A Comparative Tariff Assessment Between Grid Electricity And Own Consumer Generation: A Case Study Of Kenya

Abstract

Consumers, particularly big companies and commercial enterprises, are increasingly moving away from the traditional national grid to own generated electricity. Arguably, with low sales, the utilities are forced to pass down the high systems maintenance, Power Purchase Agreement (PPA) obligation, and operating idling capacity to customer through higher tariffs. To counteract this, consumers opt for cheaper solutions in renewable sources. For self-generating consumers, the decision is imperative towards reliable, available, and sustainable electricity. Key component of this shift is that it is projected to challenge the established structures in the energy sector. However, from the literature, little research has been done hence limited understanding of the whole concept of consumers generating own electricity. The questions economic feasibility of own electricity generating systems, factors driving consumers to move away from grid, and needed policy in light of these changes are yet to be answered. Therefore, this research aimed to conduct a comparative tariff assessment between grid and self-generated power. It took a case study of Kenyan energy sector. A mixed research approach was used. The secondary data was sourced from Energy and Petroleum Regulatory Authority (EPRA). Primary data was collected using a questionnaire from electricity consumers in commercial and industrial sector, and individuals working in Engineering Procurement and Construction (EPC). SPSS software was used to map Levelised Cost of Electricity (LCoE) the tariffs and thematic analytic tool was used in analysis questionnaire data. The LCoE for own generated electricity – $418.12/MWh for solar & $372.36/MWh for diesel generators - is relatively higher compared to the energy cost from the utility provider ($200/MWh). This is attributed to low system utilisation factor and lack of economies of scale. Consumers have a hybrid system with majority indicating that 25-50% of the total electricity consumed is sourced from own generation. The findings indicate the decision to defect to own generation is driven by such factors as need for power reliability and quality, alternative cheaper source, environmental and energy sustainability, and poor customer services. From the findings, Feed-in-Tariffs (FIT) and net-metering policy have been enacted under Energy Act 2019 but their implementation remains slow. Proper planning, financing, and system integration measures is required to cater for growing uptake of Renewable Energy Sources (RES) by the consumers.