Renewable energy sources (RES) play a key role in our decarbonisation goals. As our global shift to renewables continues in leaps and bounds, expecting to reach over 70 percent of gross electricity generation by 2030 in the EU, its introduction and effective transitions require the evolution of market regulation into a format that better supports it.
The inherently variable nature of RES needs regulations that account for fluctuations in energy generation, adaptive grid management strategies to balance supply and demand, energy storage, and small producers such as rooftop solar panels to ensure a successful transition to renewable energy by creating a more flexible and efficient energy market.
The EU commission's report states that overall solar photovoltaic and onshore wind electricity are expected to be cost-competitive by 2030, when flexibility increases alongside energy and carbon prices. From rethinking market structures, redesigning its frameworks, and introducing innovative pricing mechanisms, these changes are essential in creating a more flexible and efficient energy market, ensuring a successful transition as we navigate to our net zero goals.
The energy market of Oman, traditionally centralised and reliant on fossil fuels, is now evolving towards a more decentralised model that supports the needs of renewable energy, encouraging the distribution and generation of renewable sources of energy such as wind and solar, with capacity markets playing a significant role in supporting the largely intermittent nature of these renewable energy sources to allow the flexibility of a demand-response system that can balance the changing needs of supply and demand in real time.
While the utilisation of energy storage solutions will address the intermittency challenges of renewable sources, enabling the storage of excess energy that will support grid stability and the availability of clean energy when and where it is needed, adaptive pricing mechanisms will support the changing true cost of renewable energy according to the time of day, incentivising consumption to increase efficiency and promote sustainable habits that use more energy when renewable production is high with lower prices and less energy when renewable production is low with higher prices.
Additionally, real-time pricing and local marginal pricing are gaining traction globally. For example, one of the US’ largest electricity markets, the California Independent System Operators’ (CAISO) spot market, enables the purchasing and selling of electricity in real-time, utilising a market algorithm that matches supply with demand alongside grid constraint considerations, thus creating a system to efficiently manage the dynamic environment of renewable energy sources.
Similarly, Oman’s spot market launched in 2022, marking a significant milestone in the region’s energy sector. Operated by Nama Power and Water Procurement Company (Nama PWP), it enables the real-time trading of electricity by allowing the sale of uncontracted power at competitive prices, thus accommodating the fluctuating nature of renewable energy with regularly updated prices and fostering an increasingly cost-effective and sustainable energy trading system.
Other developments in the electricity sector framework include the restructuring of the distribution and supply companies, resulting in merging four distribution and supply companies (namely Majan Electricity Company, Mazoon Electricity Company, Muscat Electricity Distribution Company, and Rural Areas Electricity Company) into two companies: Nama Electricity Distribution Company, focusing on the distribution network and electricity delivery to customers, and Nama Electricity Supply Company, focusing on billing and collection operations.
This restructure was ultimately intended to improve efficiency and streamline the processes and procedures within the electricity sector. Furthermore, the restructure of RAEC, which has been given the mandate of generation only moving from vertical integration to horizontal integration, and therefore the other activities have been transferred to other existing companies.
As Mahmoud al Habsi, Technical Regulations Manager of Authority for Public Services Regulation, explains, “This step was taken to reduce the operating expenditure and therefore make more affordable electricity prices.” From the implementation of carbon pricing and carbon credit to penalising carbon-heavy energy sources and celebrating carbon-neutral sources to encourage cleaner, renewable energy alternatives, global market regulations continue to evolve to support the shift to RES, accommodating its flexible nature and helping us reach our decarbonisation efforts. Oman’s renewable energy journey accelerates with the evolving market regulations, innovative pricing models, and advanced technologies that lay the foundation for its greener future. From the spot market’s flexibility to the increasing potential of energy storage, these developments place Oman on the path toward a resilient, sustainable energy sector.
Globally, the continued evolution of regulatory frameworks, technological innovations, and international cooperation will be essential in supporting the transition to renewables. As more countries embrace these changes, the path to a sustainable, low-carbon global energy market becomes increasingly achievable. As we move forward, the nation’s commitment to fostering a market environment conducive to renewable energy adoption will be key to ensuring a successful transition. Not only is it a reflection of commitment to sustainability, it is also an example of how nations can adapt their energy markets to accommodate the demands of a cleaner tomorrow, building a dynamic and flexible energy system capable of meeting our future demands.
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