Industry

Net-metering could reduce high cost of power for consumers

KVA

A 20 KVA solar power system supplied and installed by Chloride Exide that replaced a diesel generator at the Lokichoggio Airport. Kenya Power says it is willing to connect individuals and firms that generate solar power to the grid. Photo/FILE

Think of all the things you do with electricity when you get home. Imagine switching on the lights, watching TV, ironing clothes, heating water, even cooking; all this time your electricity meter is just spinning forward and blinking fast.

But imagine in the morning switching off your gadgets and lights and leaving for work, leaving solar energy to pour in and spin back your meter, reversing the reading and power you have consumed.

This is what net-metering promises for those who will invest in solar panels and connect them to the main grid. The grid will act as storage for power generated by your solar panels.

“Net-metering, in essence, allows small scale renewable energy power producers to ‘bank’ or ‘store’ their electricity in times of over-production (for example, for solar energy, during peak production in the day) in the national grid, and to balance out their grid consumption with this banked or stored electricity during other times (for example, during night, morning and evening hours),” states German Development Service (GIZ).

Come end month, customer pays for the difference between the consumed electricity from the grid and their solar input into the same. In the event one has consumed less than their input, the difference will be carried forward.

Kenya Power managing director Joseph Njoroge told the Business Daily that the pilot project has been successful, which paves way for more developers to exploit the opportunity.

“We already have one customer who is on that. The grid support net metering, it’s already there. If someone has solar, there is a way of measuring from or to the grid,” said Mr Njoroge.

The SoS Children’s Village in Mombasa, Kenya Power’s first client, says the solar panels have cut their electricity bill by more than half.

According to Ms Donnah Midigo, the fund development and communication officer at the village, the electricity bill has reduced from an average of Sh250,000 per month to between Sh50,000 and Sh100,000.

“During the day we use about 30kWh and put about 30kWh into the grid. At night when there is no solar we use from the grid, we only pay if what we have used from the grid exceeds what we have input,” she says.

However, currently there is no policy that governs such small private development such as the SoS project.

“It’s a pilot project; we don’t have a policy on that (net metering). It’s something that probably those who are working on the new energy Bill will factor in. It’s something that we have given out to them,” said Rosemary Gitonga, Kenya Power’s chief manager of commercial services.

According to a report titled Grid Connection of Solar PV: Technical and Economical Assessment of Net-Metering in Kenya, compiled by GIZ on behalf of the German Federal Ministry of Economics and Technology, Kenya’s solar potential lies untapped.

The report, of a survey done last year, recommends net metering as the best option in Kenya. It was compiled following a request from the Kenya government on the feasibility of the net metering in the country.

In the course of last year, two major solar projects took place. Unep installed a 515 kilowatt-peak (kWp) rooftop solar plant, which was designed to supply power mainly within the UN compound in Nairobi.

The second one was by the SoS Children’s Village in Mombasa (60 kWp), which is estimated to have cost Sh25 million to install.

The investment at SoS Children’s Village was a move towards green energy for the home, as well as aimed at reducing the power bill. The SOS project was connected to the main grid as a pilot project.

“The investors in the two pilot projects, alongside other sector players, have requested the Ministry of Energy (MoE) and ERC to consider the net-metering option.

Against the background of these requests, MoE and ERC in turn requested GIZ to provide technical inputs, which materialised in the shape of this study,” states the report.

Net-metering has been in use for many years in some developed countries like Germany.

In Kenya, according to the report, there are more than 300,000 potential net metering customers.

The report found out that due to escalating power costs, net-metered solar will be the lowest cost option for many consumers by 2014.

It’s estimated that worldwide, more than 95 per cent of the solar market is on the grid, but in Kenya this option remains underdeveloped.
Kenya Power says it is ready to connect any company or individual who invests in solar to their grid.

“It’s available for willing investors, but somebody has to invest in that solar. You may have noted that it’s quite an investment; even that one in Mombasa,” says Mr Njoroge.

But with the price of the solar equipment worldwide falling drastically, the cost of solar installation has dropped in Kenya.

The price of solar modules has fallen by more than 50 per cent in the recent past. Over the last three years, the number of solar units sold by Davis & Shirtliff’s almost doubled but the revenue has remained flat.

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For instance, according to the firm’s price list, they were selling a 80 watt solar module at Sh40, 000 in 2007 but in September, a similar module was on sale for Sh12, 800, representing a 70 per cent drop in price.

“Around the world, the cost of solar modules has come down very dramatically. The cost used to be $3.5 to $4 per watt and it’s now $1 per watt,” said Mr David Gatende, managing director and deputy CEO, Davis & Shirtliff.

Chloride Exide, another company that sells solar equipment in Kenya, confirms that the price has been on a downward trend. The company was selling solar panels at Sh380 per watt two years ago; today the price per watt has dropped to Sh180.

The drop is connected to oversupply.

“The developed countries such as Germany, Italy China and Japan have been offering solar subsidies to promote the ‘roof-top’ project but some of these countries have reduced the subsidies while others have withdrawn, leading to low demand and high supply,” Mr Joseph Muthoka, renewable energy and project manager at Chloride Exide told the Business Daily.

However, the price may start going up again.

“This is just a short time drop and it’s a good opportunity for Kenya to install more solar units,” said Mr Muthoka.

Today, solar energy contributes 25 per cent of electricity consumed in Germany and this has been achieved through, giving subsidies to private developers.

A study by Solar Energy Industries Association and GTM Research quoted by the Wall street Journal projects that US developers are likely to install about 3,300 megawatts of solar panels this year, nearly double the amount installed in 2011.

The study projects that the global solar-panel installations this year will reach nearly 30 gigawatts, making the US the fourth-largest solar market, with an 11 per cent share of the global market.

But despite Kenya’s solar viability approximated to be one and half times that of the Germany, on-grid connections remains untapped.

Off-grid commercial and institutional photovoltaics (PV) markets play an important role in pre-electrification of areas not reached by the Kenya Power grid. PV is a technology of converting solar energy directly to electricity.

“However, the potential for PV in grid-connect applications may be much greater than off-grid applications and it offers a dynamic new stage of growth for the solar industry. However, these relatively new markets for larger, commercial on- or off-grid applications are yet to begin to develop,” states the GIZ report.

Recently, Kenya has increased its appetite for green energy as it seeks to reduce reliance on oil.

The country largely generates its electricity from a mix of hydro, geothermal and thermal sources. According to the Ministry of Energy, the available supply is 1279MW.

Out of this, hydro feed-in-tariff contributes 738 MW, thermal 345MW; Geothermal 185 MW and Mumias bagasse contributes 15 MW. Wind contributes about 0.4 MW while solar contribution to the grid is insignificant, hence not captured.

Currently, national access to electricity is estimated at 18 per cent. The government in its Vision 2030 aims to raise that to 40 per cent by 2020.

This increased level of electrification will result in increased demand for electricity, which will require major expansion in power generation and transmission infrastructure.

The government is currently tapping 300MW wind power from Lake Turkana.

As the demand outstrips supply, green energy is on the radar but solar still remains undeveloped.

According to Mr Muthoka, large scale solar power production in Kenya is not viable considering the old distribution network, which has high energy leakage.

“Replicating what they are doing in Europe won’t be effective considering our inefficient distribution line,” said Mr Muthoka.

However, Mr Njoroge disagrees with this sentiment.

“Our grid is well suited for net-metering,” he told Business Daily, adding that government, through the Ministry of Energy, had put in place policies (such as the feed-in-tariff) to allow uptake of renewable energy.

The GIZ report notes that Kenya faces challenges of shortage in relevant skills to take the solar market to the next level. There are also quality issues in terms of products and services, and a relatively weak (however improving) regulatory framework.

It commends the government for effort in improving the regulatory framework, noting the zero-rated import duty and the removed Value Added Tax (VAT) on renewable energy, equipment and accessories, including solar energy.

Net-metering will help the medium consumers of energy such as schools and companies to invest in solar energy and connect to the main grid.

The advantage is that the government would not have to spend billions in setting up the infrastructure — it will just need to put in place good policies such as tax break to such companies to encourage development.

Kenya Power on the other hand will not have to pay anything for the extra energy that is pumped into its grid by PV owners, going by the GIZ report, though it faces potential loss of revenue.

To the general consumers the reliance on expensive thermal energy will drop, hence more stable power.