SAPP gets power trading system

The system will largely be based on the successful system operating in the Nordic region, implemented by Norway-based Nord Pool ASA, which runs the worlds largest power derivatives exchange. To date, power transmission across borders in the SAPP has been arranged by bilateral agreements.

The system from November would allow for electricity to be traded as it would be on any conventional commodity exchange. It allows for sellers and buyers to input their requirements for trade in the power pool a day ahead, and, trade or bid for excess capacity on a real-time basis. The participants in the SAPP trading scheme would consist of electricity system operators such as Eskom, NamPower, the Botswana Power Corporation, Electricidade de Mozambique, and Mozambique transmission company, Motraco.

The trading centre would be based in Zimbabwes capital Harare and trading would be made possible on the Internet.

Nord Pool Consulting has been involved in the SAPP since 2004, and its involvement has included assistance in the development in market design; arranging training, seminars and workshops for stakeholders in co-operation with SAPP, and assisting in the development of specification documents for the day-ahead market system and settlement system, as well as assisting in the procurement of these.

Nord Pool Consulting has also created a specification for a balancing mechanism for the SAPP area, and has acted as a managing consultant on various topics concerning market liberalisation. The company has also provided continuous assistance for the SAPP market evolution, and has been cooperating with local partners.

One of the differences between the SAPP regional power trading system, and the market in the Nordic region, was that only system operators were participants in the market in the SAPP, whereas the system in the region comprising Norway, Denmark, Sweden and Finland had some 320 participants, of which about half were power producers. There was a large capacity for small-scale hydropower operators to contribute to the market.

Thus, in the SAPP region, there would be no local bidding for power, but rather trade of power across borders. In essence, Eskom could buy power from one of the other SAPP member countries on the open market, without needing prior bilateral agreements. The market allows for financial contracts hedging from one-day ahead of consumption, to six-years ahead.

Nord Pool Consulting MD Hans-Arild Bredeson said a power transmission line between South Africa and Namibia was currently being built to facilitate the transfer of power. He also added that investors were more likely to construct a power plant in the region if they were assured that they would be able to sell the power.

The true benefit of this market is that is sets the correct price for electricity, said Bredeson.

He said that the reference price was calculated, within a regulatory framework, and set by Nord Pool each day.

Creating a power market would set a possible price for neighbouring countries to use, which would allow investors to adequately value their investment, and have a non-discriminatory way of selling power.

Bredeson did, however, caution that it would not be a perfect market from day one.

He noted that the company has 20 years of experience in regional power trading, and is concerned with how to introduce market mechanisms to ensure security of supply, as well as electricity generation from a diversity of sources. In the SAPP, there are 12 countries involved, and these are: South Africa, Lesotho, Swaziland, Mozambique, Zimbabwe, Botswana, Namibia, Angola, Zambia, Malawi, Tanzania, and the Democratic Republic of Congo (DRC).

The SAPP was established in 1995 to facilitate the development of a competitive electricity market in the Southern African region, and to give the end user some choice of electricity supply. Members undertook to create a common market for electricity in the SADC region.

The Namibian