Independent Power Producer
Encyclopedia
An Independent Power Producer (IPP; also: Non-utility generator (NUG)) is an entity
, which is not a public utility
, but which owns facilities to generate electric power
for sale to utilities and end users. NUGs may be privately-held facilities, corporations, cooperatives such as rural solar or wind energy producers, and non-energy industrial concerns capable of feeding excess energy into the system.
or Power Purchase Agreement
provides a long term price guarantee.
of 1978, NUGs were rare, and the few that existed were seldom able to distribute power, as the cost of building the conveyance infrastructure was prohibitive. Public utilities generated power and owned the generating facilities, the transmission lines, and the local delivery systems.
Congress Passed the Public Utility Regulatory Policies Act (PURPA) in 1978, establishing a class of non‐utility generators, called Qualifying Facilities (QF), which were permitted to produce power for resale.
PURPA was intended to reduce domestic dependence on foreign energy, to encourage energy conservation, and to reduce the ability of electric utilities to abuse the purchase of power from QFs. A QF is defined as a generating facility that produces electricity and another form of useful thermal energy through the sequential use of energy, and meets certain ownership, operating, and efficiency criteria established by the Federal Energy Regulatory Commission (FERC).
Section 210 of PURPA now requires utilities to purchase energy from NUGs which qualify (qualifying facilities) at the utility's avoided cost. This allows NUGs to receive a reasonable to excellent price for the energy they produce and insures that energy generated by small producers won't be wasted.
Entity
An entity is something that has a distinct, separate existence, although it need not be a material existence. In particular, abstractions and legal fictions are usually regarded as entities. In general, there is also no presumption that an entity is animate.An entity could be viewed as a set...
, which is not a public utility
Public utility
A public utility is an organization that maintains the infrastructure for a public service . Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies...
, but which owns facilities to generate electric power
Electric power
Electric power is the rate at which electric energy is transferred by an electric circuit. The SI unit of power is the watt.-Circuits:Electric power, like mechanical power, is represented by the letter P in electrical equations...
for sale to utilities and end users. NUGs may be privately-held facilities, corporations, cooperatives such as rural solar or wind energy producers, and non-energy industrial concerns capable of feeding excess energy into the system.
Economic situation
For the majority of IPPs, particularly in the renewable energy industry, a feed-in TariffFeed-in Tariff
A feed-in tariff is a policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology...
or Power Purchase Agreement
Power Purchase Agreement
Power Purchase Agreements are contracts between two parties, one who generates electricity for the purpose of sale and one who is looking to purchase electricity . There are various forms of Power Purchase Agreements; these are differentiated by the source of energy harnessed...
provides a long term price guarantee.
United States
Prior to the US Public Utility Regulatory Policies ActPublic Utility Regulatory Policies Act
The Public Utility Regulatory Policies Act is a law, passed in 1978 by the United States Congress as part of the National Energy Act. It is meant to promote greater use of domestic renewable energy...
of 1978, NUGs were rare, and the few that existed were seldom able to distribute power, as the cost of building the conveyance infrastructure was prohibitive. Public utilities generated power and owned the generating facilities, the transmission lines, and the local delivery systems.
Congress Passed the Public Utility Regulatory Policies Act (PURPA) in 1978, establishing a class of non‐utility generators, called Qualifying Facilities (QF), which were permitted to produce power for resale.
PURPA was intended to reduce domestic dependence on foreign energy, to encourage energy conservation, and to reduce the ability of electric utilities to abuse the purchase of power from QFs. A QF is defined as a generating facility that produces electricity and another form of useful thermal energy through the sequential use of energy, and meets certain ownership, operating, and efficiency criteria established by the Federal Energy Regulatory Commission (FERC).
Section 210 of PURPA now requires utilities to purchase energy from NUGs which qualify (qualifying facilities) at the utility's avoided cost. This allows NUGs to receive a reasonable to excellent price for the energy they produce and insures that energy generated by small producers won't be wasted.