Simulating Zonal Pricing in East African Electricity Markets

Abstract

The East African electricity markets are due to fully couple and embrace short term trading. Traditionally, excess generation in any country has to be bilaterally traded or delayed signing Power Purchase Agreements to avoid capacity charges. However, in recent years, with increased pressure to increase energy access in the region, the Eastern Africa Power Pool (EAPP) has been established to introduce robust bilateral and short-term markets. Price signals are critical to determining investment levels in a competitive electricity market. Therefore, this research aims to investigate the feasibility of bidding zones using clustering methodology in selected East African Countries. This paper simulates a zonal wholesale market with optimal power flow and k-means clustering theory to identify optimal bidding zones strategies and determine Nash-equilibrium prices. The results indicate that when the markets engage in the wholesale markets with planned transmission investment, the configuration of three optimal zones induces the highest welfare level. Therefore, this research informs the Eastern Africa and the African Union energy policy debate on the African Single Electricity Market and the Eastern Africa Power Pool electricity market dilemma.