RESTRUCTURING POWER MARKET IN OMAN

Mohamed Yousuf.Sˡ Dr. Ramzi A.Abdul-Halem²

1. Lecturer / Electrical & Computer Engg, University of Nizwa, Oman / profsmyousuf@gmail.com

2. Asso.Prof / Electrical & Computer Engg, University of Nizwa , Oman /ramzi@unizwa.edu.om

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ABSTRACT:

In GCC countries, Oman is the first country that introduced Independent Power &Water

Producer (IPWP). The power market has taken different formats in different parts of the world. So the

power sector to adopt the reforms varies from country to country. In the developing countries, the power

sectors are concentrating under Build, Own, Operate and Transfer (BOOT) scheme. Similarly, Oman

country also turns exclusively to adopt the power sector under BOO (Build, Own and Operate) scheme. In

Oman, the high economic growth has triggered a significant increase in energy demand, particularly for

electricity. This country has taken a good effort for improving energy conversation policies, generation

schemes, tariff adjustments etc. This paper describes the restructuring power market model and operation

in Oman.

KEYWORDS: Oman Electricity Market Structure (OEMS) - Market overview – Market Operation - Pricing - Market modification rule

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Introduction:

In power system, the power market is one of the wings. The electricity supply is treated as

social service rather than a market commodity in the developing countries. In GCC, Oman has been

focusing the process of power sector reforming / restructuring from the last 10 years. In this way, the

Electricity Law was enacted by Royal Decrees 78/2004 and amended by Royal Decrees 59/2009 &

47/2013.The electricity and water is regulated by the Authority for Electricity Regulation (AER) [1,8].

As per the sector Law, all the electricity projects (Generation of Power) are carried out by

Independent Power Providers (IPP). The Oman Power and Water Procurement Company (OPWP) is the

single buyer of power for all IPPs. In Oman, the entire power is purchased by OPWP from the Generators

and distributed to the end consumers through distributed companies shown in figure 1. The power

transmission system that is owned and operated by the Oman Electricity Transmission Company (OETC)

[1,6]. The transmission company is responsible for the economic dispatch of the system.

Figure 1. Oman Power and Water Structure

While the transmission system delivers high-voltage electricity from generators to substations,

the distribution system is the final stage in the delivery of electrical power. The distribution system

reduces the transmission voltage and then delivers the electricity to retail customers. In addition to

substations, the distribution system includes wires, poles, metering, billing, and related support systems

involved in the retail side of electricity. Three licensed distribution and supply companies (Muscat

Electricity Distribution Company SAOC, Majan Electricity Company SAOC and Mazoon Electricity

Company SAOC ) in the Main Interconnected System (MIS) and the Dhofar Power Company (DPC) in

the south have monopoly rights to carry out these functions and distribute and supply electricity within

Authorized Areas stipulated in their licenses. The Rural Area Electricity Company (RAEC) is another

distributor one in Oman. RAEC is a vertically integrated entity that is authorized by its License to

generate electricity and desalinate water, transmit, distribute and supply electricity to customers in its

Authorized Area. RAECO is responsible for the electrification of rural areas and secures electrification

funding through a mechanism established by Article (87) of the Sector Law [8].

In 1996, Oman became the first Arab country to turn exclusively to the private sector under BOO

scheme with a major power project in Manah [2]. Based on the increasing personal income, housing

starts, and continuing government investment in infrastructure projects, the electricity demand level is

hiked one. According to OPWP’s statement, the peak demand is expected to grow from 5122 MW in

2014 to 9530 MW in 2020. In this way, Oman has expounded the power generation from various sources.

At present, the power is generated by renewable energy sources also in Oman. As of Aug 2018, the power

generation capacity has reached 7150 MW (approx.) [5, 6, 9].The details can be illustrated in Table 1.

Table: 1

PLANT PLANT TYPE CAPACITY STATUSGhubrah OCGT-Natural gas fired 430MW OperationalRusail OCGT-Natural gas fired 665 MW OperationalWadi Jizzi OCGT-Natural gas fired 325 MW OperationalManah OCGT-Natural gas fired 254 MW OperationalAl Kamil OCGT-Natural gas fired 271 MW OperationalBarka I CCGT-Natural gas fired 427 MW OperationalSohar I CCGT-Natural gas fired 585 MW OperationalBarka II CCGT-Natural gas fired 677 MW OperationalSohar II CCGT-Natural gas fired 741 MW Operational

Barka III CCGT-Natural gas fired 740MW Operational

Sur CCGT-Natural gas fired 2000 MW OperationalIbri CCGT-Natural gas fired

1509 MWUnder construction

Sohar IV CCGT-Natural gas fired 1710 MW Under construction

Duqum Thermal (Coal fired Power Plant) 1200MW Under construction

Arround Oman Solar & Wind2650MW

Proposal

1. Oman Electricity Market Structure (OEMS):

In Oman, all the power generators are connected with Main Interconnected System (MIS) which is

located at Northern part of Oman. These are licensed to generate and supply electricity (Generators), are

required to become a Party to the Market Rules and the arrangements therein (the Pool). The Oman Power

and Water procurance Company SAOC (OPWP) is developing a wholesale electricity commodities

exchange. The Market Rules governing the commodities exchange are being developed by OPWP

underneath the direction of the Authority for Electricity Regulation (AER) and in consultation with Oman

Electricity Transmission Company (OETC) and different stakeholders. The commodities exchange is

anticipated to begin operational trials in early 2020 and go live by the end of 2020[5, 6].

The market design includes the following roles:

OPWP: There will be separate ring-fenced roles for OPWP in its license and in the

Market Rules.

Market Operator (MO): The Market Operator is a part of OPWP responsible for

implementing and securing the implementation of the Market Rules and the Pool operations

under its License conditions1. It is not a Pool Participant. It operates and administers the Spot

Market.

Power Procurer (PP): It purchases power in the Spot Market and continues OPWP’s existing

roles with Power (and Water) Purchase Agreements [P(W)PAs]. The Power Procurer is the sole

purchaser in the Spot Market. The Power Procurer is a Pool Participant responsible for

submitting Offer Data in respect of Demand Side Units. It is also responsible for payment to the

Generators as per the terms of the Market Rules. Furthermore, it is responsible for determining

the Certified Availability of Pool Units in line with the Availability Certification Methodology

and responsible as well to prepare Offer Derivation from Contract Terms Principles and get it

approved by the Authority.

Oman Electricity Transmission Company (OETC): The Transmission Company is not a

Pool Participant. It is responsible for providing data and information to the Market Operator in

relation to Settlement, such as water production, reserve and dispatch, as well as validating

certain data and information provided by the Pool Participants to the Market Operator. The Load

Dispatch Centre (LDC) can still be the facility system operator and be accountable for

dispatching generators underneath the Grid Code.

Authority for Electricity Regulation (AER): In addition to its current roles, AER will

provide regulatory oversight of the Spot Market, including monitoring for rule breaches and

abuse of market power.

Generators: The Generators are responsible for submitting Offers to the Market Operator and

receive Pool Charges from the Power Procurer where the power is sold under the Market Rules.

Submit daily offers, access market knowledge like schedules and costs and receive payment for

electricity oversubscribed through the commodities market. Participation can typically be

obligatory for generators on top of a particular size threshold, though generators with existing

P(W)PAs can still be settled below their contract terms.

But the distribution companies are not participated in the Spot Market. They will continue to purchase

electricity from OPWP through the bulk supply tariff arrangements. The Oman Electricity Market

Structure (OEMS) is illustrated in figure2 [7, 9].

Oversights &Regulations

Runs the OPWPMarket

Generators sell the power to PP through POOL

GGENERAROGENERATOR

GGENERARO

GGENERARO

GENERATOR

GENERATOR

AER

MAMA

AER

MARK ET OPERATOR(MO)

POOL POWER PROCURER

(PP)

OETC

Figure 2.Oman Electricity Market Structure

2. MARKET OVERVIEW:

The Pool is the daily wholesale spot market where Generators sell electricity to OPWP in its

capacity as Power Procurer under the Market Rules [3, 4]. All power traded in the Pool is sold to the

Power Procurer as OPWP is the single buyer of electricity in the Sector as per the Sector Law. The Pool

applies to the Main Interconnected System (MIS).

This section provides a high-level overview of the key features of the Pool, which are:

Mandatory Pool And Types of Generation;

Ex-Ante Pool Operation, Centralised Dispatch and Ex-Post Pool Operation;

Complex bidding;

System Marginal Price (SMP); and

Scarcity payments for capacity

Mandatory Pool and Types of Generation:

The underlying design of the Pool is a mandatory gross pool, meaning that all substantial generation

should participate, and will offer all of its output into, and be settled through, the Pool [7]. The mandatory

gross pool arrangement is summarised in the Figure 3.

All the Electricity sold into the pool All the Electricity bought from the Pool

charges from Pool at Payment for Electricity into Pool atMarket Price Market Price

Figure 3. Mandatory gross Pool arrangement

The existing P(W)PAs between Generators and OPWP will remain in force until the expiry of their terms.

Generators with current P(W)PAs will be obliged to participate in the Pool by submitting Offer Data into

the Pool but will continue to receive payments based on the terms of their respective P(W)PAs, rather

than based on Pool Prices. In the Market Rules, these P(W)PAs are referred to as Non-Pool-Based Power

Contracts[5, 6].

There will also be exceptions to the mandatory nature of the Pool. The Participation in the Pool is

enforced by AER through conditions in Licenses/Exemptions.

Generation in the MIS will be either:

Explicitly included in the Pool; or

Not included in the Pool and instead treated as an adjustment to the Pool Demand. Such

Generators will not become Pool Participants, offer into the Pool or receive payments from the

Pool.

For generation that is included in the Pool, any participating unit in the Pool is either a Price Maker unit

or a Price Taker unit. However, there is also a possibility of having a Hybrid unit in the Pool. Below are

the descriptions of each classification of participating units.

GG

GGGENER

GENERATOR

POOL OPWP (PP)

GGENERATOR

GENERATOR

Price Maker: These are units that are fully dispatchable and the dispatcher has the ability to Dispatch

those unit from its minimum stable generation to its full rated output. All participating units are Price

Makers unless they are Price Takers.

Price Taker: These are units that are not fully dispatchable and their output is driven by an exogenous

factor that may include:

Co-generation for water production, in the case of Multi Stage Flash (MSF) desalination;

Meteorological conditions in the case of intermittent renewable energy source (RES) such as

wind and solar Generation;

Units under transitional status due to switching from one configuration to another; and

Units undergoing a test.

System Marginal Price (SMP):

The system costs are determined by matching offers from Generators to the Pool Demand in every

commercialism amount. therefore all Generators settled within the OEM are settled supported one

common time unit market value no matter their locational demand and constraints. this can be termed one

worth zone, in distinction to another electricity markets that have completely different costs at different

locations[9,10].

The Market Operator calculates the SMP in every commercialism amount to reflect the price of the

marginal MWh needed to satisfy Pool Demand in an exceedingly in a very commercialism amount at

intervals the context of an at liberty schedule. The Market Operator can use a part of the market systems

referred to as the Market programing code (MSS) to calculate Market Schedules and SMP. SMP is finite

by a worth Cap and a base.

Scarcity Payments for Capacity:

SMP is ready within the Pool supported marginal rating principles, and Generators are duty-bound to

limit their Offers to represent the particular short run cost. Therefore, a separate capability mechanism is

intended to replicate the worth of capability occasionally of scarcity. Scarcity Payments area unit created

on the idea of accessibility for Certified Units and Metered quantity for non-Certified Units. The

mechanism is meant to supply the very best scarcity Charges to available Units at periods with tightest

margin between out there capability and also the needed capability, so as to price of capability suitably

and incentivise availability[10,11].

The Scarcity Price provides a spot value for capacity in each Trading Period expressed in OMR/MWh.

The Scarcity Price is derived based on:

A Reliability Price, derived from parameters to be specified by Authority;

A caps on total scarcity payments, to be specified by Authority (and monthly caps which are set

in accordance with an Approved Methodology over which the Authority has oversight); and

The Scarcity Factor in the Trading Period, calculated based on an Approved Scarcity Factor

Table Methodology over which the Authority has oversight.

3. PRICING:

This section provides a high-level overview of the following aspects of the Market Rules [6, 7]:

* Energy Charges;

*Scarcity Credits; and

*Settlement and Invoicing.

Energy Charges

This section provides a summary of the approach in the Market Rules to calculate Energy Charges by/to

the Pool Participants[7,10].

Conceptually the Energy Charges take account of three quantities for each PSU in each Trading Period:

Market Schedule Quantity (MSQ): The amount scheduled in the market by the Market

Scheduling Software.

Dispatch Quantity (DQ) : The amount dispatched in real-time by the Transmission Company,

which may differ from the MSQ as the Transmission Company issues Dispatch Instructions to

ensure the reliable operation of the power system. There are adjustments to Energy Charges

based on the differences between MSQ and DQ.

Metered Quantity (MQ): Derived from meter data, which may differ from DQ, depending on

how closely the Generator followed its Dispatch Instructions. There are further adjustments to

Energy Charges based on the differences between DQ and MQ, referred to as the Uninstructed

Imbalance.

In addition, there is a further adjustment to reflect that Pool Participants are required to submit their

offers based on the Economic Fuel Price (EFP), which can be different than the Actual Fuel Price (AFP)

paid by each generator.

From this, the Energy Credits and Debits under the Market Rules for each Production Block in a Trading

Day are as listed below and shown in figure 4:

* Market Schedule Daily Energy Credit (MSDEC)

*Market Schedule Make Whole Credit (MSMWC)

* Constrained On Credit (COC)

*Dispatch Adjustment Debit (DAD)

* Uninstructed Imbalance Credit (UIC)

* Uninstructed Imbalance Debit (UID)

* Fuel Price Adjustment Debit (FPAD)

Figure 4.Energy Credits and Debits

The Daily Energy Credit for a Production Facility (PFDEC) is calculated as:

PFDECfd =∑{MSDECbd + MSMWCbd – DADbd +CONONCbd +

UNINSTIMBDCbd – UNINSTIMBDDbd} -FPADfd

4. MARKET OPERATION:

This focuses on the key operational activities before the relevant commerce Day, on the relevant commerce Day and when the relevant commerce Day. At the top of this section a quick outline of the links between the Market and therefore the actual Dispatch by the Transmission Company is provided [6, 11].

Market operation are often expressed in :

Pre- Day-1 activities: The table 2 summarises the Pool activities in Pre- Day-1 activities and the responsibilities of the Parties to submit relevant Data.

Table:2

PARTY EVENTTransmission Company Report to Authority for over & Under delivery.Market Operator Publish monthly and annually Scarcity credit

cap. Publish the values for Over and Under Delivery. Publish the reliability Price. Publish Pool Price cap and Pool Price Floor.

Pool Participants Submit testing schedule to Market Operator in case of testing plan.

Day-1 activities: The table 3 summarieses the Pool activities in Day-1 and the responsibilities of the Parties to submit relevant Data.

Table 3

PARTY EVENTMarket Operator Publish temperature forecast Data Send

validated offer Data to Transmission Company. Calculate Ex- ante Reserve Holding limits &

Quantities to relevant Pool participants. Initialize Ex – ante Market Schedule Run

&Scarcity Price run. Publish Ex-Ant Market Schedule. Publish Ex- Ante SMP. Publish Ex- Ante Scarcity Price & Factor.

Transmission Company Send desalination requirements to relevant pool participants.

Send inputs for forecast demand to Market

Operator. Send Ex-Ante Spinning requirements to

Market operator.Power Procurer Send Reserve Holding Thresholds to Market

operator and relevant Pool Participants Send Forecast System Exports to Market

operator.Pool Participants Submit offer Data

On the Trading Day: The Transmission Company will receive the Generator’s offers from the Market Operator, but the Market Rules do not contain any obligations for the Transmission Company (or Generators) in relation to scheduling and dispatch of the power system during the Trading Day. After the Trading Day, information about the actual dispatch on the day is provided to the Market Operator by the Transmission Company and by Pool Participants

Day+1 activities: The table 4 summarises the Pool activities in Day+1 and the responsibilities of the Parties to submit relevant Data

Table 4

PARTY EVENTMarket Operator Calculate Ex –Post Reserve Holding Limits &

Quantities and send to relevant Pool Participants.

Initiate indicative Market Schedule Run & Scarcity Price Run.

Publish indicative Market Schedule, SMP, and Scarcity Price & Pool Price.

Transmission Company Submit Demand Shedding quantity to Market Operaror.

Submit Genset Dispatch quantities &Actual availability to Market Operator.

Submit Exports to Market Operator. Send Ex- Post Spinning Reserve Requirement to

Market Operator.Pool Participants Submit meter Data to Market Operator.

Submit Fuel Consumption Data to Market Operator.

Submit Actual Availability to Market Operator.

Post Day+1 activities: The table 5 summarises the Pool activities in Post Day+1 and the responsibilities of the Parties to submit relevant Data

Table 5

PARTY EVENTMarket Operator Initiate indicative Energy Settlement Run aiatend

Issue. Initiate &Publish confirmed Market Schedule Run Publish confirmed SMP Initiate confirmed Energy Settlement Run for

Energy Credits. Initiate & Issue indicative Scarcity Settlement Run. Initiate & publish confirmed monthly Scarcity Price

Run. Initiate & publish confirmed monthly Scarcity

Settlement Run for final month of the year.

Market Scheduling Software (MSS):

The Market Operator uses software called the MSS to determine Market Schedules and SMP. An

overview of the MSS operation is described below.

* SMP for each Trading Period;

* The Market Schedule Quantity (MSQ), which is the quantity of Output scheduled by the MSS for each

Price Maker Production Unit for each Trading Period; and

*Market Schedule Transitions (MST) for each Production Block for each Trading Period.

The objective of the MSS is to minimize the total of the assembly price of regular Production Blocks

Quantities and Transitions over the outlined improvement Horizon. supported the provide knowledge

provided by Market Participants, the MSS seeks to spot all-time low total cost answer at that value Maker

Generator Units give sufficient generation to satisfy Pool Demand that's not met by value Taker Units and

Units below check.

MMS Software Operation:

There are 3 MSS runs in respect of every commercialism Day; one Ex-Ante run before the start of the

mercantilism Day and 2 Ex-Post runs once actual knowledge has been received, once the commercialism

Day. The Ex-Post runs are the Ex-Post Indicative and therefore the Ex-Post Confirmed. additionally to

those runs, further Pool Runs will be performed just in case of settlement question or Dispute raised.

The subsequent table 6 shows the various varieties of runs dispensed by the Market Operator

victimisation the code and therefore the purpose of every run:

Table 6

RUN OUTPUT PURPOSEEx – Ante Pool Run:Ex – Ante Market Schedule Run

Ex- Ante Market Schedule.

Ex- Ante Pool Prices.

Informational Purposes.

Not used for invoicing or settlement.

Ex – Post Pool Run:Indicative Pool Runs

Confirmed Pool Runs

Additional Pool Runs

Indicative Market Schedule.

Indicative Pool Prices & charges

Indicative Settlement statements.

Confirmed Market Schedule.

Confirmed Pool Prices. Confirmed settlement

statements.

Revised Market Schedule

Revised Pool Price

Allowing for Settlement queries.

Confirmed settlements used for settlement, Trading, Clearing and Invoicing.

Resolving Query or settlement dispute raised by participants.

5. Marker Rules Modifications:

Modification Proposals may be submitted by Parties or the Authority to the MO. Others WHO

might be part of the market later and meet bound criteria (a Prospective Party) may submit Modification

Proposal to the MO. Upon receipt of a Modification Proposal, the MO at the start reviews the proposal for

completion. to boot, the MO shall verify whether or not the Proposal is compliant with the Market Rules,

and whether or not or not it's tenuous. Consequently, the MO might reject the proposal at its initial stage.

If the proposal isn't rejected, it's circulated to the Parties, Prospective Parties, and therefore the Authority

for their representations on the proposal. The Market advisory Committee (MAC) then discusses the

proposal at its next meeting and prepares a report in respect of its discussions and representations. once

receiving the ultimate report from the mack, the Authority shall select whether or not to approve, not

approve, or further work is required in terms of the Modification Proposal, and may also decide the

timing of once the Modification will get force[6].

6. Conclusion:

Cost reductions, innovations in information, evolving energy goals and client engagement are simply a

couple of the trends that area unit quickly shaping power market structure in Oman. Policymakers and

regulators prefer new policies and build restrictive and finance frameworks that drive the transformation

toward a desired vision in Power Market. To modernize the facility sector most effectively, it's essential

for policymakers to interact stakeholders early and infrequently, so the facility system accommodates a

broad set of interests to best energy customers and society.

• Bulk power market style characteristics that encourage clean energy and energy potency investment, cut

back investment risk, and promote economic competition in wholesale market

• Clear designing processes for network enlargement, significantly those making an attempt to include

remote renewable energy sources or those who take into consideration the worth of distributed energy

resources. Designing and dispatch practices will be optimized to facilitate integration of fresh energy, as

well as use effective prediction methodologies, creation of platforms for demand-side participation, and

coordination with alternative leveling areas.

• Simplified interconnection rules and clear prediction and system operation protocols to scale back

capitalist risk

REFERENCES:

[1] www.omanpwp.com

[2] Middle East and North Africa Integration of Electricity Networks in the Arab World Regional Market

Structure and Design / Dec2013.

[3] Power Systems of the Future- A 21st Century Power Partnership Thought Leadership Report/

Technical Report NREL/TP-6A20-62611/February 2015.

[4] Cochran, J.; Miller, M.; Milligan, M.; Ela, E.; Arent, D.; Bloom, A.; Futch, M.; Kiviluoma,

J.;Holtinnen, H.; Orths, A.; Gomez-Lazaro, E.; Martin-Martinez, S.; Kukoda, S.; Garcia, G.;

Mikkelsen, K. M.; Yongqiang, Z.; Sandholt, K. (2013). Market Evolution: Wholesale Electricity

Market Design for 21st Century Power Systems. National Renewable Energy Laboratory.

[5] https://data.gov.om › Electricity › Oman

[6] OPWP’s 7-YEAR STATEMENT (2016 – 2022): A report / Oman power and Water Procurement Co/

Issue 10 / June2016.

[7] Oman Electricity Market guide / Dec2017

[8] www.export.gov/article-Oman-Power-and-Energy

[9] www.aer-oman.org/aer/MarketStructure

[10] Power System Restructuring Models / NPTEL

[11] Yu, Y.; Jin, T.; Zhong, C. Designing an incentive contract menu for sustaining the electricity market. Energies 2015, 8, 14197–14218.