Southern Africa Energy Project (SAEP) Balancing Market Development Workshop

The workshop focused on the development of a balancing market in the Southern African Power Pool (SAPP) region. The main objective of the balancing market is to establish a market-based balance management system in an unbundled electricity market. The SAPP region is characterized by a vertically integrated structure, with most members being utilities or single buyers. The current balancing activities in the region are primarily focused on planning and activation, governing, and settlement. However, the existing arrangements have several limitations, including the lack of a formal balancing market, which can lead to inefficiencies and high costs. The balancing market is considered the last in a sequence of electricity markets, following year-ahead, month-ahead, day-ahead, and intra-day markets. The design of the balancing market is intricate, as it lies at the junction of financial transactions and physical exchanges. The main criteria for a balancing market include supply reliability, market efficiency, and low implementation costs. The SAPP region has a complex arrangement of markets, including day-ahead, intra-day, and forward markets. The region also has a bilateral contracting system, which can lead to inefficiencies and high costs. The need for a regional balancing market is evident, as it can help to reduce imbalance risks and costs associated with the current system. Two examples illustrate the need for a regional balancing market. In the first example, an imbalance in one area can be corrected with expensive generation, while low-cost generation may be available in another area. In the second example, owners of renewable generation may not want to be exposed to huge penalties when actual generation deviates from scheduled. A regional balancing market can help to reduce these risks and costs. The SAEP Balancing Market Development Workshop aimed to address these challenges and develop a framework for a regional balancing market in the SAPP region. The workshop brought together experts from the region to discuss the current balancing activities, the need for a regional balancing market, and the potential design and implementation of such a market. The outcome of the workshop will inform the development of a regional balancing market that can help to improve the efficiency and reliability of the SAPP region's electricity market.