Private firms to resell Kenya Power electricity

Private companies will buy electricity from Kenya Power and resell it to customers, if new rules by the regulator are approved.

The new rules are aimed at pulling investors into the off-grid electricity sub-sector.

The proposals contained in the draft Energy (Mini-Grid) Regulations 2021, fronted by the Energy and Petroleum Regulatory Authority (Epra), if approved, are set to boost investors in the sector as the structure allows them to continue their operations even when the national grid reaches their area.

The remote location of most of the mini-grids means the transportation costs for the fuel that powers them are high which ensures that most of them operate at a loss, booking less earnings from electricity sales than their total costs.

But new technology has made investment in renewable energy like solar and wind cheaper, which has buoyed investors who are being put off by the high operational costs of running mini-grids.

Mini-grid license

“A mini-grid operator operating under a mini-grid license who has built a distribution system… may apply to the Authority for modification of their license to operate as a power distributor that purchases power in bulk from the Distribution Licensee and resells that electricity to the Consumers under an Energy Supply Agreement,” the regulations read.

“A mini-grid operator may in the event of a main grid arriving at the mini-grid area…apply to the Authority for modification of their license to operate as a power producer selling to the Distribution Licensee,” say the regulations.

In the new proposals, Epra will also allow applications by companies to charge more for electricity than what on-grid customers pay, which will allow investors to turn a profit.

"The Authority shall consider the application and if the proposed retail tariff is higher than the approved tariff of the Distribution Licensee, the Applicant shall be required to submit the proposed margin that would be added to the bulk supply tariff in order to ensure efficient distribution operations," say the regulations.

The new regulations seek to streamline the operation of mini-grids of capacities of up to 1 megawatts (MW) which the government is betting on to add 34,700 new households to electricity as it races to achieve universal electricity connection by next year.

The new rules  will harmonise the requirements needed for approval of building of new mini-grids, procedure for licensing and interconnection to the main grid and processes of tariffs setting and approval.

The sector is currently regulated through the Energy (Electricity Licensing) Regulations, 2012, which are not robust enough to deal with the growing interest in the sector. There are currently 106 mini-grids in Kenya with 14 owned and operated by private entities, while Rural Electrification and Renewable Energy Corporation (REREC) owns 46, Kenya Power (28) and communities (18).

Meanwhile, there are 180 new mini-grids that are being developed by private companies and are currently in various stages of development, while the government is also planning 158 mini-grids under the Kenya Off-Grid Solar Access Project (KOSAP) to be built and operated by REREC or Kenya Power.

The new mini-grids developed by REREC are built using funds generated from the Rural Electrification Levy, which makes up about 5 per cent of the total electricity charge.

Kenya Power in February floated a tender for retrofitting of its 21 diesel-powered mini-grids in Northern and North-Eastern Kenya to hybrid solar and wind technologies to cut operational costs.

The company bought 60 gigawatt-hours of electricity from off-grid power stations last year, a marginal increase from 50GWh it bought in 2019.

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