Wind farm deal to trim cost of electricity

• Turkana project signs pact with national distributor KPLC for early 2012 take-off

Power prices could come down in the near future with the signing of an agreement between Kenya Power and Lighting Company and Lake Turkana Wind Power, where the power distributor will buy 300 megawatts from the firm’s wind generated electricity expected to be ready by March 2012.

According to the power purchase agreement signed on Friday in Nairobi, KPLC will pay Lake Turkana Wind Power 7.22 euro cents (Sh7.70) a kilowatt-hour.

This is expected to translate into lower energy prices for consumers because half the amount of electricity produced currently comes from independent power producers who use diesel power generation.

“We have been relying on thermal power and that is why fuel cost charges remain high,” KPLC managing director Joseph Njoroge said during the ceremony. “But with geothermal and wind energy, we expect these charges to go down.”

The current high energy prices are a result of passing on to consumers the cost of buying heavy diesel at high foreign currency-denominated costs for the emergency thermal generators.

Currently, KPLC is charging Sh7.22 a kilowatt-hour as fuel cost charge and this item carries the largest amount on any power bill.

Price volatility

The project, which is also expected to shield Kenya from price volatility in the global oil market, entails the construction of a wind farm consisting of 365 wind turbines, each with a capacity of 850 kilowatts in Marsabit District.

The initial phase of the farm is expected to start production in March 2012 reaching full production of 300 megawatts by September 2012.

When complete the project to cost $635 million (Sh48.4 billion) will be the largest wind farm on the African continent and will provide 17 per cent of Kenya’s installed power capacity, Lake Turkana Wind Power managing director, Mr Henk Hutting, said.

It will be the single largest generation installation in Kenya and could hasten demise of diesel generators.

Mr Njoroge added that the government also plans to increase generation capacity by 898MW by 2014, to ensure adequate power to meet future demand.

Because of growth in electricity demand, peak demand has risen to 1,107 MW against effective supply of 1,135 MW, leaving a reserve margin of four per cent against the desired 15 per cent necessary to accommodate planned and unplanned system outages.

Mr Njoroge said that inadequacy of this reserve margin exposes the power system to instability, imminent collapse and national blackouts in the event of unplanned outages of larger generating units.

He asked the company to speed up the execution of the project to enhance adequacy of power in the grid as well as the price benefits to customers and for the benefit of the environment.