Structuring Procurement to Improve Sustainability Outcomes of Power Plant Projects

Abstract

Electricity consumption throughout Asia and the Pacific is projected to more than double from 2010 to 2035, reaching 16,169 terawatt-hours in 2035. While environmental factors are a pressing issue internationally, governments from developing countries in Asia also have a priority to deliver adequate power supplies to sustain their desired level of economic growth. The purpose of this article is to compare the implications of delivering power plant projects via either public private partnerships (PPPs) or traditional public procurement. A mixed method approach was used to evaluate four Indonesian power plant case studies. The article compares project performance based on project finance availability, construction and commissioning timelines, and operational reliability. It also investigates carbon emission factors from different power plant combustion technologies in relation to project financial structuring. The results show that (1) power plant projects that are procured through PPPs appear to be delivered in a more timely manner, and they have substantially better performance during the first years of operation than those of traditional public procurement; and (2) availability of project finance is influenced by a careful consideration of environmental and sustainability factors such as the selection of fuel type and the combustion technology.