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Opening Up the Power Grid | A Knowledge Exchange in Istanbul Spans Three Continents
July 14 2014

Open access to the power grid is a market regime that makes it possible for any company to use transmission and distribution systems to buy and sell electricity, as long as the required fees are paid for accessing and using these systems. A number of emerging economies have set forth ambitious national plans in recent years aimed at making electricity more reliable and affordable by allowing open access to the power grid. But the pathway to open access is often prolonged and challenging. Countries’ experiences vary widely when it comes to the technical, financial and policy hurdles involved.  And to date, there has not been much comparison of these experiences, or sharing of the methods countries have used to overcome these hurdles.

 

A knowledge exchange event involving a number of emerging economies was organized by ESMAP in Istanbul on April 25, 2014 to address this issue. The event brought together participants from Azerbaijan, Brazil, China, India, Indonesia, Tunisia, Turkey and Vietnam. 

 

“Electric power grids are much more than just physical networks enabling the flow of electrons from generators to consumers,” said Martin Raiser, the World Bank’s Country Director for Turkey, in opening the event. “From an economic perspective, access to grid infrastructure means access to electricity markets and opportunities for commerce.”

 

The basis for discussion was the recently published ESMAP report on International Experience with Open Access to Power Grids, which focused on the experience of Brazil, India, Peru and Turkey, as well as developed countries such as the UK, Germany, and the United States.  At the knowledge exchange, representatives from Brazil, Turkey, and India presented the current status of open access in their respective countries and shared their thoughts on the opportunities and challenges ahead.

 

Victor Loksha, Senior Energy Economist at the World Bank and the author of the report, presented a number of the potential benefits of open access, including enhanced opportunities for competition, cost reduction, increased quality of service, and an improved environment for investment in generation and grid infrastructure.  He noted that access to the transmission grid by wholesale market participants, such as generators and distributors, offers the best initial opportunities for improved market efficiency, ultimately serving the consumers’ interest. In countries that have set a policy objective of allowing retail electricity consumers the freedom to choose their suppliers, large consumers have often been the champions of open access on the purchasing side.

 

“Different levels of open access may be envisaged—from a minimal approach, which simply establishes the legal right for generators to access the grid in order to sell their capacity and energy, to more sophisticated models, aiming to put pricing signals to work and remove arbitrary influences from the marketplace,” said Ashley Brown, the Executive Director of the Electricity Policy Group at Harvard University’s John F. Kennedy School of Government.  He cautioned that starting conditions in each country were different, and each country would accordingly need to decide on the model of open access it wants to pursue. 

 

Budak Dilli, former Deputy General Manager and Member of the Board of Turkey’s national electric utility, stressed the importance of unbundling the generation, transmission, distribution, and retail supply functions in the market in order to achieve an effective open access regime. 

 

“Before market reform in Turkey, generation and transmission activities were carried out by a vertically-integrated state-owned company and distribution and retail activities were under another state-owned company. In the late 1990s we decided to create a competitive market structure in order to attract private participation without providing sovereign guarantees. To achieve this, we restructured state-owned companies, unbundled transmission, generation, distribution and supply, and created an independent transmission system operator,” he said.