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Roadmap to a fully integrated and operational East African Energy Market

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Daisy Muthamia's picture
Electrical Engineer Kenya Electricity Transmission Company

I am an electrical engineer in power transmission currently with the Kenya Electricity Transmission Company and with experience in design and implementation of high voltage substation and...

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  • Aug 9, 2022
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Abstract

The East African region holds an immense reservoir of potential energy resources such as hydro in Ethiopia and Geothermal in both Kenya and Ethiopia. However, the region is characterized by perennial power deficits especially when there are draughts. In response to the power shortages, poor infrastructure and a need to collaborate, a number of countries in the region created the regional power market dubbed the East African Power Pool (EAPP) in 2005. EAPP envisages the evolution of a fully integrated and operational power market in a period of about 30 years from inception though it is currently in its early stages.

Certain critical success factors must be addressed for a fully integrated and operational power market in the East African region. The starting point towards the design and establishment of a regional power market would be the formation of a common legal and regulatory framework to facilitate achievement of regional objectives. This is currently ongoing under the EAPP which is setting out the operational framework for the evolution of the pool towards full integration. There’s also need for the harmonization of legal and operational framework for uniform legal and operational norms across the power pool partners.

The next phase would involve increasing the generation capacity in the region and completion of the regional interconnector transmission lines and substations. There’s need to complete all the interconnection projects currently underway. This includes the transmission lines projects and ancillary services.

The power generation capacity in the region, generation projects with a blend of hydropower, nuclear, geothermal and thermal sources focused on the strength in each country. This will tackle the challenge of power capacity shortages. However, this requires a substantial investment from both government and the private sector. A favorable environment to attract private investment should therefore be created by reviewing the existing fiscal and legal regimes. Bilateral and multilateral agencies that are key in providing catalyst funding and technical support should be continually engaged in order to attract private investments in the sector.

The last stage before the establishment of a power market would be the establishment of an independent regional regulator to supervise and control the various aspects pertaining the operation of power pools. This institution is currently in place in the EAPP but there is need for an amendment in the electricity legislations of the member countries of the pools to empower the regulator to make binding decisions. Next would be the establishment an independent power trading institution “East African Regional Load Dispatch Center” whose functions would include the coordination of the trans-regional exchanges between the member countries grids for trading within the EAPP. This Regional institution, once established, will take on a supervisory role to the individual TSOs offering an oversight and coordination role for the energy markets handling coordination of the interchanges scheduling and settlement of energy.

This final stage would also include the design of the electricity market as well as establishing the rules to regulate it as well as the necessary hardware and software that will support the electricity trade and exchange. In this stage, there would be multiple sellers and buyers participating in the market and the regional regulator would be fully established.

 

Roadmap to a fully integrated and operational East African Energy Market

  1. Introduction

East Africa Power Pool – Integration for Optimized use of resources

The EAPP is a regional institution established with 7 member countries (Kenya, Uganda, Tanzania Ethiopia, Rwanda, Burundi, Djibouti, the DRC, Sudan, Egypt, &Libya) and comprises public or concessionary utility companies in charge of power generation, transmission and distribution in the region.

One of the aims of forming the power pool in the region was to increase the market size therefore improving the economy of scale and economics of mega power projects. This is because the individual domestic power demand in these countries is insufficient to justify bigger power plants that can exploit economies of scale.

Various projects for the interconnection of power infrastructure are ongoing and some are already complete with the aim of achieving energy security and reliability by allowing these countries to enjoy a complementary energy mix from more environmentally friendly sources of energy such as hydro from Ethiopia, geothermal from Kenya and other green sources such as wind and solar. The power pool would also promote competition since with availability of surplus capacity in the system, there would be a possibility of ensuring that the cheapest power is carried out first through the order of merit ensuring the generation sector generates the most competitive and economic power.

The region would therefore greatly benefit from an interconnected power system to optimize the use of energy resources available in the region by working out regional investment schemes in power generation, transmission and distribution taking into account the socio-economic and environmental aspects of the members.

 

  1. Background: Current state of Power infrastructure

Before the formation of the power pool, the individual member countries adopted inward looking policies aimed at planning and developing their power systems in an isolated manner with a view to satisfying their national demand growth. Bilateral power exchange agreements however existed between some countries in the region including some cross border electrification projects such as the Kenya - Uganda and Uganda Rwanda projects though the power exchange was not significant with some countries facing deficits and being unable to meet contractual power delivery commitments.

However, in the recent past, several power infrastructure projects to interconnect the member countries have started. These projects comprise not only a transmission line and substations but also ancillary facilities that ensure secured and improved quality of supply. These include generator facilities, sub facilities such as AGCs, transmission facilities and sub facilities such as reactive power compensation devices in the adjacent substations or elsewhere in the national power grids to be connected.

The interconnection projects include the 500KV HVDC bipole Ethipia – Kenya line with converter stations at Suswa in Kenya and Wolyata Sodo in Ethiopia, Ethiopia – Sudan line, the 400kV Kenya – Uganda – Rwanda Interconnector, 220kV Rwanda – DRC, DRC – Burundu and Rwanda – Burundi Interconnector, 220kV Egypt – Sudan, and the 400kV Kenya – Tanzania –Zambia to interconnect to the South African Power Pool among others.

However, the region is presently experiencing various challenges which must be adequately addressed if the envisioned fully integrated regional power market is to be realized. There is need to complete the interconnection projects currently under construction for the region to establish itself as a favorable destination for investment and financing. These projects will be important for wheeling power within the region and across power pools. In addition, the national grids in each country need to be adequately reinforced to be able to support additional generation and power imports from neighboring countries.

More importantly, even with the completion of these infrastructure projects, there is need to establish a Regional Power Dispatch and Control Center whose mandate would be the a) monitoring, control, and coordination of operations and (b) scheduling and settlement of energy exchanges between national power grids.

Currently most of these countries each have an individual National Control Center operated by the System Operators (SO) whose mandate includes monitoring, control, and coordination of system operation and power dispatch in the national  grids.

There is absolutely no guarantee that the adjacent national power grids can be operated together, no matter what the properties of the cross-border interconnection facility are. The operability of the interconnected national power grids do not depend only on technical properties, but also on decisions the responsible transmission system operators (TSOs) need to take on key nontechnical issues

There would be need to establish an independent power trading institution Regional Load Dispatch Center whose functions include the coordination of the trans-regional exchanges between the countries’ grids for trading within the EAPP. This Regional institution, once established, would take on a supervisory role to the individual SOs offering an oversight and coordination role for the energy markets handling coordination of the interchanges scheduling and settlement of energy.

SOs perform a number of key functions in real-time, including (a) monitoring, control, and coordination of operations and (b) scheduling and settlement of energy exchanges between national power grids. To accomplish those tasks, SOs rely on real-time data processing hardware and software systems, comprising supervisory control and data acquisition (SCADA) and energy management system (EMS).

 

  1. Way Forward: Proposed Phases towards a fully integrated power market
    1. Preliminary Phases

The starting point towards the design and establishment of a regional power market would be the formation of a common legal and regulatory framework to facilitate achievement of regional objectives. This is currently ongoing under the EAPP which is setting out the operational framework for the evolution of the pool towards full integration. There’s also need for the harmonization of legal and operational framework for uniform legal and operational norms across the power pool partners.

There’s need to complete all the interconnection projects currently underway. This includes the transmission lines projects and ancillary services. The power generation capacity in the region, generation projects with a blend of hydropower, nuclear, geothermal and thermal sources focused on the strength in each country. This will tackle the challenge of power capacity shortages. However, this requires a substantial investment and a favorable environment to attract private investment would have to be created by reviewing of the fiscal and legal regimes. Bilateral and multilateral agencies who are key in providing catalyst funding and technical support should be continually engaged.

The last stage before the establishment of a power market would be the establishment of an independent regional regulator to supervise and control the various aspects pertaining the operation of power pools. This institution is currently in place in the EAPP but there is need for an amendment in the electricity legislations of the member countries of the pools to empower the regulator to make binding decisions.

    1. Design of the regional power trade market

A thriving EAPP electricity market will require all the items in the preliminary stage in place. The final stage will be the design of the electricity market as well as establishing the rules to regulate it as well as the necessary hardware and software that will support the electricity trade and exchange. In this stage, there would be multiple sellers and buyers participating in the market and the regional regulator would be fully established.

    1. Summary of Project Phases

The project phases starting with the perquisite stages that must be in place for a regional power market are summarized below:

  • Phase 1 – 2: Legal and Regulatory Framework and Harmonization of legal and operational frameworks (2008 – 2022)
  • Member Utilities sign contracts on asset ownership and development of future power infrastructure
  • Enforcing rules of practice covering technical planning, operations and commercial aspects of power systems integration
  • Review of fiscal and legal regimes to encourage and increase private investors,
  • unbundling of utilities and
  • Comprehensive reforms
  • Phase 3: Increasing Power Generation Capacity and Transmission infrastructure (2022 – 2040)
  • Increase generation capacity to improve the blend of Hydro, geothermal, wind, solar and other renewable sources as well as thermal plants
  • Completion of trans-regional interconnectors including substations
  • Reinforcement of the transmission grid withing each country to support the additional capacity
  •  
  • Phase 4a: Engagement of bilateral and multilateral agencies (2024 – 2026)
  • Engage bilateral and multilateral agencies to provide catalyst funding
  • Inviting private investors

​​​​​​​Phase 4b:Establishment of an Independent Regional Regulator (2025 - 2028)

  • Establish an independent regional regulator and amend electricity legislations of member countries to empower this regulator to make binding decisions

​​​​​​​Phase 5:Designing a Regional Power Trade Market (2023 and Beyond)

  • Design the Electricity market early on to ensure that as countries are investing in generation and transmission infrastructure, the market is in place
  • Establish rules to regulate the electricity market
  • Use bilateral contracting in early stages for trading power and as the region evolves further use Use short term energy markets and day ahead markets
  • Establish the necessary hardware and software that will support the electricity trade and power exchange

 

  1. References
  1. Enel Foundation, (2019) Power market designs for energy transition in the EU and China Accessed on website: https://www.enelfoundation.org/content/dam/enel- found/EF_PowerMarkets_web.pdf
  2. Deloitte, (2015), The roadmap to a fully integrated and operational East African Power Pool Accessed on website: https://www2.deloitte.com/content/dam/Deloitte/ke/Documents/energy- resources/ER_Power%20TL.pdf
  3. Joseph Magochi – EAPP (2014), Development of regional Power Trade in East Africa Accessed on website: https://pubs.naruc.org/pub.cfm?id=5379BA15-2354-D714-51DA- 846FD8B9A223
  4. Energy Charter Secretariat Knowledge Center (2016), Energy in the East African Community. Accessed on website: https://www.energycharter.org/fileadmin/DocumentsMedia/Occasional/Energy_in_the_East_African_Community.pdf
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Thank Daisy for the Post!
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