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Policy Papers

The Case for Transparency in Power Project Contracts: A Proposal for the Creation of Global Disclosure Standards and PPA Watch

Mohamed Rali Badissy , Charles Kenny and Todd Moss
September 1, 2021
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The purpose of a nation’s power sector is to deliver reliable electricity at the lowest cost and for the greatest benefit. At the heart of any private electricity generation project is a Power Purchase Agreement (PPA), a contract that contains key provisions such as price, payment stipulations, and obligations by the offtaker utility and/or host-government. Despite their significant effects on service quality and public finances, these contracts are often negotiated and signed in secret, with even the most basic terms shielded from the citizenry. This opacity has created risks and, in a growing number of cases, contributed to costly and damaging outcomes, such as overpayment, overcapacity, large debts, and grid instability.

Drawing on examples from enhanced transparency in public budgets, sovereign debt, and extractive industries, we propose that governments agree to publish PPAs with any public sector obligation and that funders of private generation projects also agree to minimum disclosure standards. The objective is to create incentives for better practice, improve governance of the power sector, reduce transaction costs, and ultimately, to deliver cheaper and more reliable power for people and businesses. Transparency of PPAs would support the efforts of government policymakers and planners, investors, and development finance institutions to accelerate energy market development and to reap the benefits of open competition. Greater disclosure would also provide crucial information for citizens to hold their own governments accountable for the contracts they sign on behalf of the public.

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