Evolving Competitive Markets in SAPP: Leveraging Competitive Wholesale Electricity Markets to Drive Renewable Generation Capacity in the Southern African Power Pool (SAPP)
The SADC region has significant natural resource potential to increase renewable energy generation, improve electricity reliability, and support economic development. This research finds an apparent lack of confidence from electricity infrastructure investors in SAPP wholesale electricity markets, which increases risk perception and lowers the likelihood of capital deployment. With respect to free market fundamentals, competitive market obstacles and renewable energy development obstacles are characterized. Stakeholders identified the top obstacles to well-functioning competitive markets as insufficient transmission infrastructure for interconnection and regional movement of electricity, dominance of national single-buyer markets, and lack of or weak nation-state regulatory frameworks. Stakeholders prioritized the top three obstacles for renewable energy development as a lack of viable commercial arrangements for variable renewable energy (VRE) balancing, lack of functional and consistent nation-level regulations, and higher project costs related to reliance on imported equipment. With respect to potential solution options, stakeholders prioritized the development of new cost allocation and finance methods to facilitate new transmission expansion, training to educate new or potential new market entrants on SAPP processes, as well as modeling and analysis of regional SAPP participation benefits disaggregated to the nation-state level. From these perspectives, this research identified strategy options for consideration including transitioning SAPP to a regional transmission operator (RTO) for operation and planning of cross-border transmission facilities and market administration, shifting operations of SAPP member transmission systems to Independent System Operators (ISOs), establishing a regional regulatory authority and enhancing market data transparency. Implementing these reforms is expected to be challenging, but not insurmountable, given the domestic political, legal, and jurisdictional complexities of the SADC region.