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Kenya should liberalise its energy sector in order to create a robust environment for power companies and pave the way for the construction of the stalled Lake Turkana Wind Power (LTWP) project, local economists say.

Negotiations between the government and the World Bank, one of the main financiers of the mega wind farm, stalled a month ago after the two parties failed to agree on the modalities in which the power generated will be distributed.

"Whatever the reasons that might be stalling this project, Kenyans are the biggest losers since they are the ones who pay the price of constant electricity disruptions," Tiberius Barasa, an economist based at the Centre for Policy Research, told Sabahi. "Small businesses are the ones that suffer most whenever there are shortages. Therefore, if the government is determined to realise Vision 2030, they must ensure this power project takes off."

Barasa said the energy sector needs to be liberalised so independent power suppliers can access the electricity market, unlike the current situation in which Kenya Power and Lighting Company (KPLC) is the monopoly power supplier.

"If that was the case there would be no hurdle since Lake Turkana Wind Power would have gone on with the project since they would be free to market the power to any willing buyer," Barasa said. "Besides, opening the electricity supply market to private entities will create competition and improve services."

Role of the World Bank

Made up of a consortium of international investors, LTWP is in charge of the wind power project, and its funding from the World Bank hinges on a purchase agreement with the Kenyan government.

But the Kenyan government has yet to disclose how much power it will guarantee to purchase from the plant. It already purchases power from private producers when demand outstrips supply from the state-owned producer KenGen.

"Besides the 4.5 billion shillings to fund the construction, the World Bank is also guaranteeing to step in, if need be, and finance Kenya Power and Lighting Company to buy the power generated. That makes the Bank a very influential actor on the success or failure of the project," Christopher Oludhe, a wind energy expert from the University of Nairobi, told Sabahi.

The information the World Bank requires could help calculate monetary gains, which will inform financiers on the commercial viability of the project, Oludhe said.

"The government might be buying time trying to assess the pros and cons of entering into an agreement where it is supposed to purchase a certain amount of power for a determined price for a certain duration of time," he said. "But the details not withstanding, the country desperately needs this wind farm to power Vision 2030 [projects] like the Lamu Port, Tatu City and to spur growth in the heavy manufacturing sector."

The power purchase agreement between investors and the government states that power produced by the plant will be purchased at a rate of 7.52-euro cents per kilowatt-hour by KPLC over a 20-year period, according to LTWP.

Benefits of the wind farm

LTWP says the wind farm will directly create approximately 2,500 jobs during construction and 200 full-time jobs after completion, saving the country 15.6 billion shillings ($182 million) per year on imported fossil fuels and contributing 58.6 billion shillings ($685 million) annually in tax revenue.

The plant will comprise 365 giant wind turbines each with a capacity of 850 kilowatts, an overhead grid collection system and a high voltage substation that aims to provide 300 megawatts of wind power to the Kenya national grid, equivalent to about 20% of the power currently generated nationally.

Besides solving the country's energy needs, the government will gain revenue from energy exports to neighbouring countries, said David Owiro, an economist from the Nairobi-based Institute of Economic Affairs.

He said he expects the 204-kilometre road that will be constructed for lorries transporting the windmill turbines from Mombasa to Marsabit to encourage construction of other new roads in the area.

"The amount of power that will be generated by this project will be enormous," Owiro said. "This will supply enough energy to drive economic growth in the country and hasten the realisation of Kenya's Vision 2030 development plans through private sector growth."

He added that bureaucracy is one of the reasons why the government has been unable resolve the current deadlock, which he says denies the country much needed electricity supply.

In addition to the World Bank, LTWP financiers also include the African Development Bank, Standard Bank of South Africa and Nedbank Capital of South Africa.