How it works
An independent power producer develops, owns or operates generating assets and sells their electricity. Its buyers may be utilities, traders or large consumers. The term describes the producer's role in the power sector, rather than a particular technology: an IPP can own solar, wind, hydro or thermal generation, with storage alongside it.
Revenue can come from a long-term power purchase agreement, shorter contracts, wholesale markets or a combination. The contract determines who carries price, volume, imbalance and curtailment risk. An IPP may operate one plant or a portfolio, but it does not need to own the distribution network that delivers electricity to the final consumer.
Why it matters
The distinction helps buyers understand their counterparty. An IPP supplies generation; a utility or retailer may also provide network access, backup supply and billing. A buyer comparing proposals needs to know which of those responsibilities sits with the producer and which remains elsewhere.
A worked example
An IPP's wind farm generates 200,000 MWh in a year. It sells 150,000 MWh under a PPA at $45/MWh and 50,000 MWh into the market at an average $55/MWh. Gross energy revenue is 150,000 × $45 + 50,000 × $55 = $9.5 million, before operating costs, settlement adjustments and financing.
Illustrative figures.
Across markets
The term is used in India, the US and many other markets. The routes available for selling power depend on local rules. An IPP may sell to a utility under a PPA, through a power exchange, or to a corporate buyer where direct procurement is permitted.