Beyond Borders

Industry Investment Rating - The report does not explicitly provide an investment rating for the industry, but it emphasizes the growing importance of cross-border power grid interconnections and regional electricity markets as key enablers for the sustainable energy transition [17][18][19] Core Report Insights - The report highlights the multifaceted drivers of cross-border power trade, including economic value, enhanced power supply security, and climate change mitigation [19] - It underscores the importance of both physical (hard) and regulatory/operational (soft) infrastructure for successful regional power system integration [20][23] - The report identifies political commitment and financing as the two fundamental challenges to achieving deeper regional power grid integration [28][169] Summary by Section Executive Summary - The report aims to provide a foundational guide for integrating power grids and markets across borders, particularly in developing and emerging economies [17] - It emphasizes the economic, security, and environmental benefits of cross-border power trade, including cost savings, improved reliability, and reduced carbon emissions [19][20] - The report outlines five core building blocks for successful integration: interconnection infrastructure, planning and investment coordination, technical and operational coordination, commercial arrangements and market design, and institutional architecture [22][23] Power Trade Across Borders - Infrastructure connectivity, particularly power grid interconnections, is recognized as pivotal for sustainable development and shared prosperity [33] - Cross-border power trade enables countries with electricity surpluses to export power, while energy-deficient countries can improve access to reliable and affordable electricity [35] - The report highlights the potential for grid interconnection on a larger scale, connecting regions with different time zones and weather patterns to better utilize variable renewable energy (VRE) [36] Evolution of the Power Grid and Market Integration - Power system integration has evolved from bilateral grid interconnections to regional power pools and market-based trading [43] - Integration levels range from early-stage (limited coordination) to shallow integration (some coordination) and deep integration (well-developed institutions and competitive markets) [44][46] - The report provides examples of regional power pools at different integration levels, such as the Southern African Power Pool (SAPP) and the European Union's internal energy market [45][46] Drivers of Cross-Border Power Integration - The primary drivers of regional power system integration include economic efficiencies, power supply security, and climate change mitigation [67] - Economic benefits are derived from lower operating costs, economies of scale, and revenue opportunities from electricity exports [72] - Cross-border power trade enhances supply security by aggregating diverse energy resources and balancing supply and demand across regions [74] - Grid interconnections play a critical role in integrating larger shares of renewable energy and reducing carbon emissions [81][82] Building Blocks of Regional Grid Interconnections and Electricity Markets - Successful regional integration requires both physical infrastructure (transmission lines, substations) and enabling soft infrastructure (regulatory, operational, and market frameworks) [87][90] - Planning and investment coordination are essential to optimize generation and transmission investments across participating countries [108][109] - Technical and operational coordination, including grid codes and interconnector capacity allocation, are critical for efficient and reliable power system integration [125][130] - Commercial arrangements and market design, such as transitioning from bilateral trading to regional markets, are key to enhancing cost efficiency and competitiveness [137][140] Challenges of the Power Grid and Market Integration - Political commitment and cooperation are fundamental to overcoming challenges in cross-border grid integration, particularly in regions with complex political dynamics [170][171] - Financing cross-border interconnection projects is more challenging than financing renewable projects due to long lead times, revenue uncertainty, and regulatory complexities [176][177] - Developing countries face additional challenges, including limited domestic transmission infrastructure and difficulties in accessing affordable financing [179] Looking Ahead - Addressing the challenges of power grid integration requires greater partnerships, cooperation, and coordination among governments and the private sector [183] - The report emphasizes the need for global and regional initiatives to foster political commitment, build trust, and prioritize transnational benefits [184] - Scaling up financing for cross-border infrastructure, including concessional financing and innovative mechanisms like green bonds, is critical for advancing regional power grid integration [189][190]