ALURU: Captive Power Plants (C&I installations) will continue to play a big role in electricity sector

C&I installations offer a chance to expand electricity supply using low carbon options

In Summary
  • Low carbon alternatives to electricity generation are being explored by companies not only in the solar sector but also in geothermal, hydro, bioenergy (Bagasse and gasification) and wind.
  • This will not only open new possibilities to consumers but also a new business line for the transmission and distribution system operators.
George Aluru, CEO Electricity Sector Association of Kenya (ESAK).
George Aluru, CEO Electricity Sector Association of Kenya (ESAK).
Image: HANDOUT

Captive Power Plants or colloquially known as commercial and Industrial level power plant installations (C&I) continue to be deployed widely in the Kenyan and African economies.

Establishments such as schools, hospitals, hotels, factories, and shopping malls are installing solar, biomass and small hydro among other technologies.

The motivations behind these installations have been ensuring energy security, reduction of costs of supply, improving the quality of electricity and a drive to reduce our own carbon footprint in line with the sustainability agenda.

Low carbon alternatives to electricity generation are being explored by companies not only in the solar sector but also in geothermal, hydro, bioenergy (Bagasse and gasification) and wind.

The consumer is looking to have low carbon electricity to match the needs of today‚Äôs international product markets. Many African grids are dominated by hydro power installations that are renewable but subject to variations in supply due to droughts.

Expansion of the capacity will need to remain green, given the challenges of monetary and environmental costs related to fossil-based generation. Consumers taking matters to their hands are thus opting for low carbon generation.

Export commodities headed to European destinations are increasingly under pressure to comply with climate sensitive rules on commodities. Access to European markets will be limited for suppliers with a high carbon footprint.

C&I installations offer a chance to expand electricity supply using low carbon options. These installations have largely been behind-the-meter with consumers installing within their own premises. The captive power landscape in the continent is however moving to incorporate other approaches beyond the meter.

C&I supply is taking advantage of the removal of caps on size of installation, the enactment of open access and further liberalisation of electricity markets to include new approaches.

The regulatory environment in the continent is evolving in a positive way towards further liberalization and regional integration.

The wheeling of power using the transmission system introduces the possibility of generating electricity at a distant location beyond the meter of the consumer. This has seen development of wind and solar projects in the 100s of megawatts in South Africa targeted at captively supplying consumers.

Open access to the transmission system has and will bring about changes in the way large consumers procure electricity. This will bring the importance of the transmission and distribution system to the forefront, as these will be the conduits to connect high quality renewable sources to demand.

This will not only open new possibilities to consumers but also a new business line for the transmission and distribution system operators.

There will be opportunities to use the combination of captive power plants and access to regional power pools to supply directly to consumers in a different country. This will open through direct bilateral contracts between suppliers and consumers or by involving intermediaries such as aggregators.

The Southern Africa Power Pool (SAPP) is already pushing ahead with such models with private companies complementing the work that the various utilities are doing in demand aggregation. This part of the market will benefit greatly from more installations of captive plants that would have spare capacity in the long or short term to participate in a wholesale market.

Captive plants by nature will not only rely on PPA arrangements with the utilities or bilateral contracts with consumers, but with the further opening of the electricity sectors, aggregators of demand and supply will develop.

These will sit in the middle of the of demand and supply and offer a guarantee for power generators and large consumers for offtake and supply. The visibility of the aggregator of the demand will allow for more non-collocated captive plants to be built given the assurance on demand risk.

The traditional behind-the-meter installation of captive power plants is also on a growth path. Last year the total installed capacity in Kenya was estimated by the Electricity Sector Association of Kenya at 439MW with expectations that overall C&I captive installations would grow to 1GW by 2030.

Traditional behind-the-meter captive plants will continue to play a significant role, primarily in improving the quality and cost of supply at establishments. In other countries in sub-Saharan Africa and in off grid facilities, these systems act as a primary source of supply and are not grid tied.

Captive power plants herald new business opportunities away from the main grid for investors in power generation and alternatives for supply for consumers.

The ability of the consumer to determine the generation technology of choice is a big boost for corporate sustainability agendas. Captive plants also support the utilities in improving overall security and quality of supply. They co-exist, complement and free up capacity on the grid to serve more consumers.

 

George Aluru,CEO, Electricity Sector Association of Kenya (ESAK)

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