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The Southern African Power Pool (SAPP) will start implementing a cross-border power trading system in November, largely based on the successful Nord Pool, operating in the Nordic region, the world’s largest power derivatives exchange.
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To date, power transmission across borders in the SAPP has been arranged by bilateral agreements. However, the system from November will allow electricity to be traded as it would be on any conventional commodity exchange, allowing 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 the Mozambique transmission company, Motraco. The trading centre will be headquartered in Zimbabwe’s capital Harare, and trading will be made possible on the Internet.
There are 12 countries involved in the SAPP: South Africa, Lesotho, Swaziland, Mozambique, Zimbabwe, Botswana, Namibia, Angola, Zambia, Malawi, Tanzania, and the Democratic Republic of Congo. The utilities featured as members are: in Mozambique, Electricidade de Mozambique, HCB, Motraco; in Botswana, the Botswana Power Corperation; in Malawi, the Electricity Supply Commission of Malawi; in Angola, the Empresa National de Electricidade; in South Africa, Eskom; in Lesotho, the Lesotho Electricity Corporation; in Namibia NamPower; in the DRC, the Societe National d' Electricite; in Swaziland, the Swaziland Electricity Board; in Tanzania, the Tanzania Electric Supply Company; in Zambia, the Zambia Electricity Supply Corporation; and in Zimbabwe, the Zimbabwe Electricity Supply Authority.
Nord Pool Consulting has been involved in the SAPP since 2004, and involvement has included assistance in the development in market design, arranging training, seminars and workshops for stakeholders in cooperation 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 Nord Pool is that only system operators will be participants in the market in the SAPP, whereas Nord Pool initially had some 320 participants, of which about half were power producers. There was a large capacity for small-scale hydro power operators to contribute to the market.
In the SAPP region, there would be no local bidding for power, but 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 objectives revolve around improving market efficiency and increasing volumes traded. The market allows for financial contracts hedging from one-day ahead of consumption, to six-years ahead. A power transmission line between South Africa and Namibia is currently being built to facilitate the transfer of power, and investors are more likely to construct a power plant in the region if assured that they would be able to sell the power.
A similar system has been deployed in India, and the Indian Energy Exchange was India's first nationwide, automated, and online electricity trading platform. It was conceived to catalyse the modernisation of electricity trade in the country by establishing a transparent and neutral market through a technology-enabled electronic trading platform.