Power firm banks on discount to lift sales

The sub-station at Lake Turkana Wind Power farm at Sarima, near Lake Turkana in Laisamis, Marsabit County. (AliAbdi/Standard)
The Lake Turkana Wind Power is eyeing to increase its share of wind electricity consumed in the country and in turn grow its revenues by incentivising Kenya Power to buy more from its Marsabit wind farm.

The company said it will sell electricity to Kenya Power at half the price once power purchases from its plant cross a certain threshold in a move that could see the electricity retailer increasingly opt for power from the wind farm.

LTWP Executive Director Rizwan Fazal LTWP reckons that after purchasing 1.68 billion units – measured in kilowatt-hours (KWh) of electricity – Kenya Power will get a 50 per cent price discount on electricity bought from the firm for the remainder of the year. He said tabulations by LTWP show that Kenya Power can cross this threshold by October.

“It will take about ten months to get there after which we will sell power at half price,” he said. It charges about Sh8 per unit sold to KPLC, meaning the discounted rate will be at about Sh4.

The Lake Turkana Wind Power has earned Sh7.8 billion (€70 million) since October last year when it started selling electricity to Kenya Power. Mr Fazal said half of the revenues will go towards debt repayments.

The firm makes payments twice every year of €74 million (Sh8.7 billion). It expects to clear the debt in 2024. The firm has a 20 year Power Purchase Agreement (PPA) with Kenya Power.

Offering electricity at a discounted rate could undercut other power producers in that while Kenya Power is obligated to buy power from the cheapest producers and only resort to more expensive power after exhausting the cheap sources, the discount might at some point make wind power cheaper than geothermal.

Following the commissioning of the LTWP plant, the amount of wind power feeding the national electricity grid has shot up and is now the third largest power source in the country.

According to data by the Kenya National Bureau of Statistics (KNBS), electricity using wind accounted for 15 per cent of power consumed in the country. Out of the 965.9 million units of power consumed in January this year, 147 million were from the wind.

Geothermal remained the largest power source, with the Olkaria plants producing 417 million units of electricity translating to 45 per cent of power consumed in the country, with hydro coming in second at 282 million units or about 28 per cent.

Hydroelectricity took a hit following power rains during the short rains season between October and December last year, resulting in a drop in its share of the power mix and compares to 400KWh produced in July accounting for 44 per cent of the power consumed in the country during the month.

Following the commissioning of the Turkana wind as well as the Garissa solar plants, the country’s installed capacity rose to 2 711MW, according to the Kenya Economic Survey 2019. This is against a peak demand of 1 800MW.

“Total installed capacity increased by 13.7 per cent to 2,711.7 MW in 2018. This was mainly due to the injection of 310 MW and 50 MW wind and solar capacity in the main grid respectively, from Lake Turkana Wind Power Plant and Garissa Solar Power Plant. Similarly, geothermal installed capacity increased by 1.7 per cent to 663.0 MW in 2018. Thermal installed capacity also increased from 806.9 MW in 2017 to 807.7 MW in 2018,” said the Survey.

The downside to the offer by LTWP is that power production peaks at night when the winds are strong. Both industrial and domestic consumers usually switch off most of their equipment at around 10pm, when power consumption substantially drops to about 1 000MW.

There have been efforts to try and increase consumption during the off-peak hours and Kenya Power late last year introduced the ‘times of use’ tariff that offers a 50 per cent discount for large power consumers operating at night.

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Olkaria plantsLake Turkana Wind PowerKenya PowerKenya National Bureau of Statistics