A prosumer is a portmanteau of a producer and a consumer. The Energy Act 2019 provides for small producers of renewable energy for their own use to sell their surplus electricity to the national grid, which makes them prosumers. Prosumers only pay for the ‘net’ electricity they consume from the grid through a mechanism known as Net Metering. Draft regulations for Net Metering were released for public comment by the Energy and Petroleum Regulatory Authority (EPRA) in June 2022.
It is encouraging to see that the regulations are informed by a study undertaken by JKUAT which includes an analysis of the Net Metering regime in states such as Malaysia, Tanzania, Ghana and California.
It is a no-brainer that heavy consumers of electricity will contemplate generating their own power from renewable sources like solar to lower their energy costs and their carbon footprint. Use of renewable energy technologies carries the risk of intermittent power and power back-ups in the form of fuel-fed generators or battery solutions are often too expensive. For this reason, prosumers remain connected to the national grid and can take advantage of Net Metering to reduce their power bills and avoid wasting surplus energy.
It is imperative for prosumers to understand what the regulations portend for them. Firstly, the regulations outline the qualification criteria for prosumers. For example, the prosumers must have a production capacity of no more than 1MW. Some have dissenters objected that this capacity threshold is too low which appears to be supported by the JKUAT study which anticipates that 17% of local prosumers will eventually exceed the 1MW limit. That said, the 1MW limit has been adopted in states such as Tanzania and California and the Stellenbosch municipality in Cape Town.
Another criterion for prosumers in the regulations is that they must have been producing power for at least 12 months before they can benefit from a Net Metering arrangement. This appears to be a cautionary measure aimed at ensuring that the prosumers have a track record and meaningful data on their power generation for own use before they are permitted to sell their surplus to the utility.
Turning to the all-important point of compensation, the regulations propose a credit system under which the prosumer is entitled to credits for the surplus power exported to the national grid. Curiously, every 2 units of power exported to the grid by a prosumer shall offset only 1 unit of power consumed from the grid. Kenya Power deserves to be compensated for the infrastructure and resources that it uses to dispatch the prosumer’s power to other consumers and for absorbing financial risk that the other consumers will pay their electricity bills. However, pricing the unit of electricity that is sold to Kenya Power at a mere 50% of the price charged by Kenya Power when on-selling that unit to someone else may face resistance as it appears to be motivated by the need to improve the utility’s profitability.
The concern that the regulations are intended to protect Kenya Power’s revenues is buttressed by another provision which prohibits a prosumer from carrying forward unutilised credits to the following year. We note that the prohibition of carrying forward credits beyond 1 year is also applied by other jurisdictions but there are some like Tanzania which allow credits to be rolled over for 3 years.
The regulations clarify that the prosumer is responsible for the costs of infrastructure such as the bi-directional meters while the utility is responsible for supervising the connection works. A prosumer kick-starts the process by completing the Net Metering application form provided in the regulations and the utility must evaluate the application within 60 days. The regulations have also provided a 5-page Net Metering model agreement for successful applicants. Notwithstanding the simplicity of the template agreement, conscientious prosumers are likely to seek legal advice when negotiating such contracts.
Sensibly, the regulations have considered that Net Metering disputes may arise between the prosumer and the utility and have proposed that these be referred to EPRA. The right to appeal decisions made by EPRA lies in the Energy and Petroleum Tribunal.
The issuance of the draft regulations is an important step towards realising the objective of successful Net Metering in Kenya and potential prosumers should grab this opportunity to provide their considered feedback to EPRA.
The article was featured in the Business Daily on 11 October 2022 and can be accessed here.