The first spot market for electricity in the Middle East has launched in Oman, helping the country in its efforts to lower the cost of power.
While competitive electricity and water markets are common in the United States, Europe and parts of Asia, until now, they had not reached the Middle East but that has now changed.
The spot market is operated by the Oman Power and Water Procurement Company (OPWP), the sole buyer of electricity and water in the sultanate.
The spot market in Oman makes it possible for generating companies, including those with ongoing power and water purchase agreements as well as those whose agreements have expired, to sell uncontracted output to the market at the most competitive prices, a statement said.
It added that this creates new revenue opportunities for these companies, a particular benefit for solar and wind projects because it can help speed their return on investment.
In most countries in the region, the price paid to electricity and water producers is set by power purchase agreements that are signed when a power or water production plant is first developed.
While this structure provides certainty to both the generating company and the buyer, it doesn’t provide an ongoing mechanism to lower the cost of electricity.
By contrast, a spot market creates incentives for producers to drive improvements and efficiencies so they can offer a lower price in the spot market.
“This helps decrease the cost of electricity and water for households, manufacturers, and other businesses while improving the efficiency of the entire sector,” the statement noted.
Electricity and water producers access the spot market via a single unified portal, where they can participate in the daily market operations that contract for supply for the following 24-hour period.
“With the launch of its spot electricity market, Oman is in the vanguard of market liberalisations and innovations that are happening in the utility sector in the Gulf region,” said Talal Eskandar, senior director VP sales at GE Digital.
“The system supports OPWP in achieving its long-term goals regarding more competitive pricing and improved efficiency around electricity and water procurement.”
While Oman is the first country in the region to introduce an electricity market, it is not the only one pursuing this goal.
Saudi Arabia is also developing the digital infrastructure, market rules and other components required for a spot electricity market.
“The spot market gives OPWP the ability to swiftly and efficiently adjust to changes in supply, demand and transmission capacity, while at the same time encouraging sector-wide efficiency improvements, lower costs to end users, and reduced carbon intensity of the sector,” said Eskandar.
GE Digital’s Advanced Market Management System (AMMS), which includes scheduling, trading, and settlement components, is hosted in Muscat. It provides a framework to master energy trading.
“In Oman, we are witnessing the future of the power and water. As the country begins to experience the benefits of this system, their example will encourage other regional markets to speed their liberalisations, creating a cascade of benefits flowing across the entire region,” Eskandar added.