12 February 2009

Kenya: Windy Prospects - Energy Company Sets Up Shop in Kenya


Lake Turkana Wind Power plans to produce 300MW by 2012 by harnessing renewable wind power in northern Kenya. The project, once complete could meet about a quarter of at Kenya's total energy demand, now standing at an estimated 1,200M. Chris Staubo, a director at LTWP talks to us about the project and renewable energy in Africa.

How long did it take to study the viability of wind power projects in Marsabit? Why Marsabit?

The promoters of Lake Turkana Wind Power project (LTWP) were aware since the 1980's that there were was a huge potential in Loyingalani but it was not financially viable until now, with greatly improved turbines as well as rising cost of crude oil and other power sources. We have studied the area in seven different places at three heights of 40m, 60m and 80metres since early November 2006 as well as using meteorology station data for over 10 years to correlate the data with ours.

Briefly describe the LTWP project.

Production is expected to start in around July 2011 with full production 12 months later. There will be a total of 367 turbines of 850kv each being the Vestas V52 machine. The reason for this is that the V52 has a better history for reliability than other machines. The farm will produce up to 300MW. The transmission line will be a 400kv dual circuit line of 426km and will be linked from site to Suswa outside Nairobi.

What is the estimated cost of the investment? Who is the financier?

Total estimated cost $760 million of which $200 million will be the transmission line and the sub-station as well as step down and switching stations. LTWP has planned 30% equity and 70% debt which will be DFI's and other syndicated banks.

Kenya had some bad publicity following the post-election turmoil in 2008 that sent jitters among both local and international investors. Your kind of investment is obviously substantial; would you say the country is now safe for investments?

This will be one of the largest investments done in this country. The 2008 turmoil unfortunately showed the world that Kenya is not, despite what many thought, risk free to tribal problems, especially when fuelled by politics. The biggest issue Kenya has, as many other countries is "red tape." It is the politics that makes investors shy away or leave, not the investment itself. There are many opportunities in Africa for investment but its mentality is not geared towards it. Your rate of return has to be substantially bigger than if you were to invest elsewhere due to political risk. With the global credit crunch you find that many international banks have been forced to focus on their own markets and not risk funds in foreign ones. However, projects like renewable energy and infrastructure, which are desperately needed in Africa, and have many positive impacts on the entire region, attract huge interest.

Has there been any remarkable peak in interest in renewable energy in Kenya?

Not really although when the barrel sits at $146, this makes people pay attention. There are various projects but even now people find it hard to believe that one can generate 1/3 of the population's energy requirements from wind. If you look at this on a global scale Kenya will be one of the leading countries in the world for renewable energy once LTWP is up and running.

In your opinion what opportunities exist in Kenya that would interest potential energy investors?

Wind is an obvious source and so is geothermal. But one could also look at other forms of energy such as bio-gas from garbage collection, offshore wind etc.

Recently nuclear energy has been touted as one of the ways to curb power shortages in Kenya. What are your thoughts on this?

Nuclear is a touchy subject world wide but a possible solution. However, I do not believe that nuclear stations in the traditional sense is a possible solution for reasons such as the bodies that control nuclear proliferation may not allow it due to potential risks such as political instability and location. Kenya has a large energy production potential from specificall wind, coal and geothermal and I think these areas should be explored first. A lot needs to be done to strengthen the national grid system for it to cope with any additional power generation which Kenya does not have the money for. Another way would be to privatise the sector but also for transmission and not keep as a government monopoly.

According to the African Development Bank (AfDB), Africa could become a gold mine for renewable energy as both investors and governments seek a new and clean energy frontier. Please Comment.

I would agree with this but as mentioned above there is no point in generating 3,000mw if the national grid can only absorb and sustain an additional 400mw. This is the case with most African nations.

The study - "A Clean Revolution in the Energy Sector" - conducted by the Energy Watch Group says there has been an exponential growth in wind power capacity since the 1990's. What should Africa be doing to exploit its abundant natural resources for energy?

Investment opportunities are getting less and less so people are looking at new ways and new areas. People are also becoming more and more conscious about our environment and global warming; cost of traditional energy production has quadrupled in recent years; wind energy has come a long way going from the traditional huge ineffective windmills of the 1980's to high energy efficient ones of today; wind is totally complimentary to hydro as in wet years generally have low winds and high in dry allowing water reservoirs to recover, this is especially the case in Kenya where hydro being the main source but also at almost total capacity. Africa needs to focus on good private investor initiatives that are good for the country and not just a few individuals. These initiatives will in turn have huge impacts on areas such as Turkana (Marsabit) that would never otherwise get much attention.

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