Spot market set to pave way for merchant electricity generation

Muscat, DEC 23 – The region’s first electricity spot market, which is slated to come into operation in the Sultanate in 2020, is expected the spawn the growth of ‘merchant generation capacity’ —power producers that are not covered by Power Purchase Agreements (PPAs) with Oman Power and Water Procurement Company (OPWP), the sole buyer of electricity under the Sector Law.
Operational trials are expected to commence next year in the lead-up to the market’s formal launch in 2020, according to a high-level executive of OPWP. And with investment interest burgeoning in renewable energy based generation capacity — chiefly solar and wind — the potential for third party developers (merchant generators) eager to take advantage of opportunities offered up by the Spot Market is significant, he noted.
“We are expecting the Spot Market to go live towards the end of 2020,” said Brian Wood, Director — Planning & Economics, OPWP. “Once the Spot Market is operational, there is a channel for an investor or generator to sell power into the market; they don’t have to be on a contract with OPWP; they can develop their facilities and sell power to us at the price that is set by the market. The market establishes a price for every trading period, which is a half-hour.”
The Spot Market is expected to introduce competition — for the first time — in the Sultanate’s electricity generation sector. Additionally, it will open up access to available capacity that may not be readily accessible through the existing PPA procurement model, according to OPWP.
“We have a lot of generators under contract to us who will participate in the Spot Market, but their prices will be settled at the contracted rates,” said Wood.
“But it leaves things open for other generators, such as renewable generators and other types of generators that are not under a PPA contract with OPWP, to offer energy into the market at whatever the price is settled at the time.”
Efforts are ongoing to put in place the IT equipment, software and competent personnel necessary to operate and manage the Spot Market when it comes on stream, according to OPWP. Staffing the Market Operator organisation, which will operate under the auspices of OPWP, is under way as well.
Existing power plants that are unlikely to secure a renewal of their Power Purchase Agreements upon the expiry of the contracts are expected to participate in the Spot Market. “There have also been discussions about how even small-scale producers can participate in the Spot Market,” the Planning & Economics Director noted.
“We hope the Spot Market will provide a platform for merchant generation,” said Wood. “It’s intended to be another channel for contracting of power (capacity)”, he added.