One welcome development in the Energy Act, 2019 ("Act"), which came into effect in March this year, is the introduction of net metering into our energy sector.
Net metering is a system that allows consumers to offset their electricity consumption from the national grid against the locally generated power that they supply to the same grid. The Act allows persons who own an electric power generator of a capacity not exceeding 1 Megawatt to enter into a net metering system agreement with a distribution licensee/ retailer such as The Kenya Power and Lighting Company Limited.
Under the Act, every distribution licensee/ retailer is mandated, upon receipt of an application, to make available net metering service to any electricity consumer that the licensee serves. A consumer is defined in the Act as any person supplied or entitled to be supplied with electrical energy. This is a broad definition which could include home owners, healthcare facilities, malls, schools, children’s homes, homes for the elderly and commercial and industrial players who could tap into net metering as a solution to the high cost of electricity.
Net metering leads to cost savings on electricity bills in two ways. First, where one generates more energy than required for own consumption, the excess is injected into the national grid. In this case, the consumer either receives a credit or payment for the units that were injected into the grid.
Second, where the consumer does not generate any energy at all or if they generate it in insufficient quantities, the consumer can top-up their deficit power from the national grid. In this case, the consumer is only charged for the ‘top-up’.
The Act envisages that regulations will be published to provide a legal framework for the operation of net metering. The following are some aspects which we anticipate the Regulations will address:
- providing a detailed application procedure and clear eligibility criteria for net metering;
- whether the consumer can carry forward any credits for excess generation to the next billing cycle or whether a payment will be made;
- applicable tariffs;
- what are the permitted technologies such as solar, wind, biomass, biogas, hydro, etc and whether third party ownership of generation technology is permitted;
- restrictions or implementation requirements such as obligations to take out insurance;
- safety requirements and any minimum thresholds for power production so as to avoid too many connections that add very little power to the national grid;
- a monitoring mechanism to avoid an overload or oversupply; and
- whether distribution licensees/ retailers will be entitled to levy charges for being on standby to dispatch power when the consumer’s power generation is down.
Model contracts should also be provided or their contents prescribed in the regulations.
As net metering takes into account the difference between the energy consumed from the national grid and energy supplied to the national grid, it has financial benefits for the consumer as it not only reduces electricity bills significantly, but also earns them money when excess energy is supplied to the national grid.
The concept of net metering is bound to be popular as it will provide a solution in times of blackouts and help in reducing pollution due to increasing the use of clean energy which is environmentally friendly. Net metering also conserves energy by enabling excess power to be pushed into the grid when that power would otherwise have been wasted, due to the prohibitive costs of storing it.
Net metering reduces dependency on power back-up systems such as generators and batteries as excess energy is directly injected into the national grid and the deficit energy directly drawn from the grid.
In conclusion, Kenya is endowed with an ample sunlight supply due to its location on the equator. Solar is therefore the obvious and least-cost technology that may be used in net metering in Kenya. Being a free resource and considering the benefits of net metering to the consumer and to Kenya as a whole, the government should move with speed to publish clear regulations to guide implementation of net metering which is bound to drive investment in and use of renewable energy.
The article was also published in the Wakili Magazine and can be accessed here.