IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2023-05-50.html
   My bibliography  Save this article

Simulating Generalised Locational Marginal Pricing for Power Markets in East Africa

Author

Listed:
  • Geoffrey Mabea

    (Energy Regulators Association of East Africa, Energy Regulation Centre of Excellence, Arusha, Tanzania.)

Abstract

There is an enormous opportunity for adopting a wholesale electricity market under locational marginal pricing. Besides ensuring competition and accounting for network congestion, the price signal reflects a space-time electricity economy. This paper examines the prospects of introducing a single East African electricity market in five selected partner states. It reports on a pioneering effort to simulate the coupling of power markets, estimate locational marginal prices, and determine the economic benefits of cross-border power trade and competition across these five countries. The nodes representing the primary power systems in these five countries are simulated in an optimal power flow model using optimisation software GAMS. The total welfare of electric power market integration is estimated at $ 4.8 million/hr, representing a welfare gain of $ 2.6 million/hr, thus, net total welfare increases by 118%. The simulation also investigates the implications for locational prices and power flows under constrained and unconstrained scenarios. To secure the benefits of an integrated electricity market, it is vital to pursue significant institutional restructuring, a robust transmission infrastructure, and the harmonisation of energy policies.

Suggested Citation

  • Geoffrey Mabea, 2023. "Simulating Generalised Locational Marginal Pricing for Power Markets in East Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 450-460, September.
    • Handle: RePEc:eco:journ2:2023-05-50
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/14578/7508
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/14578
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David M Newbery, 2018. "What future(s) for liberalized electricity markets: efficient, equitable or innovative?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    2. Eicke, Anselm & Schittekatte, Tim, 2022. "Fighting the wrong battle? A critical assessment of arguments against nodal electricity prices in the European debate," Energy Policy, Elsevier, vol. 170(C).
    3. Geoffrey A. Mabea and Rafael Emmanuel Macatangay, 2021. "Towards Electricity Markets' Integration and Investment in Transmission Capacity: East African Community Power Markets," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1), pages 1-1.
    4. Adriaan Weijde & Benjamin Hobbs, 2011. "Locational-based coupling of electricity markets: benefits from coordinating unit commitment and balancing markets," Journal of Regulatory Economics, Springer, vol. 39(3), pages 223-251, June.
    5. Richard Green, 2007. "Nodal pricing of electricity: how much does it cost to get it wrong?," Journal of Regulatory Economics, Springer, vol. 31(2), pages 125-149, April.
    6. Meeus, Leonardo, 2011. "Implicit auctioning on the Kontek Cable: Third time lucky?," Energy Economics, Elsevier, vol. 33(3), pages 413-418, May.
    7. Böckers, Veit & Haucap, Justus & Heimeshoff, Ulrich, 2013. "Benefits of an integrated European electricity market," DICE Discussion Papers 109, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Friedrich Kunz, Juan Rosellón, and Claudia Kemfert, 2017. "Introduction of Nodal Pricing into the new Mexican Electricity Market through FTR Allocations," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    9. Machiel Mulder, 2015. "Competition in the Dutch Electricity Market: An Empirical Analysis over 2006-2011," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    10. Newbery, David & Strbac, Goran & Viehoff, Ivan, 2016. "The benefits of integrating European electricity markets," Energy Policy, Elsevier, vol. 94(C), pages 253-263.
    11. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
    12. Geske, Joachim & Green, Richard & Staffell, Iain, 2020. "Elecxit: The cost of bilaterally uncoupling British-EU electricity trade," Energy Economics, Elsevier, vol. 85(C).
    13. OGGIONI, Giorgia & MURPHY, Frederic H. & SMEERS, Yves, 2014. "Evaluating the impacts of priority dispatch in the European electricity market," LIDAM Reprints CORE 2554, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Li, Yanfei & Chang, Youngho, 2015. "Infrastructure investments for power trade and transmission in ASEAN+2: Costs, benefits, long-term contracts and prioritized developments," Energy Economics, Elsevier, vol. 51(C), pages 484-492.
    15. Schmid, Eva & Knopf, Brigitte, 2015. "Quantifying the long-term economic benefits of European electricity system integration," Energy Policy, Elsevier, vol. 87(C), pages 260-269.
    16. Dzikri Firmansyah Hakam, 2018. "Nodal Pricing: The Theory and Evidence of Indonesia Power System," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 135-147.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simshauser, Paul, 2024. "On static vs. dynamic line ratings in renewable energy zones," Energy Economics, Elsevier, vol. 129(C).
    2. Newbery, David & Strbac, Goran & Viehoff, Ivan, 2016. "The benefits of integrating European electricity markets," Energy Policy, Elsevier, vol. 94(C), pages 253-263.
    3. Paul Simshauser & Farhad Billimoria & Craig Rogers, 2021. "Optimising VRE plant capacity in Renewable Energy Zones," Working Papers EPRG2121, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Simshauser, Paul, 2021. "Renewable Energy Zones in Australia's National Electricity Market," Energy Economics, Elsevier, vol. 101(C).
    5. Triolo, Ryan C. & Wolak, Frank A., 2022. "Quantifying the benefits of a nodal market design in the Texas electricity market," Energy Economics, Elsevier, vol. 112(C).
    6. Guo, Bowei & Newbery, David, 2021. "The cost of uncoupling GB interconnectors," Energy Policy, Elsevier, vol. 158(C).
    7. Ambrosius, M. & Egerer, J. & Grimm, V. & Weijde, A.H. van der, 2020. "Uncertain bidding zone configurations: The role of expectations for transmission and generation capacity expansion," European Journal of Operational Research, Elsevier, vol. 285(1), pages 343-359.
    8. Maria Kannavou & Marilena Zampara & Pantelis Capros, 2019. "Modelling the EU Internal Electricity Market: The PRIMES-IEM Model," Energies, MDPI, vol. 12(15), pages 1-28, July.
    9. Simshauser, Paul & Billimoria, Farhad & Rogers, Craig, 2022. "Optimising VRE capacity in Renewable Energy Zones," Energy Economics, Elsevier, vol. 113(C).
    10. Bertsch, Joachim & Hagspiel, Simeon & Just, Lisa, 2016. "Congestion management in power systems - Long-term modeling framework and large-scale application," EWI Working Papers 2015-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    11. Geske, Joachim & Green, Richard & Staffell, Iain, 2020. "Elecxit: The cost of bilaterally uncoupling British-EU electricity trade," Energy Economics, Elsevier, vol. 85(C).
    12. Montoya, L.G. & Guo, B. & Newbery, D. & Dodds, P.E. & Lipman, G. & Castagneto Gissey, G., 2020. "Measuring inefficiency in international electricity trading," Energy Policy, Elsevier, vol. 143(C).
    13. Joachim Bertsch & Simeon Hagspiel & Lisa Just, 2016. "Congestion management in power systems," Journal of Regulatory Economics, Springer, vol. 50(3), pages 290-327, December.
    14. Blázquez De Paz, Mario, 2017. "Production or Transmission Investments? A Comparative Analysis," Working Paper Series 1158, Research Institute of Industrial Economics.
    15. Simshauser, P., 2021. "Renewable Energy Zones in Australia’s National Electricity Market," Cambridge Working Papers in Economics 2119, Faculty of Economics, University of Cambridge.
    16. de Menezes, Lilian M. & Houllier, Melanie A., 2015. "Germany's nuclear power plant closures and the integration of electricity markets in Europe," Energy Policy, Elsevier, vol. 85(C), pages 357-368.
    17. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
    18. Hakam, Dzikri Firmansyah, 2019. "Mitigating the risk of market power abuse in electricity sector restructuring: Evidence from Indonesia," Utilities Policy, Elsevier, vol. 56(C), pages 181-191.
    19. Yanfei Li & Youngho Chang & Choo Fook Hoong & Swati Sharma, 2016. "Business Model and Market Design for ASEAN Electricity Market Integration: Principles, Practicalities, and Conditions for Success," Chapters, in: Yanfei Li & Shigeru Kimura (ed.), Achieving an Integrated Electricity Market in Southeast Asia: Addressing the Economic, Technical, Institutional, and Geo-political Barriers, chapter 3, pages 59-108, Economic Research Institute for ASEAN and East Asia (ERIA).
    20. Christos Roumkos & Pandelis Biskas & Ilias Marneris, 2020. "Modeling Framework Simulating the TERRE Activation Optimization Function," Energies, MDPI, vol. 13(11), pages 1-30, June.

    More about this item

    Keywords

    electricity market integration; East Africa; locational pricing; congestion; optimal power flow; simulation;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2023-05-50. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.