Huawei to bolster Kenya’s solar power investment to entice national grid defectors

By Herald Aloo
Posted on Friday, 17 June 2022 11:52

The Huawei logo is pictured in the Manhattan borough of New York
Technology, particularly that of Chinese telecoms firm Huawei, is a major point of conflict between Washington and Beijing. REUTERS/Carlo Allegri

Huawei is trying to build market share in Kenya's renewable energy space.

Migration to solar power is steadily gaining momentum in Kenya, especially in the industrial sector, which has been complaining of expensive power bills, creating a perfect opportunity for the Chinese telecoms to exploit.

“Manufacturers are keen on how to offset some of the cost that they have,” says Huawei executive manager, business development unit, Victor Koyier, adding that Huawei grid-tied inverters “can essentially offset, maybe 30-40% of your electricity cost”.

The digital revolution in the solar power sector will, according to Huawei, reduce power generation costs, increase energy efficiency, and provide greener and safer energy. Technologies like artificial intelligence (AI) and cloud are some of the digital technologies the firm will leverage, an area it boasts over 30 years of experience.

The huge step hinges on significant partners that the telecoms giant will attract to bolster energy mix and revenue diversification drive.

“We will also invest in a strategic direction to attract more partners, including distribution, finance, education, association objectively to build the strongest ecosystem,” Huawei Kenya deputy-CEO Wan Wei tells The Africa Report.

Growing demand

About 100 organisations, including various Development Financial Institutions (DFIs) and state corporations, have already shown interest in partnering with Huawei in its recently launched digital photovoltaic (PV) solution.

“It is confidential, however, there are ongoing talks with a number of companies (DFIs),” says Wei, adding that “the interest is high”.

Huawei will be working closely with the Energy and Petroleum Regulatory Authority (EPRA) and state-owned Rural Electrical and Renewable Energy Authority (REREC), which spearheaded Kenya’s renewable energy drive and implementation of rural electrification projects.

EPRA is the sector regulator responsible for technical and economic regulation of electricity, including the solar photovoltaic industry, a newly emerging sector. Huawei will integrate generation, grid, load, and storage with digital technologies to build a new power system with renewable energy as the primary source.

The sudden increase in the number of solar power consumers means that grid-tied solar power systems will require more storage capacity to meet the growing demand, maintain sustainability, and address transmission losses.

The firm says while it may take 10 or 20 years to hit such an ambitious target, it is absolutely committed, signalling the firm foundation the company is building in preparation for dominance.

We recognise that Kenya has a pent-up demand for renewable energy

Huawei ESS solution of around 200kWh has only 2-3 hours of autonomy, the time when power output can be met by battery alone without any solar input, often at night. Huawei’s Smart FusionSolar PV however addresses key challenges, such as carbon emission and power loss for utility-scale PV plants and grid tied systems.

“We recognise that Kenya has a pent-up demand for renewable energy. Digital infrastructure is one of the core areas whose growth we want to facilitate,” says Wei.

Changing dynamic

The smart PV solution continues to build a greener future globally, and can sustain operations in both arid and ultra-low temperature regions. Huawei deployed 1.2GW digital PV last year in sub-Saharan Africa, reflecting 45% market share.

It has signed a cooperation agreement with Meinergy Technology to develop a 1GW solar PV plant and 500MWh energy storage system in Ghana. In Kenya, Huawei commands close to 65% market share, typically attributed to commercial industrial projects that are already deployed.

Kenya has five Power Purchase Agreements (PPAs) for Solar PV (2% of power generation mix), reflecting about 173MW installed capacity.

Part of this is the 54.6 Megawatts (MW) Garissa solar power plant project funded by a Chinese loan with Huawei providing the solar panel. Eldosol and Lessos solar projects in Eldoret have also been connected to the national grid with 40MW each.

Solar electrification of over 4700 public primary schools and more than 50 secondary schools has also been partly accomplished by REREC, in collaboration with Huawei.

The 140MW Malindi project, which uses Chinese manufactured solar panels, is in an advanced stage, awaiting commissioning to the national grid by the end of this year. The project is being undertaken by various Independent Power Producers (IPPs), who have been producing costly thermal power procured by KPLC, underscoring the changing dynamic in the solar power sector.

The possibility of break-even in the Garissa plant however remains questionable since the project, whose lifespan is 25 years against a loan repayment period of 15 years, can only generate maximum revenue of KSh500m yearly, meaning it will not be able to repay the loan.

In May, the National Assembly Public Investments Committee (PIC) asked the Ethics and Anti-Corruption Commission (EACC) to “investigate the conceptualisation and implementation of Garissa Power Plant to ascertain whether there was value for money and prefer charges”.

To break-even, the project was supposed to generate at least KSh900m revenues yearly to meet the loan repayment period.  Garissa power plant management has since been moved from REREC and Africa’s leading power producers Kenya Electricity Generating Company PLC (KenGen).

Declining cost

Kenya’s solar power potential is estimated at 18000 MW, closely followed by State-prioritised geothermal power, at 10,000MW potential. The East African economic giant is seven years off its vision 2030 that targets reliable, cheap, and clean energy for households and businesses.

By 2030, it is projected that installed solar capacity will hit 454MW, above thermal generation at 418MW. Thermal power is currently third in the country’s electricity generation mix ranking. There are about 1,000 solar PV licensed companies in the country offering more than 100,000 jobs in Kenya, according to data by EPRA.

The rising uptake of solar power in Kenya is linked to its declining cost compared to power from the national grid amid costly fuel prices that is making thermal power generation expensive.

The price decline is partly due to tax exemptions and does not incorporate energy storage components unlike the national grid electricity.

“The government has provided Value Added Tax [VAT] exemption and import duty exemption making this technology [solar] to be more competitive. That makes them relatively cheaper,” says Nickson Bukachi, senior renewable energy officer at EPRA.

The shift to cheap solar power is set to hurt revenues of troubled State-owned power utility [Kenya Power]

However, the shift to cheap solar power is set to hurt revenues of troubled State-owned power utility Kenya Power. The company has been lately grappling with the rising number of big power consumers migrating from the national grid, citing high power costs.

68% of Kenya Power revenue realised from energy sales come from industrial and commercial customers, who are just 10% of the total customers but the majority of those shifting towards captive solar generation.

The defection is set to worsen partly due to expensive thermal power, which Kenya Power procure from IPPs, creating an opportunity that Huawei is racing to exploit with mini-grid solar power solutions.

Kenya Power describes PPA with IPPs as ‘lopsided’ with suppliers “consistently ripping windfall profits,” as the state utility shoulders all the risks and expenses which are eventually transferred to end users.

London Distillers Limited, Bamburi Cement, Africa Logistics Properties (ALP), Mombasa International Airport, and Kapa Oil refineries are some of the heavy power consumers who have joined the migration to solar power.

East Africa Breweries Limited (EABL) and East African Paper Mills Ltd have also announced similar interests.

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