BAKU, Azerbaijan, August 11. The Single Buyer Model (SBM) is planned to be introduced in the Azerbaijani electricity market will implement, as part of a broader plan to transition towards a fully competitive system in the wholesale and retail electricity markets in the fourth quarter of 2024, Trend reports.
This issue has been reflected in the World Bank's report on the project "Support for the development of transition mechanisms for liberalization of the electricity market of Azerbaijan".
In 2018-2019, the Government of Azerbaijan designed the basic principles for power market liberalization, based on a three-phased plan that considers the existing conditions and challenges stemming from legal, economic, institutional, and physical conditions of Azerbaijan's power sector.
In many countries, the SBM has worked successfully as an intermediate phase towards establishing bilateral contracts and a balanced market. In Azerbaijan, it will serve the purpose of unlocking the efficiency potentials from economic generation dispatch and more adequate reflection of capacity costs until a more flexible market structure is achieved.
The report emphasized that existing components of Azerbaijan's energy market will be preserved as they naturally fit into the reform, and it's important to avoid the "destruction" of existing forms of competition. Examples of such components include mechanisms for transmitting electric power from independent renewable energy producers.
The study's authors stressed that the significance of competition in achieving more effective outcomes in the energy sector has been validated by the experiences of recent years.
According to the authors, improvements in the sector, such as infrastructure enhancement and resource utilization optimization, have been achieved within the current framework, however, competition is necessary for further development.
The SBM model entails establishing a unified state agency responsible for purchasing electric power from producers on a competitive basis and subsequently selling it at regulated prices. This approach maintains a balance between the interests of private investors and government control over prices for end consumers.