Failure by the Government to guarantee that it will buy power generated from a wind farm being proposed for set up in Turkana, risks stalling what is being billed as the biggest wind power-producing project in Africa.
The lack of assurance, which has now degenerated to a stalemate between the State and the project’s financiers, is despite the constant power shortages experienced in the country especially during the dry period.
Sources close to the project managers say the stalemate has arisen from a request by the World Bank, a key player, for clarification on the power purchase agreement to guarantee a constant uptake of power from the plant.
Currently, the government only turns to independent power producers during peak periods when demand outstrips supply from state-owned producers.
“The World Bank has asked for a re-opening of discussions on the project and before this is done, it will be very hard to move forward,” sources who sought anonymity as they are not authorised to speak on behalf of the Lake Turkana Wind Power Project (LTWP) company told the Nation.
The project, being undertaken by a consortium of European and African companies, is estimated to cost Sh62.6 billion (585 million Euros) with the World Bank guaranteeing Sh4.5 billion (42 million Euros).
Its main financiers are African Development Bank, Standard Bank of South Africa and Nedbank Capital of South Africa. Above the Sh4.5 billion, the World Bank also guarantees to step in and finance, if need be, Kenya Power to buy the power generated, making it an influential actor on the success or failure of the project.
The project hopes to set up 365 wind turbines on a 41,000 acre piece of land at the rate of one turbine per day, with the first kilowatts of electricity planned to be delivered to the grid by the end of 2013.
According to a statement by LTWP, the power purchase agreement between the investors and the government is that power produced by the plant will be bought at a rate of 7.52 euro cents/kwh by Kenya Power over a 20-year period.
However, it is the failure to break down how much power can be absorbed into the national grid at the various demand periods (peak and off-peak period) that has caught the attention of the World Bank.
Speaking to the Nation on Friday on the sidelines of a ceremony to sign a Sh8.3 billion loan for construction of high voltage power lines, Energy PS Patrick Nyoike admitted that his ministry and that of Finance were engaging the World Bank on the issue with hopes of getting clearance for construction to begin.
“It is true that we skipped a certain stage during the planning process as our engineers did not advise on the amount of power we can absorb at a given time. This is the information the bank is asking for before it guarantees the project,” said Mr Nyoike.
He, however, dismissed fears that the project may be shelved. “We cannot afford to lose this project. We need renewable energy sources and as a government, we are doing everything possible to ensure that construction for this plant kicks off as early as possible,” he said.
Based on the agreed offtake tariff, information on the amount of power to be purchased could be used to calculate the gains that would be made by each side (investors and the government) that would give an indication to the financiers on whether the project was commercially viable or not.
The World Bank is said to have begun its demands for information regarding the power offtake plan as early as August last year. The government is yet to respond.