Solar Case Study: Kenya Microgrids

Kenya has until recently been regarded as a centre for innovation on mini-grids in Africa and beyond. A strong private sector engagement benefitted from the ability to apply one’s own cost-reflective tariff if the rate of return was 18% or lower, despite a uniform tariff.

The regulation set technical standards to follow but was loose enough to attract various business models. Because Kenyans had relatively high purchasing power, mini-grid developers also saw an opportunity to sell value-added services to mini-grid customers.

Mini-grids can use existing PPAs when they operate in fuel-saver mode only to supply energy (kWh). This setup typically applies when KPLC is hybridizing an existing diesel-based mini-grid. In this case, the private sector mini-grid developer-only invests in and operates the solar PV (or any other renewable energy-based) technology, producing energy.

These PPAs are not suitable when a supplier must meet both capacity and energy requirements.133 The PPA price per unit will come from the public entity bids in the competitive tendering process.134 The existing PPAs are available on the ERC website, where KPLC is referred to as ‘the Buyer’.

Two simplified PPAs are in place:

• A standardized PPA for Renewable Energy Generators of 10MW or less. The tariffs offered are technology-specific, but the standardized PPA is the same for each technology, and

• A standardized PPA for Renewable Energy Generators greater than 10MW. Standardized PPAs are agreed under the FiTs Policy issued by MEM.

                                                                                                                                                                                Source: WorldBank