Regional power market in Central America

Regional power markets, supported by cross-border grids, are not only critical for the viability of large-scale renewable energy but can also yield tangible financial and political benefits. In 1996, six Central American countries signed the framework treaty to set up a regional electricity market. The initiative established the Central American Electrical Interconnection System (SIEPAC) and the Regional Electricity Market (MER). The MER, managed by three different regional institutions, aims to optimise electricity generation by locating power plants in the most cost-effective sites and by planning balancing infrastructure collectively. The initiative had led to monetary benefits of US$271.5 million by 2014 on account of reduction in national oil imports and more efficient sourcing of power generation. When Panama, one of the participating countries, faced energy shortages due to droughts, the regional market helped cover the shortfall, demonstrating its benefits for regional energy security.

Benefits of a single power market in Europe

Nord Pool, the power exchange that connects Nordic and Baltic countries, is one of the most successful power exchanges in the world. The complementarity of energy resources in the Nordic region was the key driver for establishing a common market for cost-efficient power exchange. Today, more than 20 countries trade electricity in Europe through Nord Pool. The power exchange is an example of deep integration of the different national electricity markets through harmonisation of domestic power regulations and structures. The initiative has resulted in lower prices of electricity in Norway and Sweden, has increased energy availability during the dry months in Denmark and Finland, and has halved the capacity reserve required for all. The exchange has also demonstrated its utility for high renewable energy penetration: in 2020, 50% of Norway’s contribution came from wind power. 

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