The economic benefits of market integration in the East Africa Power Markets

Student thesis: Doctoral ThesisDoctor of Philosophy

Abstract

This thesis examines the prospects of creating a single East Africa electricity market, to enable the five examined countries (Kenya, Uganda, Tanzania, Rwanda, and Burundi) to move from the status quo (unintegrated electricity market). The research estimates the potential benefits of integrating these power markets through an introduction of an efficient congestions management system (Nodal pricing). The integration is expected to increase efficiency in electricity trade and allow power flow amongst the countries as well as allowing for penetration of abundant renewables. Since the current electricity markets are not integrated, the study brings a new dimension in which the five countries could benefit from cross-border trade through this type of market coupling. These benefits are likely to attract more investment in the power generation and associated transmission infrastructure. Given that the five countries have a low electricity access rate and weak transmission infrastructure, this thesis finds that if the markets are integrated, the welfare gain could be $2.6million/hr and high rate of electricity supply. The thesis first adopts a 17-bus system representing the major subsystem in the five countries. A detailed analysis of the changes in prices, congestion, and power flow between these nodes under constrained and unconstrained scenarios is also investigated. It thereafter expands the nodes into a 50-bus system, representing the major substations in the five countries and the economic benefit of integrating these markets estimated. These analyses are estimated using the optimal power flow model optimisations in GAMS software. The benefits of integrating these markets are $4.8million/hr, representing overall net welfare increases by 118 percent. This thesis proceeds to investigate the impact of adding renewable energy into the system in an integrated electricity market. In this model, a 50-bus system is adopted representing the current major substation in each country. This thesis finds that integration of large-scale renewable energy sources in various countries results in an average drop of LMPs by 3.9 percent. With full integration and adequate transmission network, total electricity generation from solar and wind could contribute to 11 percent of the total generation in the East African region. Interestingly, it is also revealed that a change of location of the resources could affect the overall economic welfare. This research further finds that the aggregate welfare loss arising from inadequate transmission capacity could be of $0.3 million. Our simulation finds that a transmission capacity of at least 200MW for all the lines could be robust to yield a high economic welfare.

For the markets integration to be fully evaluated, the thesis develops a roadmap called Renewable Integration Continuum (RIC) as a model against which the East African Community (EAC) power market could set out in defining and establishing this robust integration. The final part of this thesis assesses the convergence of existing laws in support of the future integration. It is observed that substantial elements of the electricity laws in these various countries may need to be developed which, could especially promote regional power trade and increased competition. We also emphasize that appropriate regulatory frameworks should be developed and enforced under properly established institutions to ensure that market rules are followed. This could be achieved through establishment of a regional agency overseeing the implementation of the future power market integration. This agency would lead to the harmonisation of the laws and would promote the institutionalisation across the five East African countries. The research observes that investment in infrastructure and the necessity to create a regional independent regulatory body is a precondition for a stronger EAC electricity integration.
Date of Award2019
LanguageEnglish
Awarding Institution
  • University of Dundee
SupervisorAriel Bergmann (Supervisor) & Rafael Macatangay (Supervisor)

Cite this

The economic benefits of market integration in the East Africa Power Markets
Mabea, G. (Author). 2019

Student thesis: Doctoral ThesisDoctor of Philosophy