Oman to launch Middle East’s first Electricity Spot Market next year

MUSCAT, JULY 20 – The Sultanate is preparing to roll out next year the Middle East’s first Spot Market for the electricity sector — a platform that opens up the power sector to competition for the first time. The Spot Market enables power plants that are no longer covered by electricity supply contracts with the Oman Power and Water Procurement Company (OPWP) — the single buyer of all power and water output in the Sultanate — to compete for the opportunity to offer some or all of their capacity to the grid.
Announcing its strategy for introducing a viable and robust Spot Market, OPWP said: “In 2020, OPWP plans to launch the region’s first wholesale electricity spot market. It will drive further efficiency improvements and provide a means for generation capacity that is not contracted to OPWP to sell power into the national grid.” Development of the spot market, which will be run by a Market Operator, has been proceeding on schedule, according to the state-owned power procurer said. “OPWP has commenced staffing the Market Operator organisation, which is intended to be a ring-fenced department within OPWP, and implementation of the Market Management System is under way. The market is scheduled to begin operational trials during 2020 and commercial operation is targeted for the end of 2020,” the utility — part of Nama Group — stated in its newly released 7-Year Outlook Statement covering the 2019-2025 timeframe.
Significantly, the electricity spot market will operate in parallel with the existing system of long-term Power Purchase Agreements (PPAs) and Power and Water Purchase Agreements (PWPAs) that govern the supply of electricity from merchant generators to OPWP.
Power Purchase Agreements with at least four large power plants connected to the North Oman grid (Main Interconnected System) are due to expire in 2022. If their bids for contract extensions are not successful during OPWP’s 2022 Power Procurement Cycle, then it is expected that the project owners can offer their capacity via the spot market for any supply shortfalls that the contracted capacity cannot meet.
OPWP explained: “The Power 2022 procurement initiative is ongoing for a competitive tender for long-term PPAs that commence in 2022. Dependent upon peak demand growth and assessment of the system security achieved, PPAs may be awarded to a combination of bids with a total capacity in a range around 600 MW. Four I(W)PPs whose P(W)Pas are expiring in 2022 are participating as bidders for Power 2022. Bidders that are not awarded PPAs may participate in the new electricity Spot Market. They may later participate in future procurement cycles for long-term PPAs, such as Power 2024, if that is deemed to be necessary.”
Importantly, the spot market will “increase competition in the power generation market, and make available additional capacity that might otherwise not be readily accessible through the existing P(W)PA procurement channel”, the procurer pointed out.