Integrating Independent Power Producers into Emerging Wholesale Power Markets

Woolf, Fiona ; Halpern, Jonathan

World Bank, Washington, DC

关键词: BIDDING;    CHIPS;    COMPETITIVENESS;    CONSUMERS;    DAMAGES;   

DOI  :  10.1596/1813-9450-2703
RP-ID  :  WPS2703

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Many developing and industrial countrieshave sought to open their electricity industries tocompetition. In both contexts, policymakers and investorshave to deal with the consequences of earlier, more partialsector liberalization measures. Foremost among these is theexistence of long-term contracts with independent powerproducers (IPPs). The long-term nature of these contractshas complicated the introduction of more far-reachingsectoral reform designed to harness competitive marketforces for the benefit of consumers. In developingcountries, introducing competition is often coupled withbreaking up and privatizing state-owned electricitymonopolies. In this context, discussion of renegotiation ofpower purchase agreements has tended toward the polemical.At one end are those who resist any change, arguing that the"sanctity of contracts" precludes modification ofcontract terms. At the other end are those who favorgovernments taking coercive measures to modify existingcontracts in the name of maximizing economic welfare andminimizing the burden of sector reform on consumers and onthe state. Drawing on recent country experiences, theauthors analyze alternative approaches to restructuringcontracts and designing power markets to reduce rigiditiesand incentivize IPPs to participate more fully in wholesalepower markets and to take on greater market risk. Theauthors conclude that forced market integration or forcedcontract negotiation have failed and are counterproductive.Conversely, in countries where IPPs provide a sizableproportion of generation capacity, ignoring marketintegration may result in insufficient market liquidity anddiscourage new entry, attenuating the scope for marketforces to act for the benefit of consumers. Failure to adaptpower purchase contracts and market rules imposes hugeresource costs on the economy beyond the financialobligations consumers and taxpayers must bear. Based onrecent experience, a combination of measures, includingadaptation of specific market rules, contractualalternatives for enhancing market liquidity, contract buyoutprovisions, transitional financing mechanisms, andcharacteristics of the successor entity to the powerpurchaser, offer promising approaches for reconcilingpreexisting IPP contracts with new market structures andreducing the magnitude of above-market costs associated withsuch contracts.