Nairobi — A Swedish firm that wanted to construct Africa's largest wind power plant in Malindi at a cost of Sh253 billion has relocated the investment to Tanzania, citing frustration by Kenyan authorities.
VR Holding AB had last year expressed interest in building a 600-megawatt (MW) wind farm in the Indian Ocean waters bordering Ras Ngomeni in Malindi, but Ministry of Energy officials turned down the request citing lack of a framework for renewable energy projects of that scale besides low demand for electricity in the country.
The firm's executives said they have now switched their focus to Tanzania, which shares the Indian Ocean coastline.
"We have opted to look at offshore solutions for Tanzania," Victoria Rikede, an executive at the company said.
"Kenya is proving to be a very difficult place and besides the grid is too weak to absorb all the power produced and therefore mini-grids is the solution for now," she added.
Kenya, East Africa's largest economy, has recently been losing mega investments to Tanzania, including a crude pipeline deal with Uganda.
Tuesday, Ministry of Energy officials reckoned that a huge power plant would leave the country with excess power that will only force consumers to pay billions of shillings annually for electricity not used.
This would dim the government's quest to deliver cheaper power through renewable sources.
Documents seen by the Business Daily show that Kenyan authorities, upon receiving the application, had directed the Swedish company to construct a smaller capacity project. "The company was to give us a proposal for a smaller capacity plant of 50 megawatts. They are yet to do so," said Isaac Kiva, the director of renewable energy at the ministry.
The Malindi offshore location was identified by the World Bank, according to the Swedish firm's executives.
They put the cost of generating electricity from the offshore wind farm at €3.5 million (Sh423 million) per megawatt.
This means the 600 megawatt offshore wind park would cost a total of Sh253.8 billion, in what would be the single most expensive private-funded project in East Africa.
Ms Rikede, however, did not wish to disclose the consortium behind the inconclusive venture. In rejecting the mega power plant, the ministry vouched for a phased implementation that brings power on stream gradually, in tandem with growth in demand.
"Wind is an intermittent power source and, therefore, we cannot approve such a big plant in one location since it will come with huge costs tied to power supply reliability and transmission," Mr Kiva had said earlier.
Kenya's renewable energy framework provides only for small and medium-sized projects under the feed-in-tariff (FiT) system, which fixes electricity prices for wind and solar projects of up to a capacity of 50 megawatts.
The only project outside this limited framework is the 310-megawatt Lake Turkana Wind Power in northern Kenya, which was built at a cost of Sh70 billion. But despite being completed the electricity is not used due to lack of a transmission line, subjecting consumers to a Sh5.7 billion fine.
A similar capacity offshore wind farm would have cost Sh131 billion, or Sh61 billion more based on the €3.5 million per MW cost, making the offshore technology more expensive than on land.
Offshore wind farms are deemed more reliable than those built on land since breezes in the ocean can produce steadier power. Kenya has an installed power capacity of 2,330 megawatts but its peak demand is about 1,699 megawatts, leaving a reserve capacity of 631 megawatts.