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How many Enrons? Mark-ups in the stated capital cost of independent power producers' (IPPs') power projects in developing countries

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  • Phadke, Amol

Abstract

I analyze the determinants of the stated capital cost of IPPs' power projects which significantly influences their price of power. I show that IPPs face a strong incentive to overstate their capital cost and argue that effective competition or regulatory scrutiny will limit the extent of the same. I analyze the stated capital costs of combined cycle gas turbine (CCGT) IPP projects in eight developing countries which became operational during 1990–2006 and find that the stated capital cost of projects selected without competitive bidding is 44–56% higher than those selected with competitive bidding, even after controlling for the effect of cost differences among projects. The extent to which the stated capital costs of projects selected without competitive bidding are higher compared those selected with competitive bidding, is a lower bound on the extent to which they are overstated. My results indicate the drawbacks associated with a policy of promoting private sector participation without an adequate focus on improving competition or regulation.

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  • Phadke, Amol, 2009. "How many Enrons? Mark-ups in the stated capital cost of independent power producers' (IPPs') power projects in developing countries," Energy, Elsevier, vol. 34(11), pages 1917-1924.
    • Handle: RePEc:eee:energy:v:34:y:2009:i:11:p:1917-1924
    DOI: 10.1016/j.energy.2009.07.043
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    Cited by:

    1. Salci, Sener & Jenkins, Glenn, 2016. "An Economic and Stakeholder Analysis for the Design of IPP Contracts for Wind Farms," MPRA Paper 70578, University Library of Munich, Germany.
    2. Salci, Sener & Jenkins, Glenn P., 2018. "An economic analysis for the design of ipp contracts for grid-connected renewable energy projects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2410-2420.
    3. Eberhard, Anton & Gratwick, Katharine & Kariuki, Laban, 2018. "Kenya's lessons from two decades of experience with independent power producers," Utilities Policy, Elsevier, vol. 52(C), pages 37-49.
    4. Kashi, Bahman, 2015. "Risk management and the stated investment costs by independent power producers," Energy Economics, Elsevier, vol. 49(C), pages 660-668.
    5. Bahman Kashi, 2014. "Risk Management and the Stated Capital Costs by Independent Power Producers," Development Discussion Papers 2014-03, JDI Executive Programs.
    6. Salci, Sener & Jenkins, Glenn, 2016. "An Economic and Stakeholder Analysis for the Design of IPP Contracts for Wind Farms," MPRA Paper 70578, University Library of Munich, Germany.
    7. Saule Baurzhan & Glenn P. Jenkins, 2014. "Solar versus Combined Cycle Electricity Generation in Capital Constrained African Economies: Which is Greener?," Development Discussion Papers 2014-02, JDI Executive Programs.

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