In the last few years, there has been major interest among Kenyan consumers in generating electricity for their own consumption as a supplement to, and sometimes as an alternative to the national grid supply.
Net-metering allows power producers to sell excess energy to the grid during periods of overproduction to partially offset the cost of what they draw from the mains.
From a utility’s perspective, net metering provides access to cheaper, consumer-generated power. When combined with time-of-use tariffs, utilities can incentivise smarter consumption patterns, encouraging major loads to shift to periods of lower demand when power from independent generators is flowing into the grid.
This approach can help alleviate grid demand during peak times, improving overall efficiency and stability – a growing issue in Kenya.
On a macro level, net-metering could be crucial in increasing energy independence and reducing reliance on imported power, which is becoming important to meet Kenya’s needs. Furthermore, net-metering enables businesses, consumers, and governments to fulfil their decarbonisation commitments by encouraging the uptake of renewable energy.
The Energy Act 2019 (Energy Act) established a framework for electricity consumers who generate power and enter into net-metering system arrangements with a distribution licensee or retailer such as Kenya Power (KPLC). In June 2024, the Energy (Net-Metering) Regulations were officially gazetted to effect this arrangements.
We commend the government for enacting the new Net-Metering Regulations, which represent a progressive step forward. However, many in the industry view these regulations as a missed opportunity to revolutionise Kenya’s electricity market.
From a practical perspective, the distribution or retail utility retains substantial control over the net-metering process. Applications must be submitted to the utility, and eligible consumers are required to enter into an agreement with the utility.
The regulations even provide a standard form with a five-year renewable term, but this is problematic because energy plants, such as solar panels, typically have a lifespan of 25-30 years. The utility retains a significant degree of oversight, including the ability to refuse to sign or renew the deals.
This centralised control presents potential challenges for growth of the net metering programme, as the utility plays a key role in determining its expansion.
While consumers are theoretically empowered to generate and export energy, a utility could limit the growth and independent renewable energy production by acting as a gatekeeper.
In developed markets, net metering typically only requires a smart or bidirectional meter that tracks electricity consumed from the grid as well as any excess power generated, which can then be sent back to the grid. This equipment simplifies credit calculations and allows for accurate billing, streamlining the process for consumers to connect their renewable energy systems to the grid.
Credits
Under the Net Metering Regulations, consumers receive a credit worth 50 percent of the value of each unit of electricity they export to the grid. Although it could be argued that this arrangement compensates the distribution licensee or retailer for the costs of maintaining the grid, it effectively means that consumers sell their excess power at a significant discount.
This lower compensation rate may reduce the financial appeal of net metering for some consumers.
Capacity limits
The Net-Metering Regulations also impose restrictive capacity limits that undermine broader participation. With over 400 MW of captive power capacity currently installed in Kenya – and projections that this will grow to 1 GW by 2030 – the cap of 100 MW for net-metering systems for the first five years locks out many potential players.
For commercial and industrial (C&I) customers, the rules limit net metering to a maximum of 1 MW, which is relatively low for industrial users. Furthermore, this capacity is capped at the maximum load demand in kW achieved in the 12 months preceding the application for net metering, or where the maximum demand is not provided, the capacity should not exceed the contracted load demand.
This essentially restricts industrial customers from producing extra power, limiting their ability to generate surplus electricity that could be fed back into the grid. As a result, large-scale C&I consumers, who are some of the most enthusiastic adopters of renewable energy, are unlikely to benefit from the Net-Metering Regulations.
For domestic clients, the situation is similar. The rules set a maximum of 4 kW for single-phase supply and 10 kW for three-phase supply.
These limits are quite low and may be seen as prohibitive when weighing up the effort and investment required to apply for net metering, particularly considering the customer must undertake a feasibility study where its generation system is more than 10 kW under the Net Metering Regulations.
Moreover, 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 under long-term lease arrangements. Further amendments to the Net-Metering Regulations will be necessary to extend the benefits of the scheme to third-party owners.
Inclusive approach
While the regulations are a positive development, further enhancements could help drive more transformative change in Kenya’s electricity market.
The experience of other African countries serves as a cautionary tale. Despite having enabling legal frameworks, Namibia, Mauritius, Tanzania, and Zambia have struggled to achieve significant progress with net metering due to challenges such as regulatory complexity, high costs, inadequate infrastructure and capacity limitations. Kenya should draw valuable lessons from other African countries to ensure its regulations are implemented successfully.
A more inclusive approach, which includes expanding capacity limits, adjusting financial incentives and streamlining the role of the distribution licensee or retailer, is essential for unlocking the full potential of net metering in Kenya. Without these changes, net metering will remain underutilised, benefiting only a limited segment of consumers while maintaining the current energy landscape.
Edwin Baru is Partner, and Jessica Mutemi, Associate, Bowmans
