Power pooling is an effective means of mitigating electricity supply risk over a large area served by numerous utilities, information technology services company EOH divisional manager Rob Surtees said during the second day of the Africa Energy Indaba.
During a panel discussion on energy trading and power pools, he stressed the need for an interchange of power flow among the various regions in Africa.
“Cost disparity between regions is enormous, which poses an opportunity for efficiencies to be achieved. Even in the developing world, more power pools are being established for greater economic efficiencies,” he noted.
Security of electricity supply relies on increasing the diversity of primary energy sources and ensuring that systems are more robust. Power pooling can be useful in this regard.
Further, the panel of speakers added that power pools also contribute to improved electricity access, reduced load-shedding and the delivery of better-quality service in a region.
However, regions must have well-developed grid infrastructure, sufficient generating capacity, regional regulations and an official framework in place for cross-border trading for this to be effective.
African Forum for Utility Regulators technical manager James Manda stated that the energy mix in Africa was different in each of the five regions, namely North, South, Central, West and East Africa.
For example, solar and wind resources feature predominantly in the North, hydropower in Central Africa and solar power in the South.
“We need to pool resources for efficiency and reduced cost,” Manda said, adding, however, that power pools in each of Africa’s five regions were at different stages of development, as a result of a lack of infrastructure, bottlenecks, national interests clashing with regional interests and regional interests not being considered.
He added that power pooling would remain at an infancy stage as long as countries were only driving national goals and did not collaborate in, for example, programmes under the African Union to establish regional transmission capacity.
Weak governance and political interference in utilities also prohibit effective electricity trade, Manda said. Most utilities are indebted and that will not change without the political will that is required to focus on solutions and, ultimately, cross-border trading.
Manda believed that, for efficient electricity trading to take place, power pools needed to focus on human capital and mobilising domestic financing, such as pension funds, to ensure projects proceeded beyond the bankability phase and to financial closure, since Africa could not only be dependent on foreign investment.
Moreover, he mentioned that different transmission tariffs between countries prohibited trade.
“Different governments charge different tariffs for power to be moved from one country to another. All these tariffs must be submitted to a regional regulator. If all countries follow a single transmission tariff methodology, then we will get somewhere.”
University of Pretoria economics associate Professor Roula Inglesi-Lotz said it was necessary for government and utilities to reconsider their business models and designs.
For example, Norway advanced from an oligopolistic energy sector structure, with a dominant State-owned utility, no market competition and no smaller generators, to an open market pool with free trade – from both public and private energy producers.
“Africa needs mature institutions that are able to reboot both technology and policy within its business. A mature market is also necessary, in addition to good cooperation between countries with common purposes and targets.
“Trade markets globally are working because there is a common understanding between comparative advantages between countries and understanding of how to use these advantages, taking into account respective countries’ strengths,” she explained.
Electricity Regulatory Authority of Uganda CEO Ziria Waako pointed out that power pools ensured that regional regulations were reviewed and enabled trade.
However, each country had its own nationalist interest and aspects such as political security, which also affected energy security, she said.
“The continent is getting more ready for power trading. We have various resources in the region, we have gas in the west, we have hydro in the east, and coal in the south. There is a lot of regulatory framework to fulfil before it can be operationally realised, but I see effort in harmonising regulatory frameworks.
“Various regions on the continent have had challenges with supplying secure and realisable supply, which poses the need for fairly priced electricity that is pushing the different players in the civil markets to promote a regional connectivity agenda, which ultimately forms a platform for interregional trading,” Waako stated.
She also highlighted the financial stability of utilities and fair price determination as make-or-break factors in power pool trading.
Southern African Power Pool (SAPP) coordination centre manager Steve Dihwa pointed to the success of the SAPP.
“There are challenges that affect electricity trade in our region, but we have seen a marked increase in volumes traded in SAPP, with increased participation in the market in recent years.
“SAPP is reviewing [the] criteria required to open the market for private sector companies, which will see more volumes of electricity traded. The benefits of increased trading include competitive pricing and, eventually, an interconnected continent.”