What are independent energy producers?

Companies that produce and sell electricity to utilities are called independent power producers.

Independent power producers (PIEs) are companies that produce electricity for sale to public utilities. An IPP is not a public service, instead it focuses on generating electricity, not transmitting it. Some may sell to end users, depending on energy policies and industry regulations in the areas in which they operate. It is not uncommon for independent power producers to pool their resources in a collective organization designed to help them negotiate the best prices with the utilities they sell to.

The prevalence of independent power producers varies across the world. In some nations they are very common and include private companies, cooperatives and industrial facilities that sell excess energy to the utilities they work with. In other regions, they are rarer and operate at a lower level. Some producer associations focus on small regions, while others may span continents. Many are growing all the time, adding new facilities and services to their list.

Also known as a non-utility generator (NUG), an independent power producer usually does not have transmission facilities. It can generate power using a variety of methods, but must lease transmission facilities from a utility, or the utility may build transmission facilities and maintain them as part of the sales contract with the power producer. These companies often have contracts with the company or utilities they work with, which define how much energy they must generate, at what rate, and so on.

For utilities, buying power at wholesale prices through IPPs and reselling it to consumers can be cheaper than generating power, maintaining a plant and bringing new plants online. It can also allow utilities to adjust their production to meet changing consumer needs, preventing blackouts and other issues. Independent power producers can supplement the grid to ensure that sufficient power is always available, even during periods of high demand or periods when generation facilities are forced to shut down for maintenance and other reasons.

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The sale of electrical energy by independent power producers can be supervised by the government, which can regulate the rates of energy sales, in addition to regulating safety to confirm that these facilities do not operate in a dangerous way. In areas where electricity is not subject to government regulation, independent power producers point out that competition generated by multiple producers helps keep prices affordable for end users.

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