Consultant sought to develop electricity spot market system

27/04/2015 07:03 AST

Plans for the introduction of an Electricity Spot Market in the Sultanate are being firmed up with Oman Power and Water Procurement Company (OPWP) preparing to enlist the services of an international consultant to help with the drafting of detailed market rules to underpin this landmark initiative.

Yesterday, the state-owned OPWP, which is the sole procurer of power and water capacity and output in the Sultanate, announced the launch of a competitive tendering process for the selection of a qualified consultancy firm to assist in the codification of rules governing this new activity.

International firms looking to bid for OPWP’s consultancy services contract must have the expertise to develop detailed market rules consistent with international best practice and the specific requirements of the Sultanate, the utility said.

Significantly, the announcement follows the appointment last month of a new Project Manager to oversee the implementation of the Spot Market Pricing System for Oman. The Project Manager will work with a multidisciplinary team of experts from OPWP and Oman Electricity Transmission Company (OETC) to develop a High-Level TO P 19

FROM P 17

Market Design into a set of detailed market rules for approval by the sector regulator – the Authority for Electricity Regulation.

Slated for launch in 2018, the proposed Electricity Spot Market will create a new “mechanism” for procuring electricity, according to OPWP. Besides opening up opportunities for competition in Oman’s power generation market, the new system will also provide a mechanism to make available additional capacity that might otherwise not be readily accessible, it pointed out. “This may include capacity associated with generators whose long-term supply contracts have expired, or capacity in excess of contractually guaranteed capacity that plant owners have built into their facilities or that may be available under certain operating conditions,” the utility stated in its latest 7-Year Outlook Statement for the 2015-2021 timeframe.

“OPWP has obtained approval from the AER to develop a spot market for electricity, to be introduced around 2018. The spot market for electricity would operate alongside and in conjunction with the existing system of long-term Power Purchase Agreements (PPAs) and Power and Water Purchase Agreements (PWPAs). It would provide an alternative way for producers to sell power to OPWP. The objective is that in cases where generators have capacity that is not obligated as guaranteed capacity under a PPA or PWPA, they may be able to offer that capacity on the spot market and receive prices determined on a day-to-day basis in accordance with specified market rules. The market rules will be generally modelled on those that have been developed in other countries with certain modifications relevant to Oman,” OPWP explained.

Market rules and enabling infrastructure for the Electricity Spot Market are expected to be developed from 2015 to 2017, ahead of the launch of the new mechanism in 2018.

Importantly, the initiative is also expected to spur the growth of jobs in the electricity sector. Power utilities eager to exploit the commercial benefits offered by the spot market system will have to set up dedicated departments manned by specialist staff with knowledge of market rules.

Another potential spinoff, say experts, is the inflow of specialist expertise and even technology driven by competitive market conditions.

Oman’s landmark foray into Electricity Spot Market operations is the latest in a number of trendsetting developments characterizing the growth of the nation’s power sector. The Sultanate is expected to be the first country in the GCC to work towards the implementation of this new market system.

Oman Daily Observer