By: Nghiinomenwa-vali Hangala
Of the five regional power pools that have been established across the continent, the Southern African Power Pool (SAPP) stands out as the most advanced and successful.
However, the SAPP’s continued success and growth in electricity trade is limited by congested transmission lines within the SADC region, according to the State of Africa Energy Outlook Report, produced by the African Energy Chamber.
The congested transmission lines not only limit trading of power, but also limit countries that cannot produce adequately from accessing surplus power from neighbours. Moreover, it limits investment into power generation in countries that have abundant sources like Namibia.
Currently, in Namibia, the regulator cannot approve generation licences for export, as the country does not have enough high-voltage transmission lines to evacuate power to the SAPP for trading.
African power pools – spanning from southern, eastern, western, central, and northern Africa – are collaborative frameworks that enable neighbouring countries to interconnect their electricity grids, share resources, and coordinate energy policies.
According to the Energy Chamber, the SAPP is performing better than others due to its robust institutional framework, high degree of grid interconnection, and a transparent, competitive electricity market that has enabled efficient trading and resource optimisation.
This has allowed the SAPP to serve as a model for regional integration, with member countries benefitting from reliable power exchanges and a diversified generation mix. The SAPP has 12 member countries (including Namibia), which include the main power utilities and private participants (Independent Power Producers) from each nation.
The Energy Chamber indicated that even though the SAPP is recognised as the most advanced power pool, the need for further improvements to unlock true market potential remains.
In 2023, 7.7 Terawatt-hours (TWh) was traded over the SAPP, compared with a total demand of 344 TWh, which amounts to ~2%, the Energy Chamber noted.
Of this total traded power, around 80% comes from bilateral trades, followed by the day-ahead market (DAM) with 13%.
The Chamber has explained that this dominance of bilateral contracts further reduces the scale of the DAM against total power demand and reduces its ability to stabilise the network through the market mechanisms.
While the percentage of blocked trades in the SAPP DAM improved from over 40% before 2018 to 1.3%, this change, according to the Energy Chamber, is largely due to reduced trading activity rather than market enhancements.
In their recommendation, they indicated that coordinated investments in transmission facilities are essential to maximise the power pool’s benefits. However, funding gaps for critical infrastructure improvements and insufficient financial resources for developing transmission corridors present key hindrances.
With that, the Energy Chamber indicated that attracting favourable financing proves challenging for African governments and utility operators, partly due to non-cost-reflective wheeling tariffs that increase perceived risks.
The Chamber noted that addressing the financial challenges is crucial for advancing infrastructure and enhancing the trading capabilities of the power pools.
Across Africa, governments are grappling with mounting public debt and persistent fiscal constraints.
“This limits their ability to finance large-scale infrastructure projects solely through public funds,” the report read.
The inability of governments to decrease their debt burden under a vertically integrated market, further complicates infrastructure investments, as these utilities often struggle to attract private capital due to perceived risks and regulatory uncertainties.
The Energy Chamber recommends innovative approaches such as PPPs that have emerged as vital tools for bridging the infrastructure financing gap and accelerating project delivery.
Saying that PPPs present significant opportunities for developing interconnectors across the continent, as they can effectively mobilise resources, expertise, and technology from the public and private sectors.
“By leveraging private investment and government support, PPPs can facilitate the construction and operation of critical transmission infrastructure,” stated the Chamber.
In addition, the Energy Chamber also noted lack of transparency and accountability in state-owned enterprises can deter investment and hinder operational efficiency.
