Mini-Grid Regulation and Practical Experiences from Kenya

Transcription

1 Implemented by Mini-Grid Regulation and Practical Experiences from Kenya Page 1

2 Background, GIZ Energy Portfolio in Kenya Energy activities in Kenya Page 2

3 Background (I) GIZ Energy portfolio in Kenya (28.5m EUR) Energizing Development (EnDev) Powering Agriculture Promotion of Solar- Hybrid Mini-Grids (ProSolar) Promotion of variable Renewables (vre) promotes access to clean energy technologies; with a focus on pico PV systems, improved cook stoves, biogas promotes the use of clean energy solutions in food value chains and increase the quantity and quality of food produced focuses on the electrification of remote areas through mini-grids and the participation of private sector aims at improving the preconditions for integrating vre (focus on wind, solar PV) to the national grid Project Development Programme (PDP) supports German RE businesses in accessing the Kenyan RE market Page 3

4 Implemented by Promotion of Solar-Hybrid Mini-Grids in Kenya, focus on greenfield mini-grids Focus: remote rural areas Aim: Promote the development of greenfield solar-hybrid mini- and micro-grids Main objective: contribute to cost-effective and sustainable power supply in rural areas Partner institutions: MoEP, REA, ERC, KPLC 15 m Euro 7.5 m Euro 18/10/2016 Page 4

5 Fields of cooperation Energy Policy Advisory and Strategy Development Implementation mechanism Capacity building and training Support to pilot projects 5 Results-Based- Finance 18/10/2016 Page 5

6 Status of the Kenyan Energy Sector, with focus on isolated mini-grids Page 6

7 Kenya Energy Mix (2015) Thermal 36.02% Cogeneration 1.13% Solar 0.02% Energy source Hydro 820 Geothermal 598 Installed capacity in MW Thermal 797 Geothermal 26.02% Variable RE 1.16% Wind 1.13% Emergency power Solar PV 0.6 Hydro 35.68% Wind 26 Cogeneration 26 Total 2,295 > 60% from renewables! Source: Kenya Power Annual Report 2015 Page 7

8 Demand: Electricity consumption in consumer categories (2015) sales in GWh Domestic 26% Peak demand expected to grow to 2,600-3,200 MW by 2020 (Power Africa) Commercial and industrial 56% Power consumption expected to grow betw x GDP (GDP ~5%) Small commercial 18% Timelines for Vision 2030 are shifting Consumer group Domestic 1,866 Small commercial 1,346 Commercial and industrial 4,040 Source: Kenya Power Annual Report 2015 Sales in GWh Page 8

9 Generation: Kenya s power plants Source: ERC 2015, Power Africa 2015 Page 9

10 Generation: Public and private off-grid stations public Turkana Marsabit Mandera Wajir Samburu Isiolo Homa Bay Kisii Nakuru Narok Garissa Kajiado Lamu private Source: Own illustration; ERC 2015, Power Africa 2015 Page 10

11 Transmission and distribution 2015: 4,149km 200kV and 132kV transmission lines KETRACO currently constructs approx. 4,500km new lines (incl. 400kV and 500kV lines and interconnectors with ETH, UG and TZ) Challenge: way leaves! Distribution network lacks behind (now: Last-Mile Project) Source: KETRACO, 2014/5, Power Africa Study Page 11

12 Barriers to mini-grid development, with practical examples Page 12

13 Kenya as case study: Barriers typical for mini-grid deployment Barriers Demand side: Load curves and customer demand that can often not be predicted Vague regulations that prioritises gridconnection over off-grid solutions Uniform tariff and single utility model that discourage private sector A banking sector that is not prepared for small-scale highrisk projects Page 13

14 Development partners: Focus on policy/regulation and finance Challenges Details Interventions Regulatory Framework/ Policy Deficiencies in policy and regulatory framework for MG market development: arrival of main grid, lack of clarity around tariff setting (cost-reflective vs. national tariff) Timeline for grid expansion unclear / intransparent Market analyses, policy gap assessment, regulations etc: IFC, WB, GIZ, AfD, Power Africa Access to finance Few investors with sufficient risk appetite small project size with high anticipated risk Grant dependency to demonstrate bankable business model due to lack of incentives Several grant/ incentive programmes: AfD/ DfID, KfW, GIZ EnDev (RBF), Power Africa Technical capacity Lack of technical skills along the mini-grid value chain planning, design, construction, O&M, management Challenges and high costs to operate in remote, inaccessible areas Training and CB for public and private sector: AfD/ DfID, GIZ Business models High electricity costs due to high upfront / investment costs, yet low ability to pay especially in remote areas Business models remain untested: 1) Mini-Grid concession model; 2) IPP model Application of various business models: AfD/ DfID, KfW, GIZ, IFC, WB 18/10/2016 Page 14

15 Regulations: looking back Current energy policy and regulation is supportive of MG! Is it possible to obtain a permit / license for MGs? Yes! Barriers < 3 MW = permit; >3 MW = license How do we license it? A guide to licensing a private sector driven mini-grid Page 15

16 Practitioners experience: Talek Power Company Location: Talek, Narok County 40 kwp solar pv 12 kva diesel genset 3,210 Amph 3 km low-voltage distribution network (3- phase) Page 16

17 Lessons learned Regulatory compliance: start early! Involve the community and county government! Choose the right business model! Check alignment of MG economics with ATP / WTP! Work with local partner and build onsite capacity for O&M! Get technical specs right! (e.g. insulated conductors) Page 17

18 The backbone of mini-grid development a clear regulatory framework Page 18

19 Institutional landscape: electricity sector (Oct 2016) vre Kenya Page 19

20 Governing Framework in Kenya Planning Kenya Vision 2030, est. in 2008, defines economic growth agenda Least Cost Power Development Plan (LCPDP) Kenya National Electrification Strategy new Power Generation and Transmission Master Plan (MTP, LTP) new Rural Electrification Masterplan (Update 2009) Policy Sessional Paper No. 4 fo 2004 on Energy Feed-In Tariffs Policy (revised 2008, 2010, 2012) new Auctioning expected to replace FiT in 2016 Mini-grid policy (2016) new New National Energy Policy and Bill (latest draft Aug, 2015) new Law Energy Act 2006 Public-Private Partnership Act 2012 New Kenyan Constitution, fosters devolution (Aug, 2010) New Energy Bill 2016 (latest draft Aug, 2015) new Regulations Energy (Electricity Licensing) Regulation, 2012 Energy (Solar PV) Regulations, 2012 Standardised PPA for small scale RE (up to 10 MW), 2012 Small Scale Grid Connected RE Framework, 2012 Energy (Complaints and Dispute Resolution) Regulations, 2012 New Kenya Electricity Grid Code (2016) Mini-Grid regulation new new Energy activities in Kenya Page 20

21 Regulations: looking forward New Energy Policy and Bill (to be enacted end of 2016) Many provisions that support mini-grids, but... no specific mini-grid policy and legal framework (no appropriate mini-grid license, regulatory procedures still too heavy-handed) National Electrification Strategy is still under development No mini-grid coordination agency or guidelines for use of national funds to support mini-grids existing institutional roles will be redefined or extended (e.g. REA mandate will be extended through successor REREC) Ongoing study on mini-grid policy and regulation (finalised by 12/2016) Source: ECA / TTA Study Oct 2016 Page 21

22 Ongoing study on MG regulations: Categories for regulatory classification A B C D Size of system < 50kVA kva >500 kva SDP Expectation of grid connection (if it arrives) Technical standards No (but can be negotiated) Light Yes Yes n.a. Light unless grid connection is anticipated within 8 years) Light unless grid connection is anticipated within 8 years) Full grid Licensing Light mini-grid Full mini-grid Full mini-grid Full SPD Preliminary Tariff Not reviewed Cost-reflective KPLC main grid KPLC main grid Recurrent subsidies available No No Yes No 18/10/2016 XXX Page 22

23 Business models All isolated business models should be considered! Preliminary Business model Utility KPLC owns and operates MG PPA - separate generation from distribution Management contract Different parties own and operate MG Private (concession) Public public entity owns and operates MG Requirement Release the restriction on KPLC for isolated MG Allow also for much smaller generation under the RE framework REREC should no longer develop sites Already possible County Gov to develop and prioritise site Source: ECA / TTA Study Oct 2016 Page 23

24 Preliminary Business models All grid-connected business models should be considered! Business model Requirements Small Power Distributor (SPD) only Generate only/ sell distribution assets to KPLC Combined SPD / SPP Framework exists; bulk supply tariff tbd Framework needed for transferring assets, incl compensation See above, net-metering can be used for power sale/ purchase Sell viable assets to KPLC See above (2) Move or abandon assets - Source: ECA / TTA Study Oct 2016 Page 24

25 Preliminary Procurement Top-down and bottom-up approaches for universal access Source: ECA / TTA Study Oct 2016 Page 25

26 Preliminary Economic regulation Overall approach is to ensure all operators commercial sustainability and all customers affordability Source: ECA / TTA Study Oct 2016 Page 26

27 Economic regulation Operators may upgrade their category Preliminary Source: ECA / TTA Study Oct 2016 Page 27

28 Conflicting perspectives- Preliminary All people should pay the same price for electricity. Electricity cannot be produced at the national tariff. Investors are not investing unless they are able to generate reasonable returns on investment. Source: ECA / TTA Study Oct 2016 Page 28

29 Opportunities for private sector - More than 150m EUR towards mini-grid market development available Page 29

30 Development Partners activities Focus on policy and finance Green MG programme Kenya-Power (brownfield) MG hybridization Promotion of Solar-Hybrid MGs (FA) Promotion of Solar-Hybrid MGs (TA) KEEP / KEMP/ SREP/ new solar off-grid project TOTAL 6 18/10/2016 Page 30

31 Opportunities for private sector How to get involved Green Mini-Grid Facility (greenfield) KfW Promoting of Solar Hybrid Mini-Grids GIZ/ EnDev Results- Based-Financing Providing support to project preparation and capital/ credit availability Reversed bidding for private generation component (CAPEX subsidy) Reversed bidding: incentives for connections, production incentive (premium per kwh supplied), CAPEX 30 Million GBP 15 Million EUR 2.1 Million EUR 18/10/2016 XXX Page 31

32 Implemented by As a federal enterprise, GIZ supports the German Government in achieving its objectives in the field of international cooperation for sustainable development. Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices, Bonn and Eschborn, Germany Promotion of Solar-Hybrid Mini-Grids (ProSolar) Utumishi House, 5 th floor PO Box Nairobi, Kenya T M E jasmin.fraatz@giz.de I Responsible Jasmin Fraatz Author Jasmin Fraatz, Jackson Mutonga, Alice Amayo, Pierre Telep Photo credits GIZ/Alex Kamweru In cooperation with 18/10/2016 Promotion of Solar-Hybrid Mini-Grids Page 32

33 Back-up slides 18/10/2016 XXX Page 33

34 Electricity prices (2015) by category DC SC CI1 CI2 CI3 CI4 CI5 base tariff in KHs/kWh sales in GWh Source: Kenya Power Annual Report 2015, ERC Consumer category Type of consumer Energy supply Energy charge in KHs DC Domestic 240V 0-50kWh: KHs 2.5 SC Small commerci al CI1 CI2 11kV 8.00 CI3 33kV 7.50 CI4 66kV 7.30 CI5 Commerci al and 132kV 7.10 industrial kWh: KHs >1500kWh: KHs Billing Fixed charge (KHs 150) plus variable energy charge/kwh depending on consumption 240V 13.5 Fixed charge (KHs 150) plus constant price charge 415V 9.2 Fixed charge (between KHs 2,500 17,000) plus energy charge/kwh depending on consumption plus demand charge per kva Energy activities in Kenya Page 34

35 Electricity bill components and tariffs for domestic consumers in KHs (Jan 2013 Nov 2015) Abbreviations Basic Basic tariff FCC Fuel cost charge FOREX IA Inflation adjustment WARMA VAT Water resource management Authority levy Tax 0.00 BASIC FCC FOREX IA WARMA VAT ERC REP ERC REP Energy Regulatory Commission levy Rural electrification programme fund Source: Own illustration, based on KPLC data and electricity bill Energy activities in Kenya Page 35