An independent power producer (IPP) or non-utility generator (NUG) is an entity[1] that is not a public utility but owns facilities to generate electric power for sale to utilities and end users.[2] NUGs may be privately held facilities, corporations, cooperatives such as rural solar Contact online >>
An independent power producer (IPP) or non-utility generator (NUG) is an entity[1] that is not a public utility but owns facilities to generate electric power for sale to utilities and end users.[2] NUGs may be privately held facilities, corporations, cooperatives such as rural solar or wind energy producers, and non-energy industrial concerns capable of feeding excess energy into the system.[3]
IPPs have been successful in driving the electricity sector''s transition to renewables globally, owning the majority of the currently operating renewable energy generation capacity.[5]
Rare in Germany for decades, the IPP business model has grown more common since the EEG (for renewable energy). Success in the approach depends on finding a partner for distributing the produced energy to the customer.
In 2002, the government of British Columbia stipulated that new clean renewable energy generation in the province[6] would be developed by independent power producers (IPPs) not BC Hydro, save for large hydro-electric facilities. IPPs now produce a significant proportion of the power generated in BC.
NUGs were rare before the enactment of the US Public Utility Regulatory Policies Act (PURPA) of 1978. The few existing NUGs were seldom able to distribute power, as the cost of building the conveyance infrastructure was prohibitive. Public utilities generated power and owned the generating facilities, the transmission lines, and the local distribution-delivery systems. PURPA, however, established a class of non‐utility generators, called Qualifying Facilities (QFs), that were permitted to produce power for resale.
PURPA was intended to reduce domestic dependence on foreign energy, to encourage energy conservation, and to reduce the ability of electric utilities to abuse the purchase of power from QFs. A QF is defined as a generating facility that produces electricity and another form of useful thermal energy through the sequential use of energy, and meets certain ownership, operating, and efficiency criteria established by the Federal Energy Regulatory Commission (FERC).
Section 210 of PURPA now requires utilities to purchase energy from QFs at the utility''s avoided cost. This allows QFs to receive a reasonable to excellent price for the energy they produce and ensures that energy generated by small producers won''t be wasted.[3]
In 1994, the Government of Pakistan announced an investor-friendly policy to develop IPPs based on oil, coal and gas. Following the policy, 16 IPPs were established. The next year, a hydro power policy was announced, which resulted in the development of the country''s first Hydro IPP.
In 2002, the new government adopted a new policy, under which another 12 IPPs began operations. For the development of Independent Power Producers (IPPs), Private Power and Infrastructure Board operates as one window facilitator on behalf of all the departments and Ministries of the Government of Pakistan to; process power projects in IPP mode, monitor their development, and facilitates in providing all required support on behalf of the Government of Pakistan.
In 2015, Pakistan adopted a new power policy by which another 13 IPPs were established, mostly by Chinese companies. A transmission policy for development of transmission line in the private sector was also announced.
The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is an initiative by the South African government aimed at increasing electricity generation through private sector investment in solar photovoltaic and concentrated solar, onshore wind power, small hydro (<40 MW), landfill gas, biomass, and biogas. As of 2021, there were 117 allocations, totalling 8891.86 MW, for private sector generation.
Independent Power Producers (IPPs) or non-utility generator (NUG) are private entities (under unbundled market), which own and or operate facilities to generate electricity and then sell it to a utility, central government buyer and end users. IPPs may be privately-held facilities, cooperatives or non -energy industrial concerns capable of feeding excess energy into the system.[1] [2]
IPPs invest in generation technologies and recover their cost from the sale of the electricity. They can be great help to country''s energy sector (especially when the public sectore do not have the required financial capacity for investment).
The criteria for integrating IPPs into the electricity market depends on the specific country. However, there are generally four models used to describe the integration of IPPs into the grid. The picture below summarizes the four different models.[4]
Before investing in electricity generation, IPPs need to consider various factors like revenue security, market demand, and contract procurement. The following table from Best Practices Manual from USAID summarizes the risks of IPPs.[5]
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