Independent power producers own and operate generation assets — gas turbines, coal plants, increasingly wind and solar — and sell electricity to utilities, grid operators and industrial buyers. Unlike regulated utilities that earn a government-set return, IPPs are exposed to merchant power prices which can be highly volatile. Long-term power purchase agreements substantially reduce this volatility and are a key part of project financing. The energy transition is reshaping the IPP segment significantly: coal assets face regulatory and economic retirement pressure, while renewable developers are benefiting from policy tailwinds and improving economics. Gas peaking plants maintain a role providing dispatchable backup capacity that intermittent renewables cannot consistently supply. Contracted renewable IPPs operating under long-term fixed-price agreements offer infrastructure-like return profiles with minimal commodity exposure. For investors, the risk profile varies enormously within the IPP category based on fuel mix, contract coverage and geographic regulatory environment, requiring asset-level analysis rather than sector-level generalization.
