Low Carbon Microgrid Long Case Study

Powerhive microgrid pilots, Kisii, Kenya

Powerhive and First Solar

Project background

In 2012, 75% of the population residing in Kenya lived in remote areas, with only 8% (27 million people) having

access to electricity1. Historically, the rural electrification strategy selected by the Kenyan government has

almost exclusively large scale centralized generation and grid expansion. More recently the Kenyan

government has adopted off-grid electrification into their national strategy.

This strategy has subsequently led to the ownership and operation of more than twenty microgrids (~19 MW)

by the Rural Electrification Agency (REA) and Kenya Power and Lighting Company Ltd (KPLC), the national

utility. New initiatives introduced by the private sector are shaping the current utility-based approach to

implementing microgrids. The US based company Powerhive Inc., is one of the main microgrid actors in Kenya.

Powerhive and First Solar

Powerhive is a provider of energy access solutions in emerging markets. The company has developed

proprietary technologies in order to design, build and manage advanced solar microgrids. Powerhive’s

technologies include hardware (smart meters) and software (cloud-based microgrid management tool, site

selection tool) which can be purchased and licensed by microgrid

operators.

Powerhive is backed technically and financially by First Solar, a US based

global provider of photovoltaic solar energy solutions. First Solar first

invested in Powerhive in 2013 and continues to contribute its expertise in

scaling deployment and technology.

Powerhive: microgrid pilots in Kenya

Since 2012, Powerhive East Africa, Ltd., a wholly owned subsidiary of

Powerhive Inc., has been operating four microgrid pilot projects in different villages residing in the county of

Kisii, Kenya, where approximately 90% of the population have no access to electricity. The schemes have been

developed in partnership with First Solar who provided the photovoltaic modules.

The four pilots constitute a total solar PV generation capacity of 80 kW serving four remote villages and over

1500 people (~300 connections). The consumers include residential users as well as small businesses, who can

as a result of electricity, offer a range of new services that benefit the residents.

With plans to expand its coverage to over 200,000 connections in Kenya, Powerhive has used these pilot

projects to test and refine its technology to optimise the range of solutions provided. One of the most

important company objectives was to develop a clear understanding of customers’ behaviours: activities

consuming electricity, consumption patterns, etc.

1 World Energy Outlook 2014, IEA

In 2015, Powerhive East Africa became the first private utility in Kenya’s history to receive a concession to

generate, distribute, and sell electricity in the counties of Kisii and Nyamira.

Technical features

The four microgrid pilots in Kisii are powered by 100% solar energy generated in First Solar photovoltaic

modules and coupled with Lithium-Ion batteries. One of the key success factors of these projects is the use of

Powerhive’s proprietary technologies. These technologies have been developed to provide smart and

standardized microgrid solutions which improve the efficiency of O&M&M activities significantly. Powerhive`s

innovative solutions include the Asali smart meters, the Honeycomb platform and the SWARM (Site Wizard

for Analysis, Reconnaissance, and Mapping) system. The mobile-based payment platform is also a key system.

The technologies are designed for microgrids of any size, and can be integrated to new projects or retrofitted

into existing ones.

Asali smart meters: Asali is a stand-alone distributed metering system designed to service a small cluster of

customers, which controls all aspects of a microgrid to ensure smooth operation at all times. The meters

precisely measure consumption of the individual users, so that electricity can be sold on a pay-as-you-go basis.

As many units as necessary can be placed in a single microgrid to accommodate communities of any size, while

the centralized metering of a small cluster of consumers lowers total system costs. Every Asali meter responds

to commands from a central Honeycomb server, making it easy to change parameters across many customers

and scale operations.

The Honeycomb platform: Honeycomb is a cloud-based management and monitoring platform that automates

vital microgrid operations. It receives data from Asali smart meters, enabling system monitoring, analysis of

consumption patterns and financial performance. It manages the remote Asali meters and connected devices

such as charge controllers and inverters. The web interface allows operations personnel to analyse

performance data. Main applications include: account management, flexible tariffs and pricing, load balancing,

performance monitoring, field support and data analysis.

SWARM (Site Wizard for Analysis, Reconnaissance, and Mapping): The SWARM software streamlines project

development by enabling rapid microgrid site selection and customer identification. SWARM quickly and

efficiently analyses sites based on financial, technical and geospatial data, and calculates optimal microgrid

locations, reticulation design, and estimated system size, resulting in a prioritized list of the most viable sites.

Hence it reduces time and resources sending personnel to investigate a location.

Customers’ pre-payment platform: The mobile penetration rate in Kenya hit 80% in 20142. This has resulted

in innovative payment models being introduced. Customers can add credit to their accounts with Powerhive

using existing mobile payment services. Their power supply is immediately activated and can be used anytime.

Alerts are sent via phone text when their credit balance gets close to zero, and the electricity supply will be

deactivated if no credit is added.

Business Model Business Model Canvas

see the next page

2 Communications Authority of Kenya, Sector Statistics report, 2015

First Solar:

Technical and financial backing to Powerhive

PV modules provider

Equity Bank of Kenya Provides financing for eligible Powerhive customers to purchase small appliances and other electric equipment. ERC (Kenya Energy Regulatory Commission) Provided the electricity distribution concession to Powerhive in Kenya

Beyond the Grid Powerhive participates in this initiative under the US Government’s Power Africa program to support the development of small scale and off-grid projects in Africa

Proprietary technologies:

SWARM: tool for site selection and customer identification

Honeycomb: cloud-based platform for remote grid management

Asali: reliable & versatile smart meter

Staff of Powerhive East Africa Ltd.

Microgrid development, construction, operation, maintenance and management:

Site identification and selection

Studies (market, feasibility, design, etc.)

Turn-key microgrid deployment

O&M&M

On-site training

Electricity distribution and retail:

Provides access to productive, affordable and reliable electricity using microgrids:

100% solar energy

Reliable electricity supply

Low connection fees (2,500 KES versus 35,000 KES of KPLC) and fast connection

No standing charge

Pre-payment of electricity through mobile banking services

Close relationship thanks to local offices

Community involvement and promotion of productive use: Productive use has been encouraged through granting loans for income-generating activities (by the Equity Bank of Kenya)

Customer acquisition:

Sign up customers reachable by the grid through Powerhive East Africa’s commercial team

Develop new microgrids within the concession area to reach new customers

Electricity sales and grid charges:

Connection fees: 2,500 KES (~ USD 24) per connection

Electricity sales: pre-paid system (electricity tariffs are structured to enable customers to save money relatively to traditional energy sources i.e. kerosene for lighting, or diesel to power small generators for commercial or industrial applications).

CAPEX and OPEX information is confidential

Residential customers: Willing to pay if they have the guarantee to benefit from a reliable source of electricity

Existing business: Can boost their revenues and develop skills in agriculture and productive activities by transitioning to electricity

Entrepreneurs: Need electricity to start new business

Model of Ownership, Operation and Maintenance

The four microgrid pilot projects are owned and operated by Powerhive East Africa, Ltd., which is a wholly

owned subsidiary company of Powerhive Inc. The Kenya Energy Regulation Commission (ERC) recognized the

success of the pilot projects and the company`s ability to operate microgrids in compliance with the prescribed

standards for residential and commercial electricity service provisions in Kenya. For that reason, in February

2015, Powerhive`s subsidiary obtained a license to sell electricity to the public in the counties of Kisii and

Nyamira.

The microgrid Operation, Maintenance and Management (O&M&M) are facilitated by Powerhive proprietary

technologies such as the smart meter devices (Asali) and the cloud-based management and monitoring

platform (Honeycomb). In order to ensure electricity revenues from supply, Powerhive has also developed a

pre-paid billing system for its consumers. Customers credit their electricity consumption account using existing

mobile services. Their power supply is immediately activated and can be used anytime. Alerts are sent via

phone text when their credit balance gets close to zero.

Powerhive has implemented training programs dedicated to local operators and technicians. These training

sessions develop local workforce’s skills and knowledge in O&M&M of microgrids. A specific training is also

given to employees to make optimal use of Powerhive’s software.

Source: Powerhive Source: Renewable Energy World

Key learnings and best practices

Finance One of the main objectives of the pilot projects in Kenya was to challenge Powerhive’s business model.

Flexible payment could be considered as a potential risk for low and irregular consumption because customers

are not bound to a regular payment plan. Experience with the project found that such concerns are unfounded:

the regularity and predictability of consumption allows revenues to be accurately modelled based on a few

customer variables.

Powerhive aims for a business model with no need for subsidies / grant funding to reach profitability which is

attractive for private investors. The optimization of microgrid design, the efficiency of O&M technologies and

the setting of cost-reflective tariff levels are key success factors to reach this goal.

Socio-economic Electrification through microgrids offers affordable energy access for off-grid populations in Kenya. A large

portion of the monthly wage from a low income household is spent on kerosene, dry cell batteries and phone

charging. The Powerhive pilot projects have demonstrated that setting cost reflective tariffs is socially possible.

The Powerhive tariff structured has been designed such that customers are able to save money relative to

what they would spend on traditional energy sources (i.e. kerosene, diesel), while also gaining access to

cleaner and higher quality energy.

Supporting end-users can be a best practice to develop a long-term customer base. In August 2014, Equity

Bank of Kenya and Powerhive East Africa partnered to provide financing for eligible Powerhive customers to

purchase small appliances and other electric equipment. The program, called the Appliance Loan Program,

primarily finances income generating equipment for entrepreneurs and small businesses, but is also available

for home appliance purchases. The program is expected to acquire new, low-risk customers for the Equity

Bank of Kenya and increase the demand for Powerhive`s electricity.

Policy Kenya’s energy policy as a whole is currently being reviewed to reflect the adoption of the Kenya 2030 Vision.

The new policy aims to improve and precise a legal framework that supports the development of electricity

projects. The government recognises that the fastest and least expensive approach to reach 100% electricity

access by 2030 is to allow private investment in distributed generation infrastructure.

In 2014, Powerhive East Africa, after two years of operation, began the process of seeking concessions. In

February 2015, Powerhive subsidiary became the first private company in Kenya’s history to receive a utility

concession to generate, distribute and sell electricity to the Kenyan public. By guaranteeing the exclusivity

right to supply power in the counties of Kisii and Nyamira for 25 years, the concession allows Powerhive East

Africa to scale up its operations in the region and to increase the company`s ability to attract financing. Being

regulated as a utility also provides the opportunity to access government-sponsored incentives.

Powerhive and First Solar