The authority should structure the payment mechanism in a way that is not only realistic and fair in supporting the long-term partnership, but also objective, transparent, and easy to operate. To make it more robust, the public agency should seek feedback from the operators prior to developing the payment mechanism. The payment mechanism should not only incentivize the operators to deliver the service at the required standards, but also include penalties to deter the operators from providing sub-standard performance, or none at all. Depending on the nature of the projects, the payments may vary with these elements: availability of service, performance quality of service, and the usage of service.
For example, a Power Purchase Agreement (PPA), signed between the purchaser (often a state-owned electricity utility) and a privately-owned power producer, secures the payment stream for a concession project for an independent power plant (IPP). In this instance, the private producer agrees to make available to the purchaser the contracted capacity of energy and deliver the energy in accordance with the PPA. The PPA may provide sanctions or require the power producer to pay liquidated damages if it fails to deliver the power as promised.28
In a separate example, Japan's Ministry of Economy, Trade and Industry (METI) introduced expanded curtailment rules which extended the period of time which the nation's utilities were allowed to refuse to accept electricity from developers, to regulate the supply of renewables in 2015. This introduction corrected the nation's generous feed-in-tariff (FiT) program launched in July 2012 that saw 82 GW worth of FiT approved projects (as of July 2015) in queue - resulting in extremely high costs to the nation and energy output far exceeding grid capacity.