In many emerging markets, the standard contract for financing electricity infrastructure – the power purchase agreement or PPA – is often negotiated, signed, and implemented without any public knowledge. Nontransparent contracts often leads to overpaying and/or over-capacity of power generation, financial loss, systemic imbalances in delivery and demand, and higher investment and governance risks. Poorly negotiated PPAs weigh on utility/state finances and displace potential new investments at a time of historically low electricity prices.
Greater disclosure – as for sovereign debt or oil contracts – could create more positive incentives for competitive pricing and more accountable contracting. More transparency of PPAs could also lower risks for governments and investors, which over time should reduce costs and boost performance in the power sector.
The Energy for Growth Hub is proposing minimum global disclosure standards for PPAs to raise the governance bar. We are also gathering data for PPA Watch, an initiative to share information on PPAs and provide peer comparisons.