1. The Initiative for Global Development (IGD) has identified the lengthy negotiations
around Power Purchase Agreements (PPAs) as a bottleneck in the process of
developing independent power projects (IPPs) throughout Africa. The typical time
required to develop a power project in most of Africa, from inception to commercial
operation start up, can be 5-10 years, or roughly twice to three times as long as it
takes in many other parts of the world. As a result, fewer projects are successful
and those that are can be more expensive due to lengthy – and costly – delays.
IGD’S SOLUTION
As a business-oriented nonprofit organization, IGD is uniquely qualified to
consolidate support around the adoption of country-specific standardized PPAs
designed to reduce transaction costs, speed up project development time, and -
eventually - produce a greater number of bankable power projects in Africa.
During the first stage of the project, IGD is engaging stakeholders to develop
a preliminary list of countries where the development and adoption of a
Standardized PPA will have the greatest value. We will focus on the following
factors:
• Deal flow – Is there significant potential for IPP development, both renewable and
thermal?
• Interest – Have local and foreign stakeholders expressed interest in encouraging IPPs
in the country?
• Difficulty – How complex will it be to navigate the country’s bureaucracy and regulatory
system to gain traction for establishing a Standardized PPA?
IGD will narrow its preliminary list down to a small number of countries with whom to
begin the process of creating a standardized PPA, tailored specifically to that country’s
situation. IGD will also support partner governments’ efforts to obtain funding for
experienced counsel – both for purposes of developing the Standardized PPA and for
negotiating with project developers going forward, using the document as a baseline.
THE PROBLEM
Looking at a picture of
the world at night, it is no
surprise that the African
continent is mostly dark,
with a majority of Africa’s
54 countries generating
insufficient power to meet
the most basic needs.
For a comparison, Sub-
Saharan Africa generates
91 megawatts per million
people, while the United
States generates 3,360
megawatts per million.
A lack of power has
significant, often debilitating
economic and social
impacts. Communities suffer
when they have insufficient
energy for schools, health
clinics, or hospitals. The
private sector is unable to
function and grow due to
unreliable and expensive
power. Governments
are subject to political
instability do to their inability
to provide and expand
access to electricity.
WWW.IGDLEADERS.ORG
UTILIZING STANDARD POWER
PURCHASE AGREEMENTS TO SPEED UP
POWER PRODUCTION IN AFRICA
IGD’s goal is to facilitate the adoption of a model that will lead to more bankable PPAs being negotiated in Africa.
Transaction costs and time to financial close will be reduced substantially, in some instances shaving over 2 years off
project development time. Ultimately, we hope this project will both facilitate investment in Africa’s power sector and
accelerate efforts to electrify the continent.