Most folks would recommend you use your display application for this:
SELECT
LP = CASE WHEN RN = 1 THEN LP ELSE '' END,
KW
FROM (
SELECT LP, KW, rn = ROW_NUMBER() OVER(PARTITION BY LP ORDER BY (SELECT NULL))
FROM #test_table
) d
ORDER BY LEN(d.LP), d.LP, rn
For fast, accurate and documented assistance in answering your questions, please read this article.
Understanding and using APPLY, (I) and (II) Paul White
Hidden RBAR: Triangular Joins / The "Numbers" or "Tally" Table: What it is and how it replaces a loop Jeff Moden