DEVELOP A FRAMEWORK FOR REGULATORY OVERSIGHT FOR THE REGIONAL ELECTRICITY MARKET UNDER THE EU PROJECT ON ENHANCEMENT OF A SUSTAINABLE REGIONAL ENERGY MARKET IN EASTERN AFRICA, SOUTHERN AFRICA, AND INDIAN OCEAN (EA-SA-IO) REGION
The Common Market for Eastern and Southern Africa (COMESA) is a regional grouping of 19 African States which have agreed to promote regional integration through trade development and investment. In this regard, COMESA through the Regional Association of Energy Regulators of Eastern and Southern Africa (RAERESA) is currently spearheading implementation of the European Union-funded Project on Enhancement of a Sustainable Regional Energy Market in the Eastern Africa, Southern Africa and Indian Ocean (EA-SA-IO) Region.
The overall objective of the project is to enhance a sustainable regional energy market in the EA-SA-IO region, which is conducive to investment and promoting sustainable development. The project is relevant for the African Union’s Agenda 2030 and 2063 and contributes primarily to the progressive achievement of Sustainable Development Goals (SDG) target 7 of ensuring access to affordable, reliable, sustainable and modern energy for all. It also promotes progress towards Goal 5 of achieving gender equality and empowering all women and girls, Goal 9 of building resilient infrastructure, promoting inclusive and sustainable industrialization and fostering innovation, and Goal 12 of ensuring sustainable consumption and production patterns.
Most countries in the Eastern Africa-Southern Africa-Indian Ocean (EA-SA-IO) region have experienced energy challenges, although it is a region with high potential capacity of energy when compared to other sub-Saharan African regions. These challenges are manifested by inadequate level and coverage of physical energy infrastructure due to insufficient investment in the energy sector, inefficiency and unreliability of existing energy infrastructure services, increased demand for economic growth and population growth, high cost of operating existing energy infrastructure facilities, energy poverty in terms of lower access rate and reliance on traditional fuels (wood fuels), and the issue of low utilization of clean energy option which includes energy efficiency and renewable energy. These challenges have resulted in increased cost of doing business which has negatively impacted the competitiveness of the region in its internal and external markets.
It is envisaged that the planned expansion of cross-border power transmission interconnectors could, in the short, medium and longer term, increase the share of electricity traded between the regions and the nations helping to increase reliability and security of supply. However, regional trade is also hampered by transmission constraints occasioned by among other factors, the lack of investments in transmission infrastructure (old and new). For instance, making the available transmission access to the SAPP Day Ahead Market (DAM) and Post DAM has proved to be a big challenge resulting in over 80% of the matched trades being unable to materialise.
Similarly, regulatory oversight of the electricity competitive market that would otherwise boost transparency and inspire investor confidence is weak and casts some serious aspersions on the integrity and credibility of the market from investors’ perspective. Important tools and objective mechanisms necessary for providing effective regulatory oversight such as transmission pricing methodology and a regional grid code are either not clear or are missing thus making cross border trade in energy difficult. Further, regional regulatory bodies such as RAERESA, RERA and IRB, and their Member Regulators are not playing a very active role in the oversight of the market because their roles are not defined.
Unless the current challenges regarding the regional electricity competitive market are addressed, the short and long-term sustainability of the EA-SA-IO regional energy market will be compromised, and the attendant good benefits will be unrealisable into the foreseeable future.
There is therefore need for an enhanced regional energy market with a harmonized, efficient and gender- sensitive regulatory framework and with capacitated regional regulators and power pools to more effectively oversee and stimulate increased regional power trade in the EA-SA-IO region.
COMESA is now seeking proposals from qualified firms to:
- Develop a framework for regulatory oversight of the regional energy market, that can be adopted by regional and national regulatory institutions to promote investments and power trading in the region; and
- design a responsive training programme for strengthening the capacity of national and regional regulatory institutions and Power Pools to proactively influence power trading and developments in the energy sector.
The terms of reference for the consultancy service are provided in Annex 3 to this document.
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