Independent Power Producers

Policymakers wishing to introduce wholesale competition into the electricity industry must often reconcile existing independent power producer contracts with new market structures and trading arrangements. For the new market arrangements to bring the benefits of competition to consumers, enough participants must be willing to take market risk. A combination of measures (adaptation of specific market rule, contractual alternatives for enhancing market liquidity, contract buyout provisions, transitional mechanisms) offer promise for reconciling existing contracts with new market structures and reducing the magnitude of above-market costs associated with the contracts.

Summarizes findings of a review panel given the tasks of comparing the social costs of five short-listed independent power producer proposals originating in response to a request for proposals from BC Hydro in 1994. Begins with background on the BC Hydro request and a description of the five proposals, including two cogeneration projects at pulp mills and three small hydroelectric projects. This is followed by description of BC Hydro's own least-cost project for new energy supply, a repowering of the Burrard thermal plant. Chapter two discusses various methodological issues in the comparison, including Vancouver Island transmission credits, the social costing framework used, and the manner in which environmental costs and benefits are evaluated. The five proposals are ranked in relationship to that least-cost project and issues of project sequencing and premium price determination are discussed in chapter three. The premium price is that which is necessary to support BC Hydro acquisition of electricity from any project with lower social costs but higher corporate costs than BC Hydro's least-cost alternative. Concludes with recommendations based on the findings regarding the preferred project.

Inadequate electricity services pose a major impediment to reducing extreme poverty and boosting shared prosperity in Sub-Saharan Africa. Simply put, Africa does not have enough power. Despite the abundant low-carbon and low-cost energy resources available to Sub-Saharan Africa, the region s entire installed electricity capacity, at a little over 80 GW, is equivalent to that of the Republic of Korea. Looking ahead, Sub-Saharan Africa will need to ramp-up its power generation capacity substantially. The investment needed to meet this goal largely exceeds African countries already stretched public finances. Increasing private investment is critical to help expand and improve electricity supply. Historically, most private sector finance has been channeled through privately financed independent power projects (IPP), supported by nonrecourse or limited recourse loans, with long-term power purchase agreements with the state utility or another off-taker. Between 1990 and 2014, IPPs have spread across Sub-Saharan Africa and are now present in 17 countries. Currently, there are 125 IPPs, with an overall installed capacity of 10.7 GW and investments of $24.6 billion. However, private investment could be much greater and less concentrated. South Africa alone accounts for 67 IPPs, 4.3 GW of capacity and $14.4 billion of investments; the remaining projects are concentrated in a handful of countries. The objective of this study is to evaluate the experience of IPPs and identify lessons that can help African countries attract more and better private investment. At the core of this analysis is a reflection on whether IPPs have in fact benefited Sub-Saharan Africa, and how they might be improved. The analysis is based primarily on in depth case studies, carried out in five countries, including Kenya, Nigeria, South Africa, Tanzania and Uganda, which not only have the most numerous but also among the most extensive experience with IPPs.