Direct power sales now a reality in Oman

In what has been welcomed as a lifeline to gas-based power plants that have either fallen out of contract or approaching the expiry of their contracts with state-owned electricity offtaker Oman Power and Water Procurement Company (OPWP), the sector’s regulator – the Authority for Public Services Regulation (APRS) – has approved a mechanism that makes it possible for these generators to enter into direct supply contracts with large consumers.

The mechanism – the first of its kind in the Sultanate of Oman’s power sector – is set out in the Direct Sales Regulatory and Legal Framework, which was approved by the Authority recently. It represents a further step in the ongoing liberalisation of Oman’s power sector.

Announcing the introduction of the framework, the Authority said: “Article 22 of the Electricity and Related Water Sector Law stipulates that the Authority shall review the conditions of the electricity market in order to measure the readiness of the market for further liberalization.

The outcomes of the studies carried out by the Authority during the past period showed that the electricity market in the Sultanate of Oman has become ready for further liberalization. Accordingly, the Authority decided to implement the direct sale mechanism between the electricity producing companies licensed by the Authority and among major consumers other than the Oman Power and Water Procurement Company SAOC,” it added in a statement published on its website this week.

The Direct Sales Framework enables ‘bilateral arrangements’ agreed directly between generators and major customers, bypassing the state-owned monopoly offtaker OPWP, which is currently the sole buyer of all electricity output under the sector law.

Work on the initiative began last year with assistance from an international consultant that was tapped by the Authority to develop the appropriate regulatory framework in accordance with the requirements of the direct sale mechanism. The framework also specifies conditions, rules and requirements that must be met by prospective generators seeking licenses to enter into direct sales arrangements with customers.

Beneficiaries will include power plants that have fallen out of contracts and those engaged in the captive power generation business. The Authority explained: “The implementation of the direct sales mechanism, at the first stage, will be limited to generators with expired contracts (PPA) with OPWP and companies that rely on self-production and have an exemption license from the Authority. Moreover, it is necessary for the regulatory and legal framework for direct sales to consider the technical aspects - mainly to ensure that all economic and technical requirements are met such as: connection to the network, the effects of operating power units on the network, consumption calculation and settlement, ancillary services, and electricity losses.”

Besides contributing to system cost savings, the Direct Sales Legal Framework is also expected to incentivize investments in large-scale renewable and green hydrogen projects, which the Omani government is banking on to support its transition away from hydrocarbons.

A pipeline of green energy projects, underpinned by renewable energy capacity aggregating a world-scale 30 gigawatts (GW), is envisaged for implementation in Oman over the coming years and decades. While part of the green hydrogen and green ammonia output from these multibillion-dollar investments is proposed to be exported to international markets, the rest is expected to be utilized locally as a planet-friendly fuel resource to support an array of green industries, as well as zero-carbon transportation and mobility solutions.