Risk Management for Power Purchase Agreements

Abstract

Public Private Partnership (P3) is used globally in the power sector. It is usually called Power Purchase Agreements (PPA) in the Power sector. It is a relatively new delivery method in infrastructure project. It is an updated version of the Build Operate Transfer (BOT) delivery method. Renewable energy PPA are very common because of the high construction cost. They have low operation and maintenance cost which make the overall life cycle cost is low. It gives a way for the developer to get their investment back with a reasonable profit. It helps the owner get the power with low or no initial cost. The risks associated with the PPA method are different from traditional delivery methods. Identifying and understand such risks is a key in the success of PPA projects. It can make such method a viable option to many countries. This paper presents and analyzes different risks in P3 projects in addition to solutions to mitigate such risks.