The Eastern African Power Pool (EAPP) nations stretching from Libya down to Tanzania and as far west as the DR Congo and east to Somalia have been discussing modalities of integrating the electricity markets. What this means is that power will be produced in one country and through transmission interconnections enabled to flow to a customer in another country. Simply put, the borders are being erased from the perspective of the electricity market.
This continued progress is positive as it opens opportunities in various areas. Utilities in each country will be enabled to buy greener and cheaper power from the pool and be able to sell excess power that may be sitting in their grid. This trade allows for efficiency in the allocation of generation resources within the countries. Enabling of exchanges in power capacity and demand in shorter contractual periods of days and hours allows for countries to react to short term shortages by buying from the market.
The market is especially important given the deployment of varying renewable energy sources such as wind and solar. This may be predominant in one country at a moment and can be evacuated and utilised in another country that may be facing a shortage at that time. The variations in production also imply a need to draw replacement power from other sources that could be in a country or from the pool.
For instance, with a heavy installation of geothermal or natural gas plants in a country, another country could rely on these resources to balance underperforming hydro dams during droughts or short-term variations in wind and solar.
This would also be the case for enabling countries to meet their peak demand. Activating the EAPP market would allow for peaking capacity and balancing power to be sourced from the market reducing the need for more expensive peaking and balancing sources such as HFO plants and grid-scale batteries.
A short-term day-ahead market as envisioned in the EAPP will also introduce the concept of the time value of electricity. Electricity supplied at peak and off-peak has different values and with competing suppliers, utilities in the pool will compete at day-to-hourly intervals to supply.
The cheaper cost of power at off-peak times will offset high-cost power at peak times leading to better pricing of electricity and improved efficiency.
The power pool will provide different market options and business models for public and private utilities. Power generators will have access to not only their local markets but also to the regional markets.
Competitively priced generation would get priority and the short-term nature of the contracts will mean the competitiveness will be reviewed regularly. This is ultimately good for limiting consumer prices.
Operating in a pool with agreed rules defined in a unified grid code will overall raise the standards of the electricity markets of the member states and further insulate the markets from interference.
In a pool where different states, state agencies and private businesses monitor efficiency, the incentive to unilaterally influence licensing will be reduced. The pool will necessarily imply clear guidelines for inclusion and access to the market, a necessary ingredient to ensure trust. This trust is necessary to further regional trade and ambitions of integration. Interdependency will necessarily mean more frequent interaction and the need to maintain good social and economic relations between nations. Overall performance of the region’s power sector is expected to improve as competition for regional demand ratchets up.
When utilities have more options for supply and power producers have more market options, the consumers will have a better cost experience.
The writer is the CEO, of the Electricity Sector Association of Kenya.
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