Electricity Trading in Energy Market Integration: A Theoretical Review

Abstract

This paper surveys theory and practice on how a larger and integrated energy market can propel electricity trading through economies of scale. We make a systematic presentation of theories and methods used by various scholars to generate knowledge on integrated electricity markets. We discuss paradigms, concepts, and practices emanating from the complex topic of a unified electricity market with an intent to identify gaps. We conclude that electricity trading in EMI has a propensity to drive both economic integration and sustainable energy access; that crafting ways and means for integrating cross-border systems without sacrificing the local economy could make the idea of EMI more palatable to partner countries; and that adoption of ex ante studies that are non-data oriented could improve the design of upcoming regional electricity markets.

Infrastructure adequacy for electricity trading in East Africa

“…2 Regional electricity markets are essentially the interconnection of already existing national electricity markets 3 where regional electricity markets aim at harnessing economies of scale to enhance supply security and reduce costs. 4 For Africa to achieve the sustainable development goal of clean energy for all (SDG7), the continent should increase cross-border electricity trade as a strategy to avert inefficient investment in domestic generation. 5…”

“…Rubanda et al. 4 identified the four key elements of electricity market integration, including: (1) coordinated physical infrastructure development, (2) harmonized and standardized operation procedures, (3) existence of market competition, and (4) coordinated institutional governance. Regardless of approach, whether top-down integration (as the case of Europe 6 or incremental approach driven by the various utilities within a region (as the case of Association of Southeast Asian Nations 7 ), physical infrastructure is at the center of both the process and sustainability of electricity market integration.…”