Towards developing a competitive market for regional electricity cross border trading: the case of the Southern African power pool

Regional electricity cross border trading is governed by fixed co-operative bilateral agreements, generally of a long-term duration. The fixed power purchase agreements provide for the assurance of security of supply but are not flexible to accommodate varying demand profiles and varying prices. The pricing of electrical energy defers for periods of peak and off peak consumption. To explore further the benefits thereof, the sourcing and scheduling of electrical energy closer to the time of dispatch was investigated. Research has shown that competitive bidding is one option for sourcing and securing supplies closer to real time dispatch. Using the experiences of the Southern African power pool (SAPP) as a case study, a competitive market framework for cross border electrical energy trading was developed. In April 2001, the market commenced trading with a few participants. With increasing participants and market confidence, the results of the first two years show that the model is robust and is a recommended framework for cross border short term electrical energy trading. The short-term energy market (STEM); designed to be day-ahead, compliments the bilateral market and provides another technique for the pricing of electrical energy. With the addition of real time communications and energy management systems, the spot market for competitive bidding is the next step.