Sinister
JF-Expert Member
- Feb 18, 2013
- 1,529
- 1,576
New developments to watch in Kenya’s energy space
The Energy Siren The Energy Siren
5 hours ago
Beyond the horizon, past the distant shades of evening glow and mystical nights, what’s the picture of Kenya’s future energy landscape like?
Indeed much ground has been covered in the country’s forward march towards energy security. Most Kenyan adults would recall the dark days when bouts of blackouts would religiously roll across the country whenever the rains failed.
Now, East Africa’s economic powerhouse fortunes have greatly improved over the years, energy-wise. The frequency and duration of outages have steeply dropped, be it during scheduled maintenance or unforeseen network breakdown. This is a product of deliberate planning and execution of strategic blueprints involving construction of a diverse set of power plants along with upgrade of the previously rickety national grid network. Granted, the country still has a lot of miles to cover to get its energy house in order, to get to world class level.
So what new trends should consumers and investors watch out for in Kenya’s energy space?
Households/individuals to venture into electricity sales
Kenyan households with solar panels, be it on their rooftop or carports, will now be able to sell surplus power generated by their panels to Kenya Power. This provision was activated by President Uhuru Kenyatta after he signed the Energy Bill 2017 into law last month.
In the net-metering regime, widely practised in Europe and the US, households and companies connected to the national power grid and at the same time having their own rooftop solar plants will be allowed to supply into the grid their excess power. Since such homes or companies also receive electricity from the national grid, their monthly net billing becomes the difference between what they got from the grid and what they supplied. This means they end up with a significantly lower bill, or at times none at all when their supply exceeds consumption.
Equally, communities can pool together funds and construct power plant (s), wind or solar, to be owned jointly through their energy cooperatives, for own use among themselves with excess generation sold to the national grid through Kenya Power.
For instance, Carlo Van Wageningen, the founder and board director of Lake Turkana Wind Power Ltd (LTWP) – the company behind the 310MW Turkana wind farm plans to democratise ownership of power plants among Kenyans through wind projects. He seeks to create a special purpose vehicle through which individual Kenyans and local investment groups could invest directly in construction of wind turbines in exchange of equity stakes, from which to earn from power sales.
For homes, net metering ensures stable power supply by creating redundancy through an extra power source, meaning a household can have power supply even as the whole neighbourhood is cut off from the grid during downtimes.
On the flipside, much as it favours homes and businesses, it runs the risk of narrowing the revenue stream for Kenya Power which has all along enjoyed monopoly over the power retail market.
As more people install solar panels, batteries and smart software, formerly passive consumers of electricity are set to become producers and consumers (prosumers) of electricity in an interconnected grid. Innovation in smart grid and advances in communication technologies may lead to the emergence of an ‘energy internet’, allowing thousands of people to produce electricity in their homes, offices and factories and share it peer-to-peer.
Rapid growth of power mini-grids
Billed as the grid of the future being built today albeit in an experimental approach, mini-grids are promising to be a game changer in lighting up rural village populations ahead of the arrival of the national/central power grid.
Minigrids, largely powered by solar panels complete with distribution lines connecting rural households, along with standalone solar kits are in the business of decentralising electricity access to villages. Some see the mini-power generators as vessels through which electricity access could be fully democratised. This is because construction of overhead transmission lines to transport electricity to rural areas is a very expensive, long-term exercise, meaning some areas, without the off-grid power interventions like minigrids, would otherwise remain in the dark for many years to come. Plus, most African nations only connect regions that show potential for increased economic activity with backwater areas left to their own devices. Luckily, minigrids and standalone solar service providers do not discriminate households and would swiftly connect any willing customer. If anything, it’s exactly such a customer segment neglected by the government that minigrid investors are eyeing to oil their off-grid business machinery.
Sector players have drawn parallels between the mobile phone wave that swept through the telecommunications space in Africa and what’s happening in the energy space. Just as most African households not connected to fixed landline telephones leapfrogged the now redundant technology through portable cell phones, most off-grid village folk are now accessing electricity outside the national grid, thanks to flexible off-grid power solutions. By their very nature, mini-grids are quick to construct and cost a lot less, positioning them as the shortest route towards faster rural electrification.
Further, these decentralised nodes of electricity generation and supply are generally resilient in the sense that villages hosting them can remain lit even during a nationwide blackout should the national grid suffer a total breakdown. Besides, some market players aver that in future, these largely isolated small grids in different villages could be linked together creating a giant web of energy infrastructure to allow power exchange and further tighten their resilience.
RELATED KenGen lands Sh620 million geothermal drilling contract in Ethiopia
Private companies already in the solar-powered minigrid business in Kenya include American firm Powerhive which has an operational footprint in Kisii, western Kenya. Vulcan, owned by Microsoft co-founder Paul Allen, built 10 solar mini grids in Kajiado and Samburu while Nairobi-based PowerGen is equally building micro-grids in Narok.
Portuguese company, RVE.SOL, is yet another player in Kenya’s mini-grid space with operations in Busia, western Kenya.
On the government side, the Rural Electrification Authority, through World Bank funds, is moving to construct dozens of solar-powered mini-grids in off-grid villages, mostly in northern Kenya and the Coast. Equally, the Kenyan government tied up with Germany in piloting the mini-grid concept through a special vehicle, Talek, in Narok.
Currently, the tariffs for households on minigrids are, however, up to 10 times higher than what their counterparts on the national grid pay through Kenya Power, for a number of reasons.
First off, unlike on the national grid which has price controls, minigrid charges levied by private investors are not regulated, generally left to market forces of supply and demand. Next, the low purchasing power of village folk means their power use is rock-bottom, mostly for lighting and playing small electronics. This essentially means investors, some of whom use loans to construct the minigrid infrastructure and connect homes, have to wait longer to defray their initial investment costs since their power sales are low, constrained by low village demand. And so to cushion themselves, they have to charge higher per kilowatt hour (kWh).
It’s for this reason that the Energy Regulatory Commission (ERC) in partnership with the French Development Agency (AFD) is exploring ways to bring about equity in tariffs for both national grid and small grids.
The government seeks to ensure there is some level of equity in power costs, regardless of the mode of distribution and effectively put an end to price discrimination disfavouring village customers.
To address this, a fund has been proposed to offer subsidies to operators of mini-grids and cushion them from high investment costs. This move is expected to trigger the investors to significantly lower their tariffs and align them with tariffs charged by Kenya Power on the national grid.
The fund is contained in draft regulations by the ERC expected anytime this year and equally come with three options to be made available to investors, besides the fund.
First, the draft regulations provide a framework for the mini-power generators to buy bulk electricity from Kenya Power for onward sales to homes and businesses through their mini-grids, an option that Tatu City real estate in Kiambu is eyeing.
Next, minigrid operators will have the option of selling off their infrastructure to Kenya Power which will in turn own and operate the small grids and supply customers at lower tariffs, uniform to national tariffs.
The third alternative would be for private investors to set up the small grids and let Kenya Power retail electricity to customers on their behalf, ensuring lower costs for developers.
The proposals will, however, only strengthen Kenya Power’s monopoly despite the new Energy Act providing for the licensing of other electricity distributors and retailers — in a move that aims to increase competition and improve service delivery.
Drone use and Internet of Things (IoT) to run power projects
Use of drones is slowly buzzing its way in Kenya’s energy sector. Last year, Kenya Electricity Transmission Company (Ketraco), through Chinese contractors, turned to drones in stringing high voltage power line on pylons for the 435km Suswa-Marsabit transmission line connecting 310-megawatt Lake Turkana wind farm to the grid. Deployment of drones proved less cumbersome and got the work done a lot faster, according to the Ketraco executives who have indicated that future projects, especially those traversing remote, rugged terrain, would follow a similar route.
Electricity distributor Kenya Power recently also indicated plans to use drones for surveillance and maintenance of its power network. The impending switch to the pilotless aircraft, away from helicopters currently used for patrols, is expected to cut costs and improve service delivery, translating to less downtime for homes and businesses during network breakdowns.
Power producer KenGen last year equally announced it would tap into drone technology for surveillance of its geothermal power projects in remote, rugged Olkaria steam fields, Naivasha. Deployment of drones, also known as unmanned aerial vehicles (UAV) will help KenGen collect data and relay it to control centres in real-time.
The drones plan coincides with KenGen’s quest to deploy Internet of Things (IoT) to boost operation and maintenance of power plants. The IoT technology connects separate devices, appliances and equipment via the internet, allowing them to communicate with each other, collect and exchange data.
Electric car market rally
Last month, the World Bank estimated that Nairobi’s electric vehicle market will hit Sh500 billion ($5 billion) in the period to 2030, swinging open a golden investment window for businesses.
Already, Nairobi-based Opibus, founded by a group of university students from Sweden, is piloting conversion of petrol cars to electric cars by replacing engine and fuel tanks in cars with electric motor and battery. The conversion promises customers a steep drop in their motoring expenses, along with zero carbon emissions and pollution.
RELATED Kenya, Djibouti in race for pipeline deal with oil-rich Juba
Finnish company EkoRent Nopia Ride is equally piloting its electric taxi hailing service on Nairobi roads. The firm currently runs two charging stations in the pilot phase, one at Two Rivers Mall and the other at Hub in Karen on the city outskirts.
Not to be left behind, electricity distributor Kenya Power has also hinted at plans to partner with an undisclosed electric cars service provider, an arrangement that will see the utility firm operate solar powered charging stations.
Hydropower recycling
Kenya’s largest power producer KenGen has announced plans to install pumps at its key hydroelectric dams such as Masinga dam to pump downstream water uphill back to the dam, some kind of energy recycling.
Hydropower recycling, also known as pumped hydropower storage (PHS) or water battery technology is where pumps operated by electricity are installed at a hydropower dam to pump downstream water uphill back to the dam. The pumped storage technology ensures steady generation of cheap hydropower throughout the year even during prolonged bouts of drought.
During periods of low demand, especially nighttime, renewable energy such as wind is used to pump water uphill. And when demand increases water from the upper reservoir runs downhill through the turbines to produce electricity.
In Kenya’s context, the surplus nighttime power from the 310MW Turkana wind farm could be used to pump dam water to elevation and stored for release and generation during daytime, and during peak demand.
Smart solar equipment with machine learning algorithms to deepen roots
Solar power solutions companies in Kenya are increasingly adding machine learning within their kits, enabling them to accurately predict trends and adjust performance to ensure optimal output at all times, regardless of weather conditions. This is proving crucial at a time when weather conditions have become wildly unpredictable as the effects of global warming and climate change hit home.
For instance, SunCulture, a Kenyan solar irrigation technology company, has introduced a solar irrigation pump capable of studying the weather using built-in algorithms and optimising performance at all times.
The solar-powered kit, known as RainMaker2, equally incorporates Internet of Things (IoT) and sends phone SMS alerts to farmers advising them to time their irrigation, based on weather patterns predicted by the climate-smart machine.
With the machine learning component, farmers can seize control of their production patterns, without being at the mercy of weather conditions.
UK-based Azuri Technologies, which installs pay-as-you-go solar kits for lighting and powering electronics in off-grid homes, is yet another company that has incorporated machine learning in its devices.
The company’s HomeSmart kits provide light in off-grid households every night regardless of whether there was sunshine during the day or not.
The smart kit monitors homes’ power usage and adjusts light brightness according to levels of energy stored in the battery in order to sustainably meet the customers’ daily power needs, including nighttime.
Cooking gas price controls
It’s just a matter of time before price controls are imposed on cooking gas, also known as liquefied petroleum gas (LPG), which is widely expected to drive prices downward in favour of consumers.
This follows the ongoing construction of a common user gas storage facility in Mombasa port city that will enable the ministry to issue single gas tender commonly referred to as the open tender system (OTS).
Under the OTS, the ministry will award one oil marketer the right to import gas in bulk every month on behalf of the entire industry, enjoying huge discounts, like is the case with diesel, petrol and kerosene, whose maximum prices are controlled.
Auctions for renewable energy projects
Kenya is transitioning to an auction system for renewable energy projects that will introduce competitive bidding in the sector with the aim of generating the lowest tariffs possible.
The auctions will replace the current feed-in-tariff (FiT) system, where investors identify potentially viable power projects and then acquire licences to operate them at pre-determined rates without any requirement for tendering.
The competitive bidding system will see the government pick power projects and award them to bidders who offer to charge consumers the lowest tariffs.
The feed-in-tariff for solar projects (between 10 and 40 megawatts) stands at Sh12.36 per unit ($0.12), and Sh11.33 per unit ($0.11) for wind projects of between 10 and 50 megawatts.
The rate for geothermal power plants (35–70 megawatts) is Sh9 per unit ($0.088). The rates are expected to drop by as much as half, easing consumers’ billing burden.
Kenya adopted the feed-in-tariff in 2008 to attract investors in renewable energy as an alternative to expensive diesel-generated electricity.
Electricity distributor Kenya Power is obligated to buy electricity generated under feed-in-tariff — which covers smaller renewable power plants.
The tendering would help Kenya plan well and match power demand with supply and avoid ending up with more than excess electricity capacity that would force consumers to pay for idle plants.
