Oman launches first spot market for electricity in Middle East region

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In a landmark for the Middle East, the first spot market for electricity in the region has begun operating in Oman, helping the country in its efforts to lower the cost of electricity and water, increase the efficiency of power and water procurement, and support the energy transition.

While competitive electricity and water markets are common in the US, Europe, and parts of Asia, until now, they were not present in the Middle East.

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Oman formally launched a spot market for electricity and water in January 2022. The spot market is operated by the Oman Power and Water Procurement Company (OPWP), the sole buyer of electricity and water in the Sultanate.

The spot market in Oman makes it possible for generating companies, including those with ongoing power and water purchase agreements, as well as those whose agreements have expired, to sell uncontracted output to the market at the most competitive prices. This creates new revenue opportunities for these companies, a particular benefit for solar and wind projects because it can help speed their return on investment.

Electricity and water producers access the spot market via a single unified portal, where they can participate in the daily market operations that contract for supply for the following 24-hour period.

The digital infrastructure enabling the system was developed, commissioned, and configured by GE Digital’s Grid Software business in collaboration with OPWP. The system is flexible enough to incorporate OPWP’s market rules, updates to the rules, changes in the number of market participants, and real-time issues such as grid congestion and transmission capacity.

This flexibility also means the system can manage the expiry of existing power purchase agreements, as OPWP pursues its roadmap toward an increasingly liberalized electricity market.

“With the launch of its spot electricity market, Oman is in the vanguard of market liberalizations and innovations that are happening in the utility sector in the Gulf region,” said Talal Eskandar, Senior Director VP Sales at GE Digital. “The system supports OPWP in achieving its long-term goals regarding more competitive pricing and improved efficiency around electricity and water procurement.”

While Oman is the first country in the region to introduce an electricity market, it is not the only one pursuing this goal. Saudi Arabia also is developing the digital infrastructure, market rules, and other components required for a spot electricity market. These steps further liberalize efforts over the past 15 years that shifted the market from one dominated by government-owned generating assets to one primarily served by independent power (and water) producers that are privately developed, owned, and operated.

“The spot market gives OPWP the ability to swiftly and efficiently adjust to changes in supply, demand, and transmission capacity, while at the same time encouraging sector-wide efficiency improvements, lower costs to end users, and reduced carbon intensity of the sector,” said Eskandar.

GE Digital’s Advanced Market Management System (AMMS), which includes scheduling, trading, and settlement components, is hosted in Muscat. It provides a framework to master energy trading by integrating Core Market operations, Modeling, and Analytics into one modular solution.

Currently, the market mechanism is open to generating companies connected to the country’s Main Interconnection System (MIS), which operates in most of the country. It is anticipated that once an interconnection line is completed to link the MIS with the Dhofar grid system in the country’s south, generating companies in that system also will be able to participate.

“In Oman, we are witnessing the future of the power and water. As the country begins to experience the benefits of this system, their example will encourage other regional markets to speed their liberalizations, creating a cascade of benefits flowing across the entire region,” Eskandar said.

Read more: Saudi ACWA power to sign $7 billion green hydrogen deal with Omanoil

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