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

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  • Sener Salci

    (Department of Economics, Queen’s University, Kingston, ON, Canada)

  • Glenn Jenkins

    (Department of Economics, Queen's University, Kingston, Ontario K7L 3N6, Canada)

Abstract

In this paper, we undertake an integrated financial, economic, stakeholder analysis of a grid-connected onshore wind project that is owned and operated by an independent power producer (IPP) in Santiago Island, Cape Verde. This IPP project has received considerable positive publicity and has won many awards. Cape Verde has a very good wind resource, but due to its location it suffers from high transportation costs for petroleum fuels. Hence, it would appear to be an ideal site for an IPP investment in a wind farm. This 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) can simultaneously yield a high enough cash flow for 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 analysis in this paper shows the negotiated 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 under all circumstances a very substantial return for their modest investment.

Suggested Citation

  • Sener Salci & Glenn Jenkins, 2016. "An Economic and Stakeholder Analysis for the Design of IPP Contracts for Wind Farms," Development Discussion Papers 2016-16, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:6004
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    Cited by:

    1. Qing, Xiangyun, 2018. "Statistical analysis of wind energy characteristics in Santiago island, Cape Verde," Renewable Energy, Elsevier, vol. 115(C), pages 448-461.

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    More about this item

    Keywords

    : electricity; wind power; power purchase agreement; public–private partnership; Santiago Island (Cape Verde);
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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