Kenya Power has signed a 20-year, 100 megawatt power purchase agreement with Kipeto Power, which is developing an energy generation project in Oldonyo Narok, Kajiado.
Kipeto has already received $233 million (Sh23.3 billion) financing from the Overseas Private Investment Corporation (OPIC), the development fund of the United States government, for the wind project.
Under the PPA, the firm will construct, own, operate and maintain the project, with Kenya Power purchasing the power generated.
“The PPA is an important step forward in enabling the country to meet its development goals by utilising renewable power that is cost effective and environmentally friendly,” said the acting Secretary for Energy and Petroleum, Henry Rotich.
Kipeto, whose PPA Kenya Power did not disclose, is one of new major energy-generation projects in the pipeline. Electricity from Lake Turkana Wind Power, set to come on-stream by 2016, will be priced at 8.42 US cents per unit (Sh8.3).
Kenya Electricity Generating Company (KenGen) sells its hydropower to Kenya Power at Sh3 per unit ($0.03) – the cheapest source, followed by geothermal energy at Sh7 per unit ($0.07).
Thermal generators are the most expensive at Sh19.2 per unit ($0.19).
The feed-in-tariff for wind power from plants with a capacity of between 10 and 50 megawatts stands at Sh11.1 per unit ($0.11) which is adjusted for inflation annually. The government has announced plans to raise the country’s power capacity by an extra 5,000 MW by the end of 2017.
Kenya’s installed generation capacity currently stands at 2,295 MW, having increased 21.7 per cent from 1,885 MW in June last year as producers like KenGen commissioned new projects.
Renewable energy (hydro and geothermal) currently accounts for over 85 per cent of the country’s energy mix, Mr Rotich said.
Wind energy currently stands at a negligible 0.4 per cent in the country’s energy mix but this will significantly change in the coming years with the introduction of power from the Lake Turkana and Kipeto projects, which combined, will add 400 MW.
Mr Rotich said that wind energy is part of the country’s strategy of diversifying the 5,000 MW additional generation capacity to ensure adequate power as well as reduce the overall cost of electricity.
“This 100 MW PPA provides the Kipeto stakeholders the off take certainty needed to advance the project and provides Kenya Power with an important addition to their generation plan,” said Joseph Njoroge, Principal Secretary for Energy and Petroleum.
Kipeto is one of the biggest committed wind power projects in the region and second to the ongoing 300 MW Lake Turkana Wind Project.
“The PPA has a term of 20 years after the power plant commercial operation date. Project development and construction activities will be carried out in 18 to 24 months starting November this year,” Mr Njoroge said.
OPIC President and CEO, Elizabeth Littlefield, said the organisation was proud to support the wind project and its role in improving the country’s development adding that the “financial support to Kipeto is a significant step in OPIC’s pledge to US President Barack Obama’s Power Africa Initiative.”
The financing by OPIC is one of several deals that have been signed among Kenya, the US, their agencies, corporations and entrepreneurs at the recent Global Entrepreneurship Summit attended by Mr Obama.