The Impact of IPPs in Developing Countries-Out of the Crisis and into the Future
Author: Yves Albouy and Reda Bousba Date: 12/1/1998 (PDF, 200KB)
Developing countries started opening their power sectors to independent power producers (IPPs) some ten years ago, and a large IPP market has emerged. This Note examines several contentious questions relating to the development of this market: Have IPPs led to a transfer of risk to the private sector, or contributed to an increase in government liabilities? Have they contributed to an increase in foreign exchange exposure? Have they resulted in efficient pricing and investment decisions? And have they contributed to sector modernization? Answering these questions has become more pressing with the global financial crisis. The Note concludes that on the whole IPPs have had a positive development impact. But negative effects become significant when the IPP program quickly grows to a large size relative to the host grid capacity, as has happened in a few Asian countries.