TRANSITION OF POWER SECTOR MODELS FOR THE ENERGY TRANSITION ACROSS SUB-SAHARAN AFRICA

INTRODUCTION

The South African energy sector's unbundling is unlikely to proceed at the anticipated rate without sustainable support policies.[i] Thus, a state-issued strategy aiming at energy diversification, income maximization, and debt reduction is being followed, based on efforts to unbundle Eskom into three distinct entities for generation, transmission, and distribution.

According to Saliem Fakir, executive director of the African Climate Foundation, South Africa should concentrate on deregulating the energy market, unbundling the system operator, and ensuring that everyone has access to energy.

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POWER SECTOR MODELS FOR ENERGY TRANSITION

Power sector models relate to the organization of the many operations required to deliver power to end customers[ii]. Traditionally, four major operations have been identified: generation, transmission, distribution, and supply. However, many other functions, such as system operation (independent of transmission) or metering (independent of distribution), can be highlighted and developed independently.[iii] When considering electricity sector models, determining the appropriate amount of unbundling of monopolistic network corporations from enterprises performing competitive activities is critical.[iv] The assignment of duties (who makes the important choices?) and the necessary processes (how are these critical decisions made?) are fundamental to the creation of a regulatory model. Essentially,, emphasis is made on two of the numerous essential decisions: capacity expansion (i.e. long-term investment) and end-user pricing (i.e. tariffs or rates).[v]

Concentration is placed on these two decisions because they influence the overall structure of a power system's architecture. However, there are several other factors that are significant, especially because the new issue in electricity regulation is to appropriately incorporate distributed energy resources.[vi] In this regard, for example, in order to foster healthy competition, it is critical to determine who will handle the massive quantity of data generated by advanced meters and how this will be accomplished. Thus, it is proper that countries start figuring out which model to adopt for their energy transition goals.

There is increasing evidence that the present power system models are unfit for the energy transition, and this has prompted two opposing reactions. On the one hand, defenders of the existing fossil-fuel-based system have exploited the misalignments to argue against renewable energy deployment, concentrating on factors such as integration costs or the grid death spiral to undermine support for renewable energy technology.[vii] On the other hand, parties working to accelerate the energy transition are debating how to create both "system-friendly" renewable energy and "renewable energy-friendly" power systems.

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Both regulated and liberalized power systems have the problem of reformulating their procurement and allocation procedures to support the post- energy transition power system and ease the transition process.[viii] This necessitates a comprehensive perspective that recognizes the broader societal and system value of electricity, while promoting the deployment of variable renewable energy (VRE), distributed energy resources, flexibility, and system integration, at the same time overcoming misalignments and limits.[ix] In order to achieve this aim, both regulated and liberalized systems must strike the right mix of regulation, competition, and collaboration as part of their procurement and allocation procedures.[x] Both liberalised and regulated systems have their own set of obstacles and opportunities, and tackling these fundamentally is a context-dependent process in each selected country.

The International Renewable Energy Agency recommends a power system organizational structure suitable for renewable-based power systems: dual procurement.[xi] Power systems in the renewable energy age will have two key and distinguishing characteristics: renewable-based generation (mainly VRE) and flexibility.[xii] Flexible resources such as batteries, demand-side resources, pumped hydropower, dispatchable renewables, enhanced system visibility and integration, and more cross-border commerce will be critical in "filling the gap" between VRE generation and system demands.[xiii]

Renewable energy sources and flexible resources have distinct properties. Short-term marginal pricing may become incapable of ensuring VRE plant cost recovery, as their rising penetration reduces wholesale prices.[xiv] Given the CAPEX-intensive nature of renewable energy, stable long-term payments are significantly more suited.[xv] Flexible resources have distinct features and are more likely to be efficiently bought via a short-term marginal pricing mechanism that is not impacted by the price-depressing trend created by VRE generation.[xvi] The dual procurement concept tackles this quandary by dividing the acquisition of renewable power and flexibility into two complementary procurement methods that recognize the differences in these services' features.[xvii] Long-term renewable energy (LT-RE) and short-term flexibility (ST-Flex) are the two major coordinated procurement techniques. To fully complement one other, these two procurement processes will require a holistic perspective and coordinated deployment. [xviii]

The LT-RE is intended for renewable energy technologies, whereas the ST-Flex is intended for flexibility resources such as dispatchable renewable power, storage, demand response, vehicle-to-grid, and power-to-X.[xix] The essential notions explored here is: splitting the current allocation procedures in two to account for the distinct technological and economic characteristics of VRE and flexible resources.

CONSIDERATIONS

While countries are formulating energy transition goals, policies and market designs to push such transition(s), there are guiding considerations that must be in place to ease the smooth transition of their power sector models. Some of them are[xx]:

·????????Accelerate the phase-out of polluting technologies while also delivering additional generation and flexibility resources at a rapid enough pace to ensure system resilience.

·????????Maximize socioeconomic and environmental advantages by aligning competitive impulses with social aims in liberalized systems and supporting effective public ownership and governance in regulated systems.

·????????Encourage the growth of technical and social innovation by lowering entry barriers to new solutions.

·????????Maximize synergies between the two pillars of dual procurement, with transmission and distribution grids, while encouraging technical and geographical diversification of renewable and flexible resources.

·????????Adequate governance should enable policy and regulatory action to realize the objective(s), while encouraging the necessary involvement and collaboration.

·????????Have a clear holistic picture of the post-transition energy and power systems required to achieve the ambition and resilience imperatives, in addition to a sufficient policy framework to support and facilitate the energy transition.

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CONCLUSION

Power sector models of African countries must be considered in their energy transition goals. Although, the appropriate transition pathway for power sector models in each jurisdiction depends on its socio-economic-political framework, African governments must take into consideration the factors peculiar to their energy needs and which pathway they intend to deploy in the energy transition goals. This will inform the power sector model to adopt in order to effectively transition their respective power markets based on their respective trajectories.

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[i] Yunus Kemp, Outdated Vertical Energy Model Holding Back SA’s Energy Transition < https://www.esi-africa.com/industry-sectors/generation/outdated-vertical-energy-model-holding-back-sas-energy-transition-report/?> accessed 23 June 2023

[ii] Regulatory Models in the Power Sector < https://fsr.eui.eu/regulatory-models-in-the-power-sector/?> accessed 23 Jun 2023

[iii] Ibid

[iv] Ibid

[v] Ibid

[vi] Ibid

[vii] Re- Organising Power Systems for the Transition < https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jun/IRENA_Organising_Power_Systems_2022.pdf?rev=9c979df4adda4fe19cce18ab02f86e9c > accessed 23 June 2023

[viii] Ibid

[ix] Ibid

[x] Ibid

[xi] Ibid

[xii] Ibid

[xiii] Ibid

[xiv]EXPLORING THE BILATERAL AND HYBRID MODEL IN DEREGULATED ELECTRICITY MARKET?https://core.ac.uk/download/pdf/42955114.pdf?accessed 23 June?2023

[xv] Ibid

[xvi] Ibid

[xvii] Re- Organising Power Systems for the Transition < https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jun/IRENA_Organising_Power_Systems_2022.pdf?rev=9c979df4adda4fe19cce18ab02f86e9c > accessed 23 June 2023

[xviii] Ibid

[xix] Ibid

[xx] Ibid