Africa’s plan to build a single electricity market is moving beyond political declarations towards the more difficult work of designing rules, institutions and trading systems that can support cross-border power exchange at scale.
The African Union Commission said representatives of regional economic communities, African power pools and regulatory bodies had completed a technical study programme focused on electricity-market integration, including market coupling, congestion management, consumer protection, renewable-energy integration and financing mechanisms.
The programme forms part of the wider effort to develop the African Single Electricity Market, or AfSEM, which is intended to progressively connect regional markets and improve the movement of electricity across national borders. The concept is closely linked to the Continental Power System Masterplan, which seeks to identify the transmission corridors and generation investments needed to support deeper integration.
The market will need more than physical interconnectors
Transmission infrastructure remains essential, but new lines alone will not create a functioning continental market. Countries must also agree on compatible grid codes, transparent dispatch rules, settlement systems and procedures for allocating scarce transmission capacity.
Without those arrangements, electricity may technically be able to cross a border while remaining commercially difficult to trade. Differences in utility creditworthiness, tariff structures, currency exposure, regulation and payment discipline can prevent transactions even where physical connections exist.
This is particularly important because many African power utilities remain under financial pressure. Weak revenue collection, high technical and commercial losses, delayed tariff adjustments and government arrears can reduce confidence among neighbouring utilities, private generators and lenders.
Regional power pools provide a foundation
Africa is not starting from zero. Regional power pools already provide institutional platforms for electricity cooperation in Southern, Eastern, Western, Central and Northern Africa. Their level of market development, however, remains uneven.
Some regions have made progress with short-term electricity trading and coordinated planning, while others continue to rely mainly on bilateral agreements. Integrating these systems into a continental framework will require common standards without ignoring the operational realities of each region.
The African Union’s latest technical engagement is therefore significant because it focuses on the architecture behind functioning electricity markets. European experience with market coupling and independent regulation is relevant, but African institutions will still need to adapt those lessons to grids that are less interconnected, utilities with weaker balance sheets and markets with different levels of regulatory maturity.
Why cross-border trade matters
A larger electricity market can help countries use generation assets more efficiently. Hydropower, solar, wind, gas and geothermal resources are distributed unevenly across the continent, and national demand patterns do not always peak at the same time.
Cross-border trade can allow countries with temporary surpluses to sell power to neighbours facing shortages. It can also reduce the need for every country to build expensive reserve capacity independently, while giving larger renewable-energy projects access to broader markets.
For industrialisation, the benefits could be substantial. More reliable power would support mining, manufacturing, cold chains, digital infrastructure and transport systems. Regional electricity trade could also strengthen the competitiveness of economic corridors and cross-border industrial zones.
Regulation and trust will determine progress
The success of AfSEM will depend heavily on regulatory credibility. Market participants need confidence that contracts will be enforced, tariffs will be transparent, system operators will act independently and disputes will be resolved consistently.
Consumer protection will also matter. Regional trade should improve reliability and affordability, but poorly designed markets can expose consumers to volatility or shift the cost of inefficient utilities onto households and businesses.
Financing presents another challenge. New interconnectors, substations, control systems and digital market platforms will require substantial capital. Development finance institutions can help prepare projects and reduce risk, but governments must also improve utility governance and create credible revenue models.
The next test is implementation
The African Union’s engagement marks another step in building the technical and institutional foundations of a continental electricity market. It does not mean that AfSEM is already operational or that the required financing and reforms have been secured.
The next phase will need measurable agreements on regulatory alignment, transmission priorities, market rules and the responsibilities of national and regional institutions.
Africa’s electricity challenge is often described primarily as a shortage of generation and transmission capacity. The development of AfSEM shows that the continent also faces a market-design challenge. Infrastructure can connect national grids, but only credible rules, financially viable utilities and trusted institutions can turn those connections into reliable electricity trade.
Sources: African Union; Africa-EU Energy Partnership.
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