Mini-Grid Power Suppliers Offered 50 percent Tax Allowance

Mini-Grid Power producers who sell electricity without going through the national grid have been granted a 50 percent tax allowance,

This will in turn boost the growth of small-scale plants with the potential to lower bills for customers.

The Finance Act 2021 has from January 1 recognized mini-grid power systems, which distribute electricity as “manufacturers”.

This gives them the same tax incentives available to large-scale generators who sell to near-monopoly Kenya Power.

Mini-Grid Generation

The coming to force of this clause of the Finance law will see investors in power mini-grids deduct half of the expenses of the buildings and machinery used to generate electricity from income when calculating corporation taxes.

The Kenya Association of Manufacturers (KAM), had in the past protested that Income Tax Act only recognizes producers of electricity to the national grid as manufacturers.

This had locked out small-sized generators, which are legally allowed to supply to surrounding consumers under the Energy Act 2019, from tax incentives.

The energy sector law has opened up the national grid to multiple players.

Energy Act 2019

Energy Act 2019 allows a person who owns an electric power generator of a capacity of not more than one megawatt to agree with a licensed distributor to operate a net-metering system.

The system allows the power generator and retailer to install meters, enabling them to charge homes and businesses connected to the electricity.

“In the net metering, you don’t have to necessarily supply to the national grid.

You have a number of consumers who are the ones you supply to.

But because you are not supplying to the national grid, you cannot get some allowance,” said KAM’s head of policy and research Job Wanjohi in a past interview.