An Economic and Stakeholder Analysis for the Design of IPP Contracts for Wind Farms

Salci, Sener and Jenkins, Glenn (2016): An Economic and Stakeholder Analysis for the Design of IPP Contracts for Wind Farms.

Abstract

In this paper we introduce a method for quantifying the benefits and costs of implementing a grid-connected onshore wind project that is owned and operated by an independent power producer (IPP). The proposed policy analysis tool is applied to the appraisal of a wind farm in Santiago Island, Cape Verde. The policy analysis is conducted from the perspectives of the electric utility, the country’s economy, the government and the private sector investor. The key question is whether the design of the power purchase agreement (PPA) will yield a high enough rate of return to the project to be bankable, while at the same time yielding a positive net financial and economic present value to the electric utility and the country respectively. The PPA results in a negative outcome for the economy of Cape Verde in almost all circumstances. In contrast the owners of the IPP are guaranteed a very substantial return for their modest investment under all circumstances.

• Item Type: MPRA Paper
• Language: English
• Keywords: electricity, wind power, power purchase agreement, public–private partnership, Santiago (Cape Verde)
• Subjects: D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L94 - Electric Utilities; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources

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