 Hello, everyone. As he said, my name is Amy Rose and I'm coming from the Massachusetts Institute of Technology and the Institute for Data Systems and Society. We just changed names one month ago, so I'm still getting the long name down and my work is focused on regional electricity markets, the technical design, regulatory design, and market design for these kind of markets. And I'm focusing on the African region and the various power pools that are being proposed and currently exist in Africa. I previously worked with the government of Kenya on renewable integration and the kind of work that Johannes will be talking about later, where we were looking at the impacts of large penetrations of solar and how they could, the intermentancy could be assisted with all of the reservoir hydro that exists in Kenya right now. But I'm excited to talk about power pools today, so let's get started. I think first it's important to establish what is a power pool, and this is effectively a group of two or more utilities who agree to coordinate their planning and their operations. And the actual level of coordination can vary quite a bit, from fully integrating their systems and operating as if they're a single company, like we see in the United States, to simply agreeing to share information and support each other in times of emergency. So when we look at the African continent, it's currently envisioned to be divided into five power pools and the north and green. We have among the North African countries this Komalek pool, which is a French acronym. And then in blue we have the East African power pool, which is still in its infancy and starting to come together. We have the ECOWAS community creating the West African power pool, which is still being developed. In pink the Central African power pool, which is by far the least developed, it's still kind of at a concept stage right now. And then in orange, the Southern African power pool, which is by far the most developed and most influential on the continent. And this is where I'll be focusing most of my comments today. And there's a lot of excitement about power pools among governments, among international organizations, among donors. And the UN in 2005 said that power pools are the best strategy to deal with the energy problems in Africa. So that kind of shows you how excited some people are about this. And why? Why are people, not just in Africa, but all over the world, there's a growing trend towards power pools. And there's a lot of reasons for this. The first is really a desire to have greater economic efficiency and supplying electricity. By pooling demand and pooling supply, these systems can better utilize their most efficient generators and drive down production costs. Also by pooling demand, you can capture economies of scale to build larger plants that have lower per unit cost, which is important in areas like Central America or sub-Saharan Africa, where national systems tend to be pretty small. And also there's a desire to drive down prices through increased competition, both at the wholesale level by increasing the size of the market and at the retail level where consumers can have a larger choice of suppliers. And the second big motivation and one of the things that really drove the development of the SAP is a desire for greater security of supply. Both strategic security of supply by diversifying the inputs you're using for electricity and protect yourself against things like fuel price spikes or droughts and then operational security of supply where systems can support each other in real time in case a plant goes down or there's a fault in a power line. And typically for international power pools, this is just one part of a much broader regional integration strategy that's happening at the same time. So I just want to continue this motivation in the African context real quick and you can see that the energy resources in Africa are not uniformly distributed in size or location. So you have lots of coal obviously here in South Africa, but oil and gas is distributed kind of in the west and the north and then if we look at hydro, there's in the DRC huge hydro potential, but also in Ethiopia. And so there's a desire to try to connect these systems and be able to share these resources. And then if we think about the economies of scale argument, this plot shows the installed capacity, so the size of the systems, in African countries, I've taken out the northern African countries as well as South Africa because they just skew the whole scale. And so you can get an idea of kind of the size of the national systems in sub-Saharan Africa and then think about the size of a typical utility scale power plant, a coal plant, a gas plant, a nuclear plant. If we're being conservative, about 300 to a thousand megawatts. So that would be this yellow bar. And look at how many countries have systems that are below the size for even a single utility scale plant. So there's a huge opportunity in sub-Saharan Africa to pool demand and actually have a demand that's large enough to justify the investment in some of these cheaper plants. So now let's talk about the SAP. It's 20 years old now, created among the SATA countries. Excuse me. And the size is about 56, 57 gigawatts. Obviously, South Africa is by far the biggest portion of this, both on the supply side and the demand side. And trade has been growing every year in the last 20 years. They now have markets for long-term bilateral contracts, shorter-term bilateral contracts, a day-ahead market, a post-day-ahead market, but by far it's long-term bilateral contracts that make up the vast majority of trade that's happening in the SAP. And even though they've developed a lot in the last 20 years, there are a number of challenges that remain to help the regional market grow even more. And I've divided these into kind of three main challenges. The first is really the need for more investment, more investment in generation capacity, but also transmission capacity. And the second is the need to increase competition, to have more people participating in the market to help drive down prices and improve efficiency. And then the third element, which is also incredibly important, not both at the national level and the regional level, is to improve the regulatory capacity of the member countries. And so there are a variety of reforms that are taking place to try to address these challenges. And I would say reforms that need to happen fall in three categories, in talking about market structure, regulatory structure, and then very specifically transmission regulation. And in reforming all of these, the systems are going to have to move towards a greater degree of regional integration. So let's talk in more detail about each of these three areas. First, market structure. The important thing to first think about is who gets to participate in the SAP? There's a traditional, like in most Sub-Saharan African countries, the basic model is there are a lot of state-owned, vertically integrated utilities, and those are the main participants in the market. But this is changing slowly. The SAP has recently changed their rules to allow independent power producers, so private companies, can become members of the SAP. And all of the member countries have either adopted or in the process of adopting frameworks to allow independent power producers to operate within their country. The barrier comes when you think about how do these members get to participate in the market. The predominant model in most of the countries, all but two actually, is still what's termed the single buyer model. Where, for example, here in South Africa, you can have a lot of private companies building generation, but they all have to sell to Ascom, and it's only Ascom that gets to participate in the regional market. So if we have 15 countries, then we can only have 15 people participating in the regional market, and that doesn't help increase competition. So this is the first barrier. And the second one, which some people have said is an issue, is that the SAP is still largely reliant on long-term bilateral trades. And there are good reasons for this. If you're a big consumer, like a mining company, and you've seen all the shortages of supply that have happened, then you want to make sure you have electricity. So you're going to sign a long-term contract with a generator to make sure that you have security of supply for your plant. Similarly, if you're a generation company and you're interested in building a new plant, or if you're a bank that's going to fund a new project, you want to make sure that that project is going to make money, and they'll be able to sell their power. So a lot of these projects come with the condition that they have to sign a long-term power purchase agreement with some consumer. So given the investment climate right now, long-term bilateral contracts are probably here to stay. So the question is, at least in the medium term, but the question is, is this a problem? Can we have competition but also still rely heavily on these long-term bilateral contracts? And I would argue no, because if you're a generator, you're profit maximizing company. So if there is someone offering power in the market that's cheaper than what it would cost you to use your own plant, you're going to keep your plant off and buy from the market. And this isn't just me being an academic saying this, but in the SAP, before we had lots of shortages in the last few years, this is what generators were doing. So as we get more transmission capacity and people are able to trade power, then they'll go back to this mode of operating where, if there's a cheaper generator, they'll buy from the market. And you can still have competition, but also have the security of supply that comes from this long-term bilateral contract, which becomes more of a financial instrument rather than a physical instrument. And that might have been a little jargony, and we can talk about it later if you have questions. But moving on to regulatory reforms. First, let me paint kind of the regulatory history of the SAP. And the first 10 years that the SAP existed, there was no regional regulator. Actually, in the first five years, only four member countries had national regulators. So the utilities are accustomed to operating under this mode of setting their own rules and policing themselves and resolving disputes among themselves. However, if you want to foster competition, if you want to get the private sector to start investing and participating in a big way, you need to have some kind of regulatory authority. Because if you're a private generating company, would you want to go up against ESCOM if you have a dispute? Probably not. So right now we have, in the last 10 years, this Regional Electricity Regulators Association, which has been established. But it's just an association, so they don't have any power to set rules and enforce those rules. And what's currently in the process of happening is RARA is going to become an authority. All of the ministries of energy have backed this. The SAP Coordination Center is supporting this. And it's going to go to the SATIC Ministerial and hopefully be approved fairly quickly. And once RARA is an authority as a regional regulator, then they can start to develop regional rules to set the rules of the game that everyone has to follow. And this will help kind of level the playing field and create some certainty for new investors. Additionally, another thing that's still kind of in the works is that at the national level, as well as at the regional level, a lot of the regulatory institutions are still new. And they're still kind of struggling to define what are their rules, what are their responsibilities and get the training on how they should go about actually carrying out these functions. And finally, transmission regulation. I would say there's probably a very small and sad group of us that get really excited about transmission regulation, so I'll try to keep it very brief. But I spent the last week talking with people at RARA, at the SAP Coordination Center, at ESCARM, at NERSA, and they all told me the same story. Transmission is the big problem. We need more transmission. We need investment and transmission. How can that happen? And the reason they all said this is because when you don't have enough transmission, it's a problem for everyone. Generators need to make sure they can evacuate their power. If you're a transmission company and you want to build a line, you need to make sure you're going to recover your cost because you can't pick that line up and move it if the demand moves. And if you're participating in the market, you want to make sure there's enough transmission capacity to actually make that trade happen. And this plot on the right, this is from the SAP Coordination Center, and it shows over the last five years in red, these are the volumes of energy that were matched in the day ahead market. So there's a buyer willing to buy, a seller willing to sell, they get matched up, but in blue, this is the energy that's actually traded. And that gap is insufficient transmission capacity, so they just can't send the power, even though there are people willing to trade. And without going into too much detail about transmission regulation, I would say the basic issue is that we need to change the mode in which transmission lines are built in the region. The current, the term of art for the current way lines are built is called merchant lines where two companies, two countries decide we should build a cross border line because we would really benefit from trading power. So they agree to do this, and then between the two of them, they have to negotiate how the cost is going to be split between them, how the line will be priced, and it's a long process. And what if the line has to cross some third country, and they're also going to benefit, but they don't even want to benefit. They don't want to have to pay for this. They didn't ask for the line, and so it leads to this long negotiation and under investment. And this is what's been happening in the SAP. An international experience has shown the only way to get sufficient cross border transmission capacity is to move to a model of regulated lines. And what this is, is you have a regulator like RARA, once they have authority to do so, who will look at a line that's proposed, they'll assess. Do the benefits from this line outweigh the cost? If yes, then RARA approves the line. It is up to RARA, or whoever the regulator is, to allocate the costs among all the beneficiaries, and then they have to pay. So there's zero risk to the investor. If the line costs 100, they're going to get paid 100. The only difference is how that 100 gets split among the beneficiaries. And we're not claiming that this process is easy. There are transmission allocation and how you price transmission is a huge field. But moving to this model of regulated lines has been the only way in Europe, in the US, in Central America, all the markets I've looked at, the lines actually get built. So just to conclude and wrap up about the opportunities for regional trade, and why despite all of the headaches that are going to be involved in getting these reforms done, why it's worth it? First off, just from an economic point of view, there's huge savings that can happen from regional integration, and from coordinating planning and operations. The estimates range quite a bit depending on what policies you assume happen, but billions of dollars can be saved. Secondly, by creating a stable regional market with firmly established rules, you can attract private sector investment, which is something that all of these groups I've talked with say they desperately need. The national utilities have weak balance sheets. They're unable to make the investments that are needed in generation, and also in transmission. And so private sector investment will be key, but you need to have a stable regulatory framework and a market that feels fair in order for those companies to come. And then finally, there's a real opportunity here in the Satic region to create regional expertise and market design, market operations, and also how you regulate a regional pool. All of the other power pools, the West African Power Pool, East African Power Pool, they're all looking to the SAP, and they're coming to the SAP to get training on how do you design a power pool? And so there's a real opportunity for the SAP to develop these lessons and pass it on to the other pools. Thank you.