HomeRegional NewsAfricaOp-Ed: Energy trading via power pools can ease energy poverty

Op-Ed: Energy trading via power pools can ease energy poverty

By Thuo Njoroge Daniel, an energy economist and advisor at the Africa Utility Forum

Trade in electricity helps bring down energy prices, mitigate against power shocks, relieve shortages, facilitate decarbonisation and provide incentives for market extension and integration.

Dynamic development is underway in Africa, manifested by high rates of urbanisation registered at 3.6 % annually, adding nearly 350 million city dwellers by 2030 according to Brookings Institution. It is, therefore, incumbent upon governments to ensure power infrastructure is developed at a pace needed to meet growing demands.

Could the power pools play a key role here?

Today six out of the 15 fastest-growing economies in the world is an African country, yet access to electricity is a persistent challenge. Studies by the World Bank reveal nearly two-thirds of Africa’s population, lack access to energy, with 80% of whom live in rural areas as a major challenge to economic development and poverty reduction. In addition, those with access to electricity typically face high prices for a supply that is both insufficient and unreliable. Interestingly countries have been reluctant to trade electricity across borders in this part of the world.

Through the East African Power Pool (EAPP) critical steps towards efficient power trade among the 12 member states in the region are being put in place with member states working on plans to develop an integrated least cost power development plan for the region. The member states have since revised the EAPP master plan in 2014, with an intent to establish a regional regulatory body as well as the construction of transmission lines and interconnectivity networks. This is already evident in the strong link between the Southern African Power Pool (SAPP) and EAPP that has been made possible through the Zambia –Tanzania – Kenya 400kV transmission line, the ZTK interconnectivity.

This type of pooled system eventually leads to the creation of transmission mechanism for evacuation of electricity from point-to-point throughout a grid to enhance energy security to member states as countries move to meet individual power deficits. Kenya is in the process of completing the 500kV Ethiopia–Kenya transmission line to evacuate 400MW. The country’s Power Generation and Transmission Master Plan (PGTMP 2015-2035) anticipates surplus energy in its fourth medium-term with renewable energy among the must-run projects expected to result in significant surplus between 2020 and 2024.

With various power projects taking shape such as the 6,000MW Grand Reconnaissance Dam in Ethiopia, the Grand Inga and Karuma hydropower projects in Congo and Uganda respectively, Kenya’s geothermal potential envisaged at 10,000MW, according to the Least Cost Power Development Plan, as well as other renewable energy projects and given that energy resources are not uniformly distributed in forms and locations; there is need to facilitate and leverage on market power pools to enhance energy trading.

Energy trading

Once the various power projects throughout the continent and investment in transmission lines become operational, there will be a huge shift in the market and energy trading. Kenya has positioned itself to benefit from this arrangement especially in earning the scarce foreign exchange revenues. However, governments remain concerned that past efforts to develop national power grids capable of delivering reliable power supply to their citizens at affordable prices fall short of expectation.

It is peremptory therefore to note that more accelerated growth is needed to meet the timetable of global targets. Delaying electrification has a high opportunity cost because the lack of electricity impedes modern technology adoption and lowers the quality of service delivery for health care, education, and a multitude of other public services. It may also negatively affect how urbanisation unfolds. Hence, it is all important to find ways to finance the upfront costs of electrification.

The Nordic power pool commonly referred to as the Nordic market is the leading power market in Europe and is considered a model market power pool globally, with about 80% of electricity and energy resources consumption in Europe coming from the pool. Given the rapid urbanisation in Africa, power sector shortcomings in sub-Saharan Africa, low manufacturing indices as well as inadequate transmission infrastructure, there is need for governments, development partners funding bodies as well other stakeholders to work towards having a market power pool that is responsive to the energy needs of its people.

Increased cross-border trade in electricity can play a major role in helping overcome these challenges. Further the interconnectivity and market power pool argument plugs in well with continental-scale development agenda 2063, which commits to fast track modern, efficient, reliable and cost effective electricity for the both household and businesses.

Specifically, Agenda 2063 places emphasis on the need for energy integrations as a key foundation with the Inga hydropower project cited as a critical flagship project in the continent key to transforming Africa from traditional to modern energy economy with interconnectivity transmission being key to usher this dispensation.

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