A solar microgrid company is poised to enter the Kenyan energy market, aiming to end the five-decade monopoly of the state-owned electricity supplier.
Powerhive East Africa was granted a permit to supply electricity to rural homes in Kenya by the country’s government earlier this year. The firm, which has already tested its technology in four villages in Kisii over a two-year period, hopes to start commercial operations in September.
It will become the first private entity licensed to sell power to the public in the country, which has previously always been reliant on grid giant Kenya Power.
"Our goal ... is in line with that of the government: we want to connect and provide reliable service to as many rural communities as possible," said Rik Wuts, Powerhive's co-founder and vice president for business development.
The government license allows Powerhive to produce and distribute solar power to off-grid communities in the west Kenyan counties of Kisii and Nyamira.
The area has a high population density and concentration of homes, making it ideal for microgrid models that rely on short distances between the power source and target premises. The microgrids connect around 150 to 300 clients per locality, including public buildings and schools.
About 1,500 people were already able to benefit from the trials in the region.
Leveraging the falling prices of solar photovoltaic panels and power storage equipment globally, Powerhive says it has succeeded in bringing the cost of microgrid power closer to that of mains electricity.
"In many places in the developing world, the cost of [main] grid extensions is simply too high to be feasible," said Wuts.
"The cost decline in solar and [power] storage will continue bringing off-grid generation costs ever-closer to grid levels and we have developed innovative technology to optimise the cost of distribution and the design of the distribution systems," he told Thomson Reuters Foundation.
Kenya is trying to speed up expansion of electricity penetration across the country, particularly in rural areas, under the Last Mile Connectivity Project launched by the government in March.
This scheme aims to connect some 310,000 people living close to 35,000 Kenya Power transformers to the grid in the next two years, at a cost of around $200 per connection.
The model used by Powerhive will help bring power to over 50,000 primary schools that are set to benefit from a government-sponsored project to equip them with laptops, according to Pavel Oimeke, director of renewable energy at the Energy Regulatory Commission.
The Powerhive utility concession is "a win-win development for Kenya that will allow more people to access electricity and make the industry more competitive", he said.
Kenya has a huge market for power that companies like Powerhive could exploit, he added.
"If they make a good business case, we can expect more players to come on board and help connect more people," Oimeke said.
Powerhive may not pose a major threat to a well-funded, established entity like Kenya Power, but the role of smaller companies in energy-sector development should not be underestimated, he noted.
World Bank figures indicate that only around three in 10 Kenyans have access to electricity, dropping to around two in 10 in under-served rural areas.
Oimeke predicted that solar power's market share in Kenya would increase through microgrids with continued government support in the form of enabling legislation and regulation.
Wuts also argued that if Kenya Power can access funds to assist with the cost of lighting up rural areas, smaller utilities should also be able to tap concessional loans, government guarantees and other financial support.
Last November Kenya Power received a $147m loan from the African Development Bank and the Kenyan government for the Last Mile venture.
"We have confidence in our model on a fully commercial basis, but we would be happy to cooperate with the government and Kenya Power to reach Kenya's electrification goals as soon as possible," Wuts said.