1. 1 WHOLESALE ELECTRICITY MARKET AN OVERVIEW By:Ag. Manager, Market Operations

2. Objectives 1.Appreciate the need and objects for the Power Sector Reforms 2.Have an overview of the WEM and current status 3.Understand the role of Market Operations Section 4.Opportunities and Prospects 2

3. Outline of Presentation  Brief History  Power Sector Reforms  The changing landscape  The Law  The Market  Prospects & Conclusion 3

4. Brief History 4

5. History of Electric Power Generation 3 Main periods  Before Akosombo (1914 – 1966)  Hydro Years (1966 – mid 80’s)  Thermal complementation 5

6. History of Electric Power Generation 1914 – 1930  Sekondi-Takoradi (1914)  Koforidua (1925)  Kumasi (1927) Evening supply  Winneba & Swedru  Tamale (1930) limited supply 6 1932 - 1955  Cape Coast  Swedru  Oda, Dunkwa, Bolgatanga  Nsawam  Keta32) 1956 - 1966  1956 – Tema Diesel (3 x 650 kW)  1957 – Ho power station  1961-64 - Tema power station  1966 – Akosombo (In 1967 Domestic demand was < 20% of installed capacity  1982 – Kpong Hydro  1997/99 – TAPCO  2000 - TICo  VRA Tema Thermals  2012 - Asogli  2013 – Bui Hydro

7. Domestic demand  1967 – 540 GWh  1976 – 1300 Gwh  1980 – 1350 GWh  1984 - 1000 GWh  2004 – 6004 GWh  2010 – 9300 GWh 7

8. Power Crisis The 4 major power crises in Ghana  1982 / 1983  1997 / 1998  2002 / 2003  2006 /2007  And now the 5 th in 2012 8

9. Power Sector Reforms 9

10. Triggers for Reform  Insufficient and unreliable power  Policy shift by the World Bank  NO more concessionary loans for power infrastructure development  Need to attract private investment to the power sector 10

11. Objectives of reforms  Improve quality & reliability of supply  Improve financial health of the utilities  Introduce competition in supply  Transparency in regulation  Encourage private investment Commercialization of operations of utilities 11

12. POWER SECTOR REFORMS Establishment of EC & PURC Operationalized GRIDCo Commencement of Reforms 1994199720082005 **Set up of GRIDCo **Pursuant to The Energy Commission Act, 1997 (Act541) and the Volta River Development (Amendment) Act, 2005 Act 692 Launch of Grid Code 2009 2012 Phase 1 Market Operation 2014 Launch of Market Rules On-line Data submission + Dev’t of Rules 2015

13. The Changing Landscape 13

14. Electricity Industry MakersMovers System Operator GRIDCo Transmission Owner GRIDCo Users Bulk Customers, ECG & NEDCo Generation Mix: Hydro & Thermal BUI, VRA, TICO, CENIT, Sunon Asogli Transmission Bulk System – High Voltage Distribution Medium & Low Voltage System

15. END USERS Past OTHERS

16. Akosombo Kpong Asogli OPEN ACCESS TRANSMISSION GRID BULK CUSTOMERS IPPs CENIT TICO Others VRA Thermals WAPPWAPP Bui PURC ACT 538 Energy Comm. ACT 541 ECG NEDCo EPC END USERS

17. Generators Load Serving Entities Scheduling Dispatch GRIDCo Electricity suppliers Electricity Purchasers Private bilateral energy transactions Spot Market Settlement The Future

18. The Law 18

19. Legislative Authority for Market Operations ETU is obliged to perform functions under the  Energy Commission Act 1997, Act 541,  LI 1937 & LI 19341934  National Electricity Grid Code and National Electricity Grid Code  Electricity Market Rules 19

20. LI 1937  It establishes the Wholesale Electricity Market to facilitate wholesale electricity trading and the provision of ancillary services  Provides the Market Structure comprising a Spot Market and Bilateral Contracts Market  It places the responsibility for the development of Market Rules with the ETU (GRIDCo) 20

21. LI 1937 – The Challenges  Section 5 (2) states that Electricity generated from the Akosombo and Kpong hydro electric dams shall not be the subject for a bilateral contract  Market Participants are unwilling to sign PPAs with VRA and are not motivated to sign PPAs with other IPP’s  Clear guidelines would be required for the treatment of Legacy Hydro 21

22. LI 1937 – The Challenges (2)  Section 7 (2) states that the spot market price for electricity shall be based on the system marginal cost of supply and merit- order dispatch  The EC proposes to price energy from Legacy Hydro at the SMC.  Lack of adequate reserve can result in high prices 22

23. The Market 23

24. Introduction to Wholesale Electricity Market (WEM) The purchase (by Bulk Customers) and sale (by generators) of electricity. It exists when competing generators offer electricity (and ancillary services) to Bulk Customers. 24 GRIDCo is to develop, coordinate, control and monitor operations in the energy market. What is a Market? Anywhere buyers and sellers meet to transact business.

25. Why the Market? Will increase competition (Generation Side)  Breed efficiency  Improve quality  Ultimately lead to reduction in price  Increase customer satisfaction Fundamental Requirements (WEM)  Make electricity transmission independent  Encourage more IPP generation  Create a marketplace for electricity & other services 25

26. Who are the Market Participants?  Wholesale Suppliers – VRA, TICO, Sunon Asogli, CENIT Power, Bui Power Authority.  Distribution Utilities - ECG, Enclave Power, NEDCo  Bulk Customers – Mines, VALCO, Aluworks, Diamond Cement, etc. NB: GRIDCo CANNOT be a Participant. 26

27. Governance Market Regulation Market Monitoring System Operation and Market Administration Market Participants Energy Commission Market Oversight Panel ETU [GRIDCo] Transmission Owners [GRIDCo] Wholesale Suppliers Load Serving Entities (LSEs) PURC Ancillary Service Providers

28. Responsibilities of Market Operations Section  Development of the WEM  Market Manuals, standards, procedures and policies  Market Monitoring  Management of Transmission Service Agreements, Connection Agreements  Metering, Billing and Settlement  Stakeholder Engagement 28

29. Current activities in the WEM Phase 1 Operations  Submission of load forecasts by Bulk Customers/Distribution companies  Submission of availability declaration by Generators  Development of the system load forecast & generation schedule for next day. 29

30. The WEM - How will it work? - 1  Least cost economic dispatch is met by first allowing buyers and sellers to act in their best interest under bilateral contracts.  Buyers and Sellers are in the best position to make purchase and sale decisions.  GRIDCo commits least cost generation to meet Spot Market requirements.  Regulators to ensure that the market is competitive

31. Generators Load Serving Entities Scheduling Dispatch GRIDCo Electricity suppliers Electricity Purchasers Private bilateral energy transactions Spot Market Settlement

32. How Will It Work - Demand and Supply Components Demand Requirement MW Operating Reserve Requirements Forecast Capacity Requirement Spot/Balancing Forecast Energy Requirement Bilateral Transactions Submitted to GRIDCo Generation Supply

33. Next Steps  Develop new market rules based on approved Market Design  Develop Ancillary Services Market 33

34. Prospects & Conclusion  The Market is the way forward  It is important to get things right the first time  There are opportunities inside and outside of GRIDCo

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40. 40  Defines the National Interconnected Transmission System (NITS),  Establishes requirements, procedures, practices and standard to develop, operate, maintain and use of the NITS,  Establishes the Utility as the Independent Operator of the NITS  Set rules that applies to all persons connected to the NITS ( Grid Participants)  Sets obligations for the Utility and Grid Participants  Establishes the Grid Code Legislative Instruments LI 1934