As part of PESD's ongoing research on power sector reform, the program has focused on the special role of independent power projects (IPPs). Many countries institute reform with the goal of attracting private (usually foreign) investors in new generating capacity. IPPs, rather than across-the-board reform, are usually the mechanism employed; yet the IPP market has been highly volatile in the last decade and has evaporated in most countries in recent years.
During 2004-06, the Program on Energy & Sustainable Development undertook a study of the experience of independent power producers ("IPPs") in developing countries. As part of the study, the Program sponsored a series of country studies. These papers detail the basic contours of the IPP experience in each country and discuss the country factors identified in the research protocol.
Private investment in electricity generation (so called "independent power producers" or IPPs) in developing countries grew dramatically during the 1990s, only to decline equally dramatically in the wake of the Asian financial crisis and other troubles in the late 1990s. The Program on Energy and Sustainable Development at Stanford University has undertaken a detailed review of the IPP experience in developing countries. The study has sought to identify the principal factors that explain the wide variation in outcomes for IPP investors and hosts.
The Brazilian energy sector reform followed a textbook model from early 1990s Latin America - specifically Chile and Argentina - premised on introducing competition to the wholesale power market while maintaining monopolies in transmission and distribution. The textbook electricity reform model also established an independent system operator and independent regulator to oversee system management. Brazil began its power sector reform by privatizing distribution, followed by generation and transmission.
The Philippines occupies a unique position in the global experience with energy sector reform and independent power producers. The Philippine experience with IPPs has been ongoing for almost sixteen years, and has spanned a time period that includes distinct energy regulatory regimes and an ever-changing legal environment for foreign capital. Since the first contract for independent generation in 1988, the government of the Philippines has signed contracts with more than forty other IPPs, and by 1994 had more IPP contracts than the rest of the developing world combined.
This paper presents interim findings of "The Experience with Independent Power Producers in Developing Countries," a research project being conducted by the Program on Energy and Sustainable Development at Stanford University ("PESD").