Simulating Generalised Locational Marginal Pricing for Power Markets in East Africa

Abstract

There is an enormous opportunity for adopting a wholesale electricity market under locational marginal pricing. Besides ensuring competition and accounting for network congestion, the price signal reflects a space-time electricity economy. This paper examines the prospects of introducing a single East African electricity market in five selected partner states. It reports on a pioneering effort to simulate the coupling of power markets, estimate locational marginal prices, and determine the economic benefits of cross-border power trade and competition across these five countries. The nodes representing the primary power systems in these five countries are simulated in an optimal power flow model using optimisation software GAMS. The total welfare of electric power market integration is estimated at $ 4.8 million/hr, representing a welfare gain of $ 2.6 million/hr, thus, net total welfare increases by 118%. The simulation also investigates the implications for locational prices and power flows under constrained and unconstrained scenarios. To secure the benefits of an integrated electricity market, it is vital to pursue significant institutional restructuring, a robust transmission infrastructure, and the harmonisation of energy policies.