15(2)
[38] Section 6(1)
[39] Renewable energy adoption provides cheap and cost-effective electricity, and net-metering allows a prosumer to supply energy to the distribution network while receiving from it. This process of net-metering ultimately reduces electricity bills from Kenya Power for power supplied to a prosumer since the prosumer has also supplied power to Kenya Power.
[40] Draft Metering Reporting for June 2022, available at https://www.epra.go.ke/wp-content/uploads/2022/06/Revised_Final-Draft-Report_Net-Metering_Ver.2.pdf
[41] Draft Metering Reporting for June 2022, available at https://www.epra.go.ke/wp-content/uploads/2022/06/Revised_Final-Draft-Report_Net-Metering_Ver.2.pdf
[42] ibid