The development of the SAPP competitive electricity market

Abstract

The Southern African Power Pool (SAPP) has come a long way in establishing a competitive electricity market for the Southern African region. In the early 1960's, only a few participants took part in the market that was typically governmental to governmental bilateral agreements. As the interconnections expanded, more participants entered the market. The main drawbacks at that time were transmission tariffs and the pricing of electricity. It was difficult to get third party access and this prevented meaningful trading from taking place between countries. From 1995, the north-south interconnector was commissioned and this paved the way for increased energy trading between the predominantly northern hydro networks and the southern thermal systems. In 2001, the SAPP started the short-term energy market (STEM). The STEM market was viewed as a first step towards the development of a regional competitive electricity market. In the STEM energy is traded a day-ahead. The STEM is a firm energy market though bilateral contracts takes precedence over STEM contracts on the transmission lines. From January 2004., the SAPP embarked on the development of a competitive electricity market. The aim of this paper is to describe the development of the SAPP competitive electricity market and the challenges the SAPP is facing in migrating from a cooperative pool into a competitive pool. The results of the market simulation will be presented predicting how competition in the electricity supply industry of southern Africa would work taking into account that most of the members are not only vertically integrated but also government