Key Highlights:
- Kenergy’s utility-scale power project is able to supply power at an affordable price to KPLC, the local utility, enabling it to both reduce the power cost to consumers and reduce transmission losses in the region, which is far from other sources of generation.
- Kenergy is focused on the larger scale C&I developments where our developer and project financing skills are valuable.
- BESS has a major role to play in the future to enable grids to incorporate increased variable renewable energy sources of power however BESS should not be used on an individual power plant level but at a system level.
How has the year 2022 been so far at Kenergy? What have been some key developments?
It’s been a challenging year for the IPP business and positive for the large-scale C&I business.
The IPP business in Kenya has been stalled since the Presidential Task Force was implemented in March 2021, which is 17 months ago. The recently issued White Paper which sets a vision for the incoming government suggests the IPP business could get started again, in particular for renewable energy sources, should the incoming government use this as a blueprint for the energy sector.
Kenergy’s utility-scale power project is able to supply power at an affordable price to KPLC, the local utility, enabling it to both reduce the power cost to consumers and reduce transmission losses in the region, which is far from other sources of generation.
Electricity prices from KPLC, the utility, are likely to increase later in the year as the current subsidies for fuel and power costs are no longer sustainable.
We will see a continued increase in the demand for C&I solar as this is cheaper than power from the utility. Kenergy is focused on the larger scale C&I developments where our developer and project financing skills are valuable.
What is your outlook on East Africa’s large-scale utility solar segment in the next 5 years?
The outlook is highly dependent on the incoming government’s policy for Kenya.
I do believe that Kenya and the wider East Africa have enormous potential to become a large hub for manufacturing with net zero power given the renewable resources available to the region as per the White Paper and that this would have a major positive impact on socio-economic growth.
The demand would have to be created and this is dependent on ensuring the correct policies are put in place by the government to attract investment to set up industries.
Compared to Europe, which is seeing an electricity supply deficit with exorbitant electricity prices and Asia, which has a higher carbon power generation content, we are in an excellent position to attract manufacturing by ensuring 95% + of our power is generated from renewable energy sources.
What is your view on getting finance for a large-scale utility solar project in East Africa?
At the moment, it is trickier to attract debt financing due to the lack of clarity on energy policy. DFIs, who are the main lenders for infrastructure projects in Kenya, are focused on other African markets and don’t wish to invest in debt until there is a clear signal from the government with regards to timelines for the issuance of letters of support to projects with signed power purchase agreements.
Projects will need to be provided with a clear way forwards and bankable letters of support to secure the necessary debt financing.
A major issue over the last year is the significant increase in the base rates for lending which could make it challenging to finance certain projects as the base rates continue to increase.
How the recent BESS (Battery Energy Storage System) with Large format solar modules could change the utility-scale solar landscape in East Africa?
BESS would strengthen the grid in areas that are far from generation sources and where there is insufficient generation. BESS has a major role to play in the future to enable grids to incorporate increased variable renewable energy sources of power however BESS should not be used on an individual power plant level but at a system level. At present, BESS is not as economically viable as a pure energy storage play based on electricity prices in the region, but more so for the provision of ancillary services in addition to some energy shifting across the day. BESS can be very expensive if not used optimally hence the analysis of how much is required needs to be done carefully.
In Kenya, we have done a high-level study that suggests that due to the geographical diversity of the planned and existing wind and solar projects, the variability of the portfolio of projects is not as significant as many expect on an hour-to-hour basis. The indicative study suggested that 95% of the variability could be dealt with by installing approximately 150MW of BESS.
This interview was taken on 1st September 2022
