In the last few years, there has been a significant interest among consumers connected to the national grid in generating electricity for their own consumption as a supplement to the national grid supply. Most of the electricity generated by these electricity producers is derived from renewable energy technologies such as solar photovoltaic (PV) systems, small hydropower and biomass plants. Current statistics show that as of December 2023, Kenya’s solar installed capacity was 410.4MW, comprising 210.3MW of grid-interconnected capacity,3.9MW of off-grid capacity and 196.2MW of captive capacity.  

However, the inherent intermittency of renewable energy assets presents a major challenge, as their intermittent power output can vary. For instance, the production of power generated from a solar PV system is higher during the day and lower in the nighttime when residential power consumption typically peaks, making it difficult to match supply and demand. To address these challenges, many grid-connected energy producers curtail power generation when the supply exceeds demand – particularly when the generation facilities lack energy storage systems to store the excess power produced during low consumption periods.

Net-metering arrangements offer a solution by allowing electricity producers to sell excess electricity back to the grid during overproduction periods, with the intention of offsetting the cost of the electricity they consume from the grid. These arrangements also offer consumers storage options for excess energy as an alternative to investing in storage systems.

The Energy Act 2019 (the Energy Act) establishes a framework for electricity consumers who generate electricity to enter into net-metering system arrangements with a distribution licensee or retailer (such as Kenya Power and Lighting Company PLC (KPLC)) if:

1. the consumer’s electric power generator does not exceed a capacity of 1 MW; and
2. the consumer’s generation facility is located in the area of supply of KPLC or its respective retailer.

The long-anticipated Energy (Net-Metering) Regulations, 2024 (the Net-Metering Regulations), have been officially gazetted by the Cabinet Secretary for the Ministry of Energy to operationalise the net-metering arrangements envisioned in the Energy Act.

Key highlights of the Net-Metering Regulations include:

• Eligibility – The Net-Metering Regulations apply to renewable energy technologies such as solar, wind, hydro geothermal and ocean and tidal energy with an installed capacity of less than 1 MW.
• Capacity limits – The installed capacity for:
  1. Domestic customers: A maximum of 4 kW for single-phase supply and 10 kW for three-phase supply.
  2. Commercial and industrial (C&I) customers: A maximum of 1 MW but capped at the maximum load demand in kW achieved in 12 months preceding the application for net metering or where the maximum demand is not provided as part of the electricity bill, the capacity should not exceed the contracted load demand.

Where a C&I customer has multiple meters for the same facility, the maximum demand shall be the sum of all the values recorded by the meters, provided the total installed capacity does not exceed 1 MW.

• Net-metering agreement – Eligible consumers must enter into a net-metering agreement with KPLC or its respective retailer, which outlines the terms of the net-metering arrangement. The Regulations provide a standard agreement form that is valid for a five-year renewable term.
• Application process – A person who intends to enter into a net-metering system agreement is required to apply to KPLC or its respective retailer. Upon approval, the consumer must enter into the net metering system agreement and install and commission the meter within six months from the date of entering into the agreement.
• Metering – The consumer is responsible for installing, commissioning and interconnection of the meter with the licensee’s network at their own cost. The Regulations specify that meters for net metering systems must be smart, with the following minimum specifications:
  1. bi-directional and capable of two-way communication to measure and register electricity flow in both directions at the same rate;
  2. measure and record peak supply in different periods; and
  3. provide for time-of-use metering. The consumer bears the cost related to the meter and setting up of the interconnection with the licensee’s network.
• Billing arrangements – Consumers in a net metering system receive a credit for each unit of electrical energy exported to KPLC or its respective retailer during a billing period. A credit is equal to 50% of the exported unit. When billing the consumer, KPLC or the relevant retailer credits units in kWh exported by the consumer and charges for the net energy supplied in accordance with the applicable retail tariff. Any credit units which exceed the energy supplied by KPLC or the relevant retailer are rolled over to the next billing period, and any unused credits are forfeited at the end of the financial year of KPLC or the relevant retailer.
• Incentives – Consumers are entitled to the value of any carbon credits accruing from the net metering systems.

The gazettement of the Net-Metering Regulations marks a pivotal shift in Kenya’s electricity market by enabling consumers to bank excess capacity on the grid during low consumption periods and offset the cost of electricity consumed from KPLC with the capacity supplied to the grid. The Regulations also underscore Kenya’s commitment to increasing the uptake of renewable energy generation technologies by providing electricity producers with energy storage on the grid. However, from a C&I perspective, the Regulations primarily benefit consumers who own their generation systems, excluding third-party owners who install and operate captive power systems within a consumer’s facility. Further amendments to the Net-Metering Regulations will be necessary to extend the benefits of the net-metering scheme to third-party owners.   

Bowmans will continue to monitor the implementation of the Regulations and provide updates on any regulatory/practice developments impacting net-metering arrangements in Kenya.