We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What are Independent Power Producers?

Mary McMahon
Updated May 17, 2024
Our promise to you
About Mechanics is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At About Mechanics, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Independent power producers (IPPs) are companies which produce electricity for sale to public utilities. An IPP is not a public utility, instead focusing on the generation of electricity, not the transmission of it. Some may sell to end users, depending on the energy policies and industry norms in the areas where they operate. It is not uncommon for independent power producers to pool their resources in a collective organization which is designed to help them negotiate the best prices with the utilities they sell to.

The prevalence of independent power producers varies around the world. In some nations, they are very common, and include private companies, cooperatives, and industrial facilities which sell excess power to the utilities they work with. It other regions, they are more rare, and operate on a smaller level. Some associations of producers focus on small regions, while others may span continents. Many are growing all the time by adding new facilities and services to their roster.

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 it must lease transmission facilities from a public utility, or the utility may construct transmission facilities and maintain them as part of the sales contract with the power producer. These companies generally have contracts with the utility or utilities they work with which spell out how much power 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 the power, maintaining a plant, and getting new plants online. It can also allow utilities to adjust their output to meet changing consumer needs, thereby avoiding blackouts and other problems. Independent power producers can supplement the grid to ensure that enough energy will always be available, even during periods of high demand or periods when generation facilities are forced to go offline for maintenance and other reasons.

The sale of electric power by independent power producers may be overseen by the government, which can regulate the rates at which power is sold 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 the competition generated by multiple producers helps to keep prices affordable for end users.

About Mechanics is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a About Mechanics researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By anon980099 — On Dec 02, 2014

How is the power transmitted?

By anon943897 — On Apr 04, 2014

How do you evaluate IPP bids?

By Babalaas — On May 04, 2011

@Amphibious54- Investing in independent power producers can be very profitable. My grandfather made a lot of money investing in a wind turbine farm in California. He invested in the farm back in the 80s and it has been generating revenue to this day. He is dead, but the funds still go to his foundation. I would not mind investing in this type of project myself.

By Amphibious54 — On May 03, 2011

@Submariner- Before investing in a renewable energy project, it may be best to study the project and calculate your risks. A successful renewable energy project depends on a number of factors like permitting and siting (probably the most critical factor) and whether a power purchase agreement can be secured.

Renewable energy investments can be a bit of a risk because many of the tax credits and grants are not permanent. If a project runs into delays, it can stall completely because large investors become scared the project will not find funding. You can end up losing money in a poorly planned renewable energy investment.

By submariner — On May 02, 2011

Independent power plants can be a great investment idea for those who are green minded and looking to invest in alternative energy. I have read about a number of community wind projects that allowed average people to invest in an energy product with great returns.

A number of energy developers projects that offer local ownership and stake in the company. Most energy projects need a large tax liability to qualify for certain energy production tax credits, but a smaller project made up of local, rural investors can qualify for a number of USDA rural development grants, making their electricity competitive with other sources.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
About Mechanics, in your inbox

Our latest articles, guides, and more, delivered daily.

About Mechanics, in your inbox

Our latest articles, guides, and more, delivered daily.