ALURU: Kenya’s Captive Power industry has a bright future

George Aluru, CEO, ESAK/HANDOUT

Captive Power plants otherwise colloquially referred to as C&I power plants are those power plants installed at a customer premises. They are mainly solar rooftop installations or small hydropower installations in tea farms in Kenya’s case.

This would also include sugar processing companies installing their own generation based on bagasse.

 I am sure we have all seen industries and shopping malls with solar panels installed to supply electricity. These allow for consumers to take charge of their electricity needs often in very innovative ways that only involve the consumer paying their regular bill, at a lower cost.

A developer or investor takes the cost of setting up the system and bills the consumer a monthly cost not unusual from what they would otherwise be paying the utility. This works for most establishments, avoiding the setup costs while enjoying the cost reductions.

The C&I market in Kenya continues to grow, with more than 600 MW installed across different technologies by the beginning of 2025. On the solar front, captive solar installed capacity in Kenya last year outstripped the solar installed on the grid. Today captive solar is nearing 300 MW as the solar on the grid stagnates at 210MW.

Captive plants are being more efficiently licensed and face fewer delays than those targeted at the grid. Investors, customers and developers alike are thus choosing to go behind the meter route.

This comparison shouldn’t matter anyway, as the end goal of electricity supply is to give consumers the most efficient supply of electricity in cost and quality, regardless of the supplier.

The enactment of the net metering regulations and the continued development of the electricity markets, bulk supply and open access regulations open new frontiers for the electricity market. These will change how we look at electricity supply and benefit the entire market.

Through net metering facilities with C&I projects installed will be able to bank excess electrical energy generated from their system with the utility and take back half of that for their own use within the year.

Consumers will better utilise the power-producing ability of their solar installations. This will also allow the utility to access half of that generated energy for sale to other consumers. This is a valuable source of distributed generation to support the consumers at ends of the distribution network.

Even more anticipated by players in the captive power space are the regulations allowing for wheeling. Open access to transmission lines will enable consumers to access supply from bigger powerplants that are not located within their premises.

The ability to produce power at one location and pay a fee for its transportation through the transmission and distribution system to the location where consumption is done is a game changer. This fee is the wheeling fee or the cost of carrying electrical energy between two locations.

 What this arrangement means is the transmission system operator will get a new source of revenue; the consumer will be able to contract directly with a power producer located where good and significant renewable energy resources exist; and the utility will not require to bear any direct risk in this transaction.

Private enterprises, one in power generation and the other consuming the power for productive reasons will be able to trade in electrical energy.

 Currently C&I projects are limited by the quality of renewable resource in the consumer premises and the availability of space to develop the resource.

Wheeling of power will enable consumers to tap into the best resource areas to maximise how much power they can self-supply in addition to power they can buy from the utility. This will also introduce wind power to the C&I market in Kenya in a big way.

One might say that these are ambitious thoughts and perhaps just aspirational. The current interest in Kenya for the setting up of hyperscale data centers, expansion of traditional steel and allied industries, and set up of various industries related to e-fuels, e-mobility and green industrialisation tell a different story.

These types of consumers have big power demands and are attracted to Kenya’s potential to supply green energy. Consumers with the right regulation will be willing to take the risk of their own supply at bigger volumes. The C&I market has a bright future full of mutual benefits for Kenya’s industries.