MUSCAT, JULY 17 – Local industries with surplus captive power generation capacity, as well as a significant number of existing power plants, are keenly eyeing opportunities to participate in the Electricity Spot Market due to be rolled out in the Sultanate in 2020. The Oman Power and Water Procurement Company (OPWP) — a member of the Nama Group — will double as the Market Operator of the Spot Market, which will operate alongside the existing system of long-term power supply agreements secured by OPWP with various independent power projects (IPP) in operation around the Sultanate. It is the latest in a series of measures adopted by the government to open up the sector to competition and liberalisation.
Development of the spot market, according to the wholly state-owned power and water procurer, is “proceeding on schedule”. A detailed framework for the market has already been approved by the sector regulator – the Authority for Electricity Regulation Oman (AER), with OPWP now focused on putting in place the Market Management System, as well as recruiting competent staff to run the Market Operator entity.
“The market is scheduled to begin operational trials in 2019 and commercial operation in 2020. The electricity spot market will operate alongside the existing system of long-term Power Purchase Agreements (PPAs) and Power & Water Purchase Agreements (PWPAs),” OPWP stated in its newly released 7-Year Statement detailing the outlook for power and water demand over the 2018-2024 timeframe.
OPWP, the sole buyer of all electricity output under the sector law, says it expects the Spot Market to spur competition in the Sultanate’s power generation market, thereby making available “additional capacity that might otherwise not be readily accessible through the existing procurement channel”.
Already, a number of industries operating captive power plants have evinced “preliminary” interest in participating in the Spot Market. Also expected to participate are several existing Independent Power Projects that are expected to reach the end of their Power Purchase Agreements with OPWP in 2022. At least four companies, offering an aggregate capacity of nearly 2,000 MW, are due to fall out of contract by then. While some of this capacity will secure contract extensions, uncontracted generators are likely to offer their capacity under the Spot Market, it is pointed out.
“OPWP anticipates that up to 1,300 MW may be available from the spot market, depending upon the level of capacity awards through (2022 procurement cycle — dubbed Power 2022), the need for capacity and assessment of market prices, and the feasibility to extend permits or other necessary conditions for plant operation,” OPWP noted.
Besides offering generation capacity at competitive prices, the Spot Market — believed to be the first of its kind in the Gulf region — will also help support Oman’s efforts to meet any short-term spike in electricity demand growth.
Options for short-term capacity purchases have hitherto included surplus capacity from Petroleum Development Oman (PDO) and local industries, temporary diesel generation, and even the GCC Interconnection Authority (GCCIA). Yet another option that will be added to this list is the North-South 400 kV Interconnect, which is expected to be constructed over the next several years.