The Southern African Power Pool

Transcription

1 The Southern African Power Pool SAPP PROMOTING A REGIONAL ELECTRICITY MARKET By Eng. Musara BETA SAPP Chief Market Analyst AFUR Workshop on Emerging Electricity Markets Southern Sun Hotel, PRETORIA, SOUTH AFRICA 6-8 December

2 Presentation Outline 1. INTRODUCTION TO SAPP 2. POWER SUPPLY SITUATION 3. REGIONAL TRADING KEY ISSUES 4. SAPP MARKET DEVELOPMENT 5. MARKET PERFORMANCE 6. TRADING CHALLENGES AND ACHIEVEMENTS 7. THE FUTURE ELECTRICITY MARKET 2

3 1. Introduction to SAPP SAPP Key Facts 12 SADC Member Countries 9 Interconnected, 3 Not yet 16 SAPP Members 294 Million people Installed Generation Capacity - 58 GW Available Generation Capacity - 47 GW Planned Generation is 34,816 MW Peak Demand - 53 GW Consumption - 400TWh DR Congo Tanzania Angola Malawi Zambia Zimbabwe Namibia Botswana Mozambique Swaziland South Africa Lesotho 3

4 SAPP Main Objectives SAPP was created in 1995 with the following Objectives: to cooperate and coordinate in the planning and operation of the electricity business in SADC Facilitate cross border electricity trading in SADC Promote regional cooperation in power projects development (Generation and Transmission Infrastructure Development) economies of scale Increase Access to Electricity in Rural Areas 4 Ensure that the region Attracts Investment for large energy intensive electricity users (attractive tariff)

5 Electrification Access Levels in the SADC Countries Electricity Access in SADC, % Electrification Access,% SADC Average Electricity Acess, % Weighted average electrification access = 36 % 5

6 2. Power Supply Situation in SAPP Demand and Supply Balance with Current Peak Demand No. Country Utility Capacity Current Peak Installed Operating excess/ Peak Demand capacity Capacity shortfall Demand Plus (MW) (MW) including (MW) Reserves Reserves Angola RNT 2,210 1,772 1,599 1,829 (57) Botswana BPC (239) DRC SNEL 2,442 1,066 1,317 1,507 (441) Lesotho LEC (102) Malawi ESCOM (22) Mozambique EDM/HCB/ MOTRACO 2,724 2,279 1,780 2, Namibia Nampower (366) South Africa Eskom 42,710 35,563 34,913 36,913 (1,350) Swaziland SEC (205) Tanzania TANESCO 1, ,070 (247) Zambia ZESCO/CEC/ LHPC 2,206 2,175 2,287 2,616 (441) Zimbabwe ZESA 2,045 1,555 1,589 1,818 (263) TOTAL ALL 57,641 46,522 46,362 53,036 (6,514) TOTAL Operating Members Only 53,699 43,576 43,502 49,765 (6,189) 6 6,514 MW Shortfall for all SAPP members.

7 Generation Projects Planned for No Country Commited Generation Capacity, MW Total 1 Angola ,551 2 Botswana DRC ,500 2,010 4 Lesotho Malawi Mozambique ,900 3,040 7 Namibia RSA 1, ,169 2,169 1,446 1,446 1,528 11,260 9 Swaziland Tanzania , , , Zambia ,200 3, Zimbabwe ,210 1,200 5,500 TOTAL 3,058 4,931 4,174 4,593 4,836 5,796 7,428 34,816 27,147 MW from Operating Members only 7,671 MW from Angola, Malawi and Tanzania,)

8 MW SAPP Demand and Supply All SAPP Members Planned Capacity vs Forecast, MW All SAPP Members (As at AUG 2016) Peak Demand Capacity Planned (No Renewables) Capacity Planned All technologies 8

9 Update on Transmission Projects DRC 2016: 2 nd DRC Zambia 220 kv Tanzania 2018: Morupule Maun 400 kv 2019: ZIZABONA kv Angola Zambia Malawi 2019: Zambia-Tanzania-Kenya 400 kv 2020: Phokoje Pandamatenga 400 kv Zimbabwe 2020: Mozambique Malawi 400 kv Namibia Botswana Mozambique 2022: MOZISA 400 kv 2022: Botswana-RSA (BOSA) 400 kv 2022: Namibia Angola 400 kv South Africa Swaziland 2024: Mozambique STE HVDC/AC Lesotho 2024: Grand Inga Transmission HVDC/AC 9 Map Not to Scale: For illustration purposes only

10 3. Regional Electricity Trading Why? Demand and Supply balance is achieved in a more efficient manner - minimize load shedding Aim is to use pool cheapest source of generation to meet demand Regional trading ensures that members assist each other in cases of emergencies Regional trading promotes efficiency and economies of scale on investment of power projects Generation mix is optimized An evolutionary rather than revolutionary approach 10 SAPP has slowly evolved into a regional market

11 Regional Trading Key Issues a. Power Pool Governance and Operational Rules Critical especially with sovereign countries like in the SAPP b. Transmission Capacity Allocation and Pricing Need clear and consistent rules on how to allocate and compensate network owners c. Handling of Energy Imbalances Actual flows not always same as scheduled flows Clear and consistent rules required to handle variances d. Handling Outages and System Emergency Situations Outages and emergency situations disrupt trade flows 11

12 SAPP Governing Documents Inter-Governmental MOU Established SAPP. Signed by SADC Member Countries in Revised document signed on 23 February Inter-Utility MOU Established the Management of SAPP. Revised document signed on 25 April Agreement Between Operating Members Signed by Operating Members. Revised document signed May 2008 Operating Guidelines Reviewed and approved in Market Guidelines and Market Rules Developed and approved in 2014 and 2016

13 Transmission Wheeling in SAPP 100 MW Country A Country C 100 MW Country B 13 All Transmission equipment used for wheeling is identified in Country C

14 Transmission Pricing in the SAPP Transmission Pricing in SAPP went through the following stages: At inception a Postage Stamp Approach was used 7.5% of energy costs for one wheeler and 15% of energy costs for more than one wheeler The MW-KM Approach adopted from 2003 All assets that wheel at least 1MW are identified on the wheeler s network and are compensated in proportion to the level of usage This was developed and implemented from 2003 Transit Key Usage methodology Developed but not implemented Nodal pricing methodology Developed and is going through trials 14

15 Ancillary Services Provision 15

16 Handling Outages and Non Delivery Financial Settlement of all SAPP-MTP Physical Markets (FPM-M, FPM-W, DAM, IDM) All confirmed trades on the SAPP-MTP shall be firm contracts and shall be settled on scheduled volumes and prices and not on actual flows Any deviation between scheduled and actual volumes are handled through the SAPP imbalance settlement procedure This rule shall apply for imbalances caused by nondelivery of a generator, non-consumption from a buyer as well as non-performance by a wheeler During emergency situations, communication between players is key in a market environment Trade cancellations or revisions are done if both seller and buyer did not deliver and receive power 16

17 4. SAPP Market Development - Evolution 17 Bilateral contracts Market evolution PREVIOUSLY FUTURE Bilateral contracts Day-ahead Market (DAM) Forward Physical Market s (MA &WA) Intra Day Market Balancing Market Financial Markets CURRENT Bilateral contracts Short-Term Energy Market (STEM) Post STEM (Balancing Market) 2002 Day-ahead Market (DAM) 2009 Post Day Ahead Market (PDAM) 2013 Forward Physical Markets &IDM

18 Overview of SAPP-MTP Development SAPP started competitive market using SAPRI system SAPP started developing its own trading platform (SAPP-MTP) in 2014 that incorporates the following: Handling of Bilateral scheduling Day Ahead Market (DAM) live from 1 st Apr 15 Forward Physical Monthly & Weekly Markets (FPM-M & FPM-W) commissioned in Aug 15. Live operation was from 1 st Apr 16. Intra-day Market (IDM) commissioned in Oct 15. Live operation was from 1 st March Energy Imbalance calculations and Bilateral Wheeling & Losses Settlement were incorporated in the system commissioned in January Live operation was from 1 st Apr 16.

19 Bilateral Trading in SAPP Key Features 19 Trading arrangements mutually agreed between bilateral parties Volumes and Prices are the key parameters Transmission path to be secured in advance Bilateral parties directly invoice and settle each other Can be firm or non firm Firm contracts Generally not interruptible hence there is reliability premium Non Firm contracts Are interruptible with notice If notice given, no penalties

20 Forward Physical Market - Monthly (FPM-M) a) Base load product market result will have same volume & price for all hours in a month b) Off Peak (same volume & price for all off peak hours) and Non Off Peak (same volume & price for all non off peak hours in a month Above products cannot overlap in a given month i.e either select Base load or Off Peak and Non Off Peak in a single month Bids can have different volumes for different prices as is the case in DAM 20 SAPP decided to start with Off Peak and Non Off peak products

21 Forward Physical Market - Weekly (FPM-W) a) Off Peak product market result will have same volume & price for all off peak hours in a week b) Standard product market result will have same volume & price for all off peak hours in a week c) Peak product market result will have same volume & price for all peak hours in a week Bids for above products will be entered independently 21 Trading in FPM-W will be done on a Thursday every week

22 DAM Main Features 22 Market for secure, effective and nondiscriminatory trade of electricity: Trading to be concluded daily for delivery next day Forward bidding up to 10 days Participants submit bids (purchase) & (sale) offers Closed market only market operator and participant know the details of the bid / offer Price discovery Provides a neutral reference price Open and competitive market Provides platform to manage demand & supply fluctuations Gives price signals to policy makers Stable & Liquid market will give investor confidence

23 Intra Day Market (IDM) Details Continuous trading upto one hour prior to delivery Automatic Matching is based on following rules Seller s price should be less or equal to buyer s price Seller s volume should be lower or equal to buyer s volume First come first serve will apply as long as above conditions are met Participants have the hit/strike function where these cannot be matched automatically Participants will only see counter party orders which have an available transmission path. An open order can be traded at any time without any further 23 confirmation.

24 Objectives of SAPP Trading Portfolios 1. Bilateral Trading Objectives are mainly To meet long term demand and supply balance To underpin Generation and Transmission Investments 2. Month and Week Ahead Markets To meet short term demand and supply balance 3. DAM & IDM Trading Objectives are mainly To optimize supply & demand portfolios in a bid to minimize cost of supply and maximize participants profits Assists in managing load and generation fluctuations 24 Bilateral and competitive markets (DAM, FPM & IDM) trading compliment each other and are not meant to compete against each other

25 SAPP Markets Roles Weekly Forward Contracts Monthly Forward Contracts Bilateral Contracts Own Supply 25

26 Conditions to Trade in the SAPP-MTP Participants can only trade directly on the SAPP market upon: Having been licensed or given permission by the host country to undertake cross border trading Acceptance as a Market Particpant by SAPP Executive Committee Being party to a TSO connected to a SAPP Control Area and have arrangements for Balance Responsibility Signing the SAPP Market governance documents Opening of the requisite accounts for trading purposes and having the requisite security for trading purposes Have at least two trained Traders 26

27 5. SAPP Markets Performances - Bilaterals 1,000, , , , , , , , , ,000 0 BILATERAL TRADE VOLUMES (MWh) 2013 BILATERAL TRADE VOLUMES (MWh) 2014 BILATERAL TRADE VOLUMES (MWh) 2015 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar There is a general decrease in volumes traded on the bilateral market from 2013 through to 2015 This is more pronounced during March December period 27

28 Market Performance Competitive Market Traded Volumes on Competitive Market (MWh) 1,200, ,000, , , , , Significant increases in trade volumes were recorded in 2014/15 (508,526 MWh) & 2015/16 (1,059,540 MWh) when compared to previous years of less than 100,000MWh annually

29 Competitive Market 2016/17 Traded Volumes A total of 1, 751, MWh was matched with only 522,712.3 MWh or 29.84% being traded on the market from April to October % of the matched volumes was not traded due to transmission constraints 29

30 Traded Volumes Share by Market 2016/17 DAM contributed highest trade volumes share with 71% followed by FPM-M with 9%, FPM-W with 13% and IDM with 7% 30

31 Market Clearing Prices DAM Average DAM market clearing prices were dropping from Feb 2016 to May 2016 but started increasing from May 2016 to Aug 2016 before dropping again in September and October

32 DAM Historical Market Clearing Prices There is a general increase in market clearing prices from 2010 to present 32

33 Market Clearing Prices FPM Monthly FPM Monthly prices have been fairly steady for Off Peak period but have been increasing for the Non Off Peak period from Apr to Aug 2016 but have been lower for Sept and Oct

34 Market Clearing Prices FPM Weekly FPM Monthly prices have been fairly steady for Off peak and Standard periods but have been increasing for the Peak period from Apr to Aug 2016 and falling for Oct

35 Market Revenues Realized in 2015/16 Losses Fees (USD) 2,074,734 3% Wheeling Fees (USD) 2,452,216 3% Administration Fees (USD) 2,117,741 3% Congestion Income (USD) 1,803,760 2% Traded Energy Cost (USD) 66,470,181 89% Revenues on the Competitive Market in 2015/16 (April 2015 to March 2016) 35

36 Historical Market Revenue Turnover 70,000, ,000, ,000, ,000, ,000, ,000, ,000, Competitive Market Turnover (USD) In 2015/16, USD66.5 million was exchanged among buyers and sellers 36 In 2014/15 total market turnover of USD29.1 million was exchanged among market participants for the whole year

37 6. Trading Challenges Member Country Market Models dominated by single buyer model a more closed or limited market Diminished generation capacity -This is pushing prices up on competitive markets Transmission Constraints - On some corridors, existing contracts are more than double available transmission capacities 37

38 Key Achievements SAPP achievements in the area of electricity trading are: Governance documents revised to accommodate other players in the SAPP and to allow for the creation of a competitive market Developed its own trading platform for the competitive markets (FPM, DAM, IDM) First of its kind in Africa Developed rules for the trading platforms Bilateral, DAM, FPM and IDM Developed a mechanism to handle energy imbalances Minimized the impact of load shedding as a result of trading Provides a learning curve for other regional electricity markets in Africa and the world 38

39 7. The Future Power Market The way it used to be or is in some regions Customers purchase all their power needs from a single supplier at fixed price: Customer takes all the price risks. Customer however enjoys simplicity but has less flexibility. The supplier takes the risk in many relations, future prices, inefficiency, balancing service, etc. 39

40 The Future Electricity Industry Competition and Natural Monopoly Large Scale Consumption/ production - hourly metered - Power Plant Main Grid & System Operation Regional Grid Power market Power Exchange Local Grid Small Scale Consumption - hourly metered - Small Scale Consumption - not hourly metered - Retailer 40

41 Vision is to have an African Market GHANA TOGO BENIN TUNISIA ALGERIA LIBYA EGYPT SENEGAL GAMBIA GUINEE-BISSAU SIERRA LEONE MAURITANIA GUINEE LIBERIA COTE D IVOIRE MALI BURKINA FASO NIGER NIGERIA TCHAD RCA SUDAN ERITERA ETHIOPIA DJIBOUTI POWER POOLS IN AFRICA GUINEE EQ. KENYA COMELEC SAO TOME & PRINCIPE GABON RD CONGO R. B. TANZANIA WAPP COMORES CAPP ANGOLA ZAMBIA EAPP (+ RDC, Rwanda, Burundi) SAPP NAMIBIA BOTSWANA Interconnect of Power Pools is key 41 SWAZILAND SOUTHERN LESOTHO AFRICAN POWER POOL

42 The SAPP Market Trading Platform Built to support the future African power markets 42

43 For more information contact Eng Musara Beta SAPP Chief Market Analyst Website: Phone: Mobile: Thank you for your attention 43