Econonomics of Energy and Environmental Policy

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Towards Electricity Markets’ Integration and Investment in Transmission Capacity: East African Community Power Markets

Abstract:
This research examines the impact of transmission expansion on a future East Africa’s electricity market, to enable the five examined countries (Kenya, Uganda, Tanzania, Rwanda, and Burundi) to adequately couple. As a pioneering move, we introduce nodal pricing and investigate the economic welfare arising from the planned transmission upgrade. This simulation is then compared to our simulated scenarios to propose a transmission capacity that could yield a robust integrated market. In analysing the impact of transmission infrastructure investment on the prospective electricity market, we examine the transmission investment that could yield the highest economic welfare. We argue that electricity market coupling increases efficiency in electricity trade and allow power flow amongst the countries as well as permitting high penetration of abundant electricity from renewable energy sources. The study brings a new dimension in which the five electricity markets, currently unintegrated, could benefit from cross-border trade. We base our analyses on the economic dispatch simulated through an optimal power flow model. Thus, we argue that the aggregate welfare loss arising from inadequate transmission capacity could be $0.3 million/hour while the transmission capacity of at least 200MW for all the lines yields adequate economic welfare.
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Keywords: Electricity markets coupling, Nodal price, Economic Welfare, East African Community

DOI: 10.5547/2160-5890.10.1.gmab


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Published in Volume 10, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


 

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