Eastern Africa countries closer to regional power auction market

Kenya and other countries that are faced with challenges in generating enough electricity to meet demand will be major wins given the price discovery aspect of the auction market.

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Kenya and her Eastern African neighbours are inching closer to a regional auction market for electricity that is expected to help them avoid blackouts tied to generation hitches besides the possibility of cheaper electricity.

Consultants tapped by the 13-member economies in the Eastern Africa Power Pool (EAPP), are expected to publish regulations that will govern the trade next month and establish a Day Ahead Market (DAM) that will allow distributors to hedge against price volatility of the critical commodity among others.

The regional market will boost access to clean and cheaper electricity in the region, mainly for countries beset by generation hitches.

Publishing of the draft regulations marks a crucial step in helping the EAPP to operationalise a plan that was mooted in 2005.

“There is a team working on them, and we expect to have the draft regulations by the end of next month. From there, each member country will have a look at the regulations and give feedback,” said Kenya Power.

Countries in the EAPP are Kenya, Uganda, Ethiopia, South Sudan, Tanzania, Somalia, Libya, Congo DR, Djibouti, Rwanda, Sudan, Egypt and Burundi.

Through what is known as DAM, participating countries are able to lock prices for the next 24 hours through an auction system, helping distributors (buyers) hedge against price fluctuations, and buy and sell electricity at a set price for the following day.

DAM will allow countries with excess power to submit price offers while those in deficit will table bids, in what will directly impact on the final prices besides ensuring steady supply and thus helping countries to avoid blackouts tied to generation hitches.

The regulations will also allow the economies to buy and sell electricity without relying on bilateral agreements.

Kenya and other countries that are faced with challenges in generating enough electricity to meet demand will be major wins given the price discovery aspect of the auction market.

Countries in the EAPP are also banking on the regional power market trade, to significantly reduce dependence on the dirty and expensive plants which have for years been used to shore up supply during peak demands, especially in countries with low hydro-power production.

Kenya has the highest potential of geothermal electricity in the region with an installed capacity of 940 Megawatts (Mw), while Ethiopia is the highest producer of hydro-power in the continent at 4.9 Gigawatts as at mid last year.

The regulations come months after Kenya completed the construction of high-voltage interconnecting lines with Tanzania, Uganda and Ethiopia.

Currently, Kenya has bilateral electricity trade agreements with Ethiopia and Uganda which have been key in helping the country avert power rationing amid low local generation which has been unable to meet the fast-rising demand.

Power trade within the EAPP will enable member countries to harness the region's vast reserves of low-cost renewable energy resources, enhancing reliability and affordability of electricity supply.

Neighbouring Tanzania, Democratic Republic of Congo and Burundi have high electricity deficits underscoring the critical role of the looming regional power trade.

EAPP is one of the five power pools on the continent with the others being Central Africa Power Pool, North African Power Pool, West Africa Power Pool and the Southern African Power Pool.

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