Independent power producers, commonly called IPPs, are independent owners of generation that are not part of the regulated utility. They own and operate generation in the interests of making a profit for their shareholders. Some in the industry differentiate between IPPs, who tend to contract all their capacity to utilities or other buyers in long-term agreements, and merchant generators, who sell to a variety of market participants in shorter deals and are generally more exposed to market prices. Others use the terms synonymously.
IPPs offer a number of services such as electricity (MWh), capacity (MW), and/or ancillary services that may be sold to utilities, marketers, ISOs, or directly to end-use customers. IPPs may build new generating stations or may acquire units from utilities selling off existing generation. Some IPPs evolved as unregulated subsidiaries of utility companies while others formed as independent companies. It is common for utility-scale renewable projects to be built by IPPs, with the output contracted to utilities and/or corporate buyers in long-term contracts.