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Sustainable Growth the Nordic Way
WEB MAGAZINE - May 2018

Nordic expertise to boost East African power supply and energy trading






Nordic Energy Solutions go global

Since the deregulation of the Nordic energy markets in the 1990s, Nordic countries have become world leaders in renewable energy. The secret to the success is the ability to trade energy across Nordic and European borders, thereby helping to balance demand and supply in a system that is becoming increasingly dependent on variable renewable energy sources. In 2017, the Nordic power exchange, Nord Pool, which operates markets in the Nordic and Baltic Regions, Germany and UK, had a total turnover of 512 TWh of traded power.

In their joint initiative, Nordic Solutions to Global Challenges, the Nordic Prime Ministers have emphasised the importance of sharing tried-and-tested solutions and knowledge in the work towards attaining the global goals for sustainable development. The sub-project Nordic Energy Solutions in Ethiopia and East Africa aims to improve access to renewable energy, by supporting the local authorities in a much-needed expansion of the energy infrastructure and in implementing commercial energy trading systems within and between countries.

Only around 25 per cent of Ethiopian households have access to a modern power supply, and more than half the population of 102 million has no access to electricity. The Ethiopian Government’s goal is to ensure access for all by 2025, in part through a significant increase of renewables.

“Ethiopia has a range of renewable energy sources that is similar to the energy mix in the Nordic Region,” says Svend Søyland, Senior Advisor at Nordic Energy Research. “Our aim is to support efforts to strengthen the power supply in Ethiopia and East Africa by drawing on experience from the Nordic electricity market, flexible management of hydro energy in Norway, wind power in Denmark, geothermal energy in Iceland, solar expertise from Sweden, and deployment of clean cookstoves promoted by Finland.”

 

“Ethiopia has a range of renewable energy sources that correspond to the energy mix in the Nordic Region”

Svend Søyland
Senior Advisor, Nordic Energy Research


Interconnections between countries and regions

By 2021, the Ethiopian Government plans to increase power generation by 17,000 MW, such as by increasing the share of wind energy to 1200 MW. Today, 90 per cent of the power generation comes from large hydro plants that are developed and managed by the state-owned utility, Ethiopian Electric Power (EEP).

“These hydro resources will play an important role in increasing the share of renewables,” says Søyland. “A key focus of ours is to contribute to more dynamic management of the hydro reserves, where the water in the reservoirs is saved for later use when there’s excess power in the grid from other intermittent renewables. This has been done with great success in the Nordic Region.”

Exploiting the full balancing capacity of the hydro resources requires further development of grid connections within the East African region and to the neighbouring regions. According to Hans Arild Bredesen, CEO of Nord Pool Consulting, better connections and transmission capacity management would pave the way for a more integrated regional electricity market.

“Eastern and Southern Africa could enjoy the same benefits of an integrated market as the Nordic region,” he says. “Such a market, in which prices depend on supply and demand, is all about optimising power production, producing energy at the lowest possible price and maximising social welfare in the countries involved. And the bigger the region, the better you can optimise.”


Connecting the energy markets of two regions

Since 2004, Nord Pool has supported the Southern African Power Pool, SAPP, in developing what has become one of the biggest regional energy markets in the world. Nine of the twelve member countries are already interconnected, and construction of a link to the Eastern African Power Pool, EAPP, is underway. This regional transmission connection is expected to be in operation by 2021.

“Our liaison with the Nordic countries, in particular Norway and Sweden, has been nothing short of phenomenal,” says Musara Beta, SAPP’s Chief Market Analyst. “They’ve supported us in developing our SAPP competitive market, including everything from infrastructure to market design and trading systems. We now have four competitive markets: a month-ahead, a week-ahead, a day-ahead and an hour-ahead market, in which we want renewable energy to play a big role.”

“Currently, we’re working with the EAPP on operational issues relating to the Zambia-Tanzania link, connecting the two regions, and on developing formal governance structures for the cooperation. We’ll be trading power all the way between Egypt and South Africa, so it’s important that we cooperate politically, technically and, not least, on the trading side.”

The example of SAPP, says Bredesen, clearly demonstrates the benefits of developing commercial regional energy markets in Africa.

“We often hear that while this may work in some of the richest countries in the world, it will never work in developing countries. The message from Nordic countries should be that we’ve already supported the development of an integrated energy market in Southern Africa. What needs to be done in Eastern Africa is essentially the same, but it calls for closer cooperation.”

 

"Our liaison with the Nordic countries, in particular Norway and Sweden, has been nothing short of phenomenal. They’ve supported us in developing our SAPP competitive market, including everything from infrastructure to market design and trading systems."

Musara Beta
Chief Market Analyst, SAPP




Large investments in renewable energy required

“For Ethiopia, as for many developing countries, it’s difficult to mobilise enough funding for developing the power sector due to low credit ratings,” says Henrik Breum, Special Advisor at the Danish Energy Agency (DEA) and Country Co-ordinator of the Accelerated Wind Power Generation Ethiopia programme (AWPGE), which was launched in 2017.

“Renewables like hydro, wind and solar require large initial investment. Despite economic growth and development, Ethiopia is limited by the ability of the public sector to mobilise further funding.”

Together with the Ethiopian Ministry of Water, Irrigation and Electricity, the DEA’s focus in the project is to develop tendering processes for independent power producers (IPPs).

“In the Nordic countries, most development of new capacity is based on private investment or privatised utility companies,” Breum says. “We’re utilising our experience in tendering large-scale wind projects to develop onshore wind projects of 100MW or more in Ethiopia. There’s a clear focus on attracting private investment to further develop the energy system.”

Breum explains that, due to seasonal variations, the combination of wind and hydro in Ethiopia could maintain a power system almost free of fossil fuels.

“Hydro capacity increases in the rainy season, while the wind resource is stronger and more reliable in the dry season. Furthermore, droughts are becoming more frequent, which in some years reduces hydro capacity. Adding more wind power to the Ethiopian system would ensure a more stable power supply, as it would compensate for the sometimes limited water resources in the hydro plants.”

 

Photo 1: Nikolaj Lamholt Svensson
Photo 2: Hans-Arild Bredesen