Payback time: Wind power firm faces fine for delayed supplies

Energy Ministry officials last year found themselves in a tight spot as Lake Turkana Wind Power (LTWP) came calling.

The firm had come to collect Sh5.7 billion penalty fee after the Government’s failed to live up to its promissory contract.

The State had failed to meet its end of the bargain in putting up electricity transmission infrastructure from Marsabit to Suswa. The demand for payment was in line with an agreement that the firm had signed with the Government before it started building its wind farm in Marsabit County.

The project guaranteed payment from the Government should the company be unable to monetise its investment due to such factors as the lack of a power line to evacuate power to the national electricity grid.

The firm had completed the construction of the plant in December 2016 and was ready to start generating about 100 megawatts (MW), about a third of the plant’s installed capacity of 310MW, with the balance expected to come on board mid-2017. The transmission line was by then far from being finished owing to various factors, including complex land acquisition process and the financial challenges that the Spanish contractor Isolux Corsan experienced that led to its filing for bankruptcy in August 2017.

The line, like the plant, was scheduled for completion in December 2016.

As per the agreement, the firm would have pocketed Sh1 billion monthly from January last year until the completion of the line to compensate it for lack of power transmission infrastructure that denied it an opportunity to start selling electricity to Kenya Power.

It was, however, paid Sh5.7 billion as penalty after negotiations with the Ministry of Energy. As part of the negotiation, a new deadline for line completion was set for August this year and failure would again see taxpayers exposed to another Sh1 billion monthly penalty.

Fast forward to August 31 this year and after missing many other deadlines to complete the line, the Kenya Electricity Transmission Company (Ketraco) delivered the line.

After much fanfare and publicity throughout the first week of September that involved officials from LTWP, the ministry and State-run power agencies, the firm was expected to start power production from one of the biggest wind farms in Africa.

But it now appears that the power generator that was quick to penalise the Government in 2017 might not have been ready to start injecting electricity to the national grid from its plant.

As of Wednesday last week, the firm said it was generating and feeding 25MW to the grid. This is against the 310MW that it was expected to start feeding when the line was made available.

LTWP in an update yesterday said this has gone up to 39MW.

It said it was injecting power to the grid in a phased manner, which was an accepted practice globally. This has not gone down well with the Government, with energy ministry officials now contemplating penalising the firm.

The Energy Regulatory Commission (ERC) Director General Pavel Oimeke said going by what the regulator has observed in the last three weeks, it may require LTWP to feed power to the grid for free to compensate for the time it has not been injecting the agreed amount of electricity from the wind farm despite availability of the transmission line.

“We have noted what is happening with the wind farm and we are looking at it keenly as the regulator. Right now, we are waiting to see how long it will take them to bring in the full capacity online and then evaluate what level of credits they will have to give,” said Oimeke.

“We paid them for deemed generated energy… once the full capacity comes in, we look at it and ask them to issue a debit note for that one or two weeks or month that they were not injecting power to the grid.”

Global practice

While the firm in responses to queries said its plant has been ready and its actions are guided by global best practices, Oimeke said it was a display of lack of preparedness and the company may have not tested its equipment. “So far we do not have official communication from LTWP about their readiness or lack of it. But they may have lied when they said they had tested the turbines and were ready to feed the grid,” said Oimeke.

“Kenya Power as the signatory to the PPA has written to them asking them to confirm when and how much are they able to give. What we have seen is that they had not tested the turbines.” Oimeke said he had enquired on the firm’s progress of feeding power to the grid and he was told that the firm was only managing to generate and inject to the grid 5MW as of Monday last week.

LTWP has also not given the power agencies a schedule of what they would be generating in the coming days, which enables Kenya Power to update its power offtake schedule.

This enables the power distributor is able to give priority to the cheapest power and add costly generated power to the grid as demand grows.

Hydro and geothermal power sources are the cheapest but at Sh8.6 per unit.

Power from LTWP plant is cheaper and could displace costly thermal plants. “For you to feed the grid, you have to give projections so that we plan for it, which has not happened with LTWP. You cannot have other generators running and suddenly ask them to switch off because another plant, not in the schedule, has started generating,” he said.

LTWP, however, defended its actions, saying it was a global practice to bring in power from a new plant into the grid in a measured manner, which is also captured in the Power Purchase Agreement (PPA) signed with Kenya Power.

“LTWP was granted energisation of the transmission line on September 20 and September 24 for the first and second circuit respectively. As of September 26, 2018, LTWP had commissioned 39 Wind Turbines and was evacuating power into the national grid. The highest peak was 25MW on Tuesday night (last week)… any allegations that LTWP is not feeding power is simply unfounded,” said Rizwan Fazal, a director at LTWP.

“(As a power producer) when the transmission line is availed, you cannot simply ‘switch-on’ 365 Turbines in one go. That is not prudent and is not permitted under the PPA that LTWP has with Kenya Power. There is a well-described and internationally accepted practice for commissioning and testing so that both plant and grid integrity are maintained.”

Full testing

The firm said it would commission the 365 turbines at the wind farm over 21 to 30 days, going by the current rate of switching on between 12 and 24 turbines a day. “We inject power into the grid sequentially and in a safe and phased mode. It is irresponsible to push 310MW of wind in one go prior to full testing.

This will cause system-wide instability and network blackouts. Each day, between 12 and 24 turbines are commissioned,” said Fazal. It, however, ruled out the possibility of remedying the slow injection of power to the grid, saying that it has been ready and is delivering power to the national grid in full compliance of its contractual agreements.

LTWP’s piecemeal commissioning of the 310MW plant can be compared to other mega power projects that other entities have undertaken in Kenya. Such include KenGen’s 280MW from its Olkaria IV and Olkaria I (units four and five).

The project started feeding the grid as the different phases of the power plants were completed, the last of which was the additional unit five of OLkaria I and when commissioned in late 2015, it started injecting 72MW to the grid.

It is also against the fact that wind unpredictable and the wind farm is highly unlikely to feed the 310MW.

If anything, experts say it can only achieve about 50 per cent of its installed capacity when generating at peak.

“LTWP plant will provide about 150MW firm capacity of the 310MW installed capacity during evening peak,” said Hindpal Jabbal who has worked in the power sector for years and is a former ERC chair.