Expanding the role of renewable energy in PNG

For a country that relies heavily on hydrocarbons exports as a major revenue stream, Papua New Guinea has an electricity sector surprisingly reliant on renewable energy. This is more from necessity than from any overriding imperative to develop clean energy; PNG has little in the way of tailored incentives like feed-in tariffs or a “green certificate” scheme for producers of clean energy. Instead, the wide availability of renewable sources – mainly hydro and geothermal – combined with the absence of a local coal mining industry and presence of an export-heavy oil and gas sector, have led to an energy mix heavily weighted towards green energy. The exception is the prevalence of base load and backup diesel generators, which shoulder a considerable burden in the absence of viable alternatives.

Hydropower

With PNG’s power system stretched as it is – demand already exceeds supply – the underdevelopment of power generation presents the country with a unique chance to build up the system in a clean, efficient, cost-effective, sustainable way. High and frequent precipitation, combined with rugged, mountainous terrain, mean dozens of river valleys have optimal conditions for hydropower plants, which at present make up about 40% of PNG’s installed capacity.

This already-large contribution is set to rise further in the coming years as state utility operator PNG Power Limited (PPL) moves forward with several hydropower plant expansions and greenfield projects. These include the 80-MW Naoro Brown hydroelectric plant it is building under a public-private partnership (PPP), an 180-MW extension of the Ramu power station and the 3-MW Divune hydropower project in Oro Province. Plans to build by far PNG’s largest hydro project to date – a $5bn, 2500-MW plant on the Purari River – were put on hold, however, after developer Origin Energy announced in March 2014 it was shelving the plan. The plant’s output would have been enough to power PNG several times over, then sell the excess to Queensland, Australia via undersea cable. “There is a window of opportunity in the next couple of years to build a new hydropower plant, as prices will certainly escalate in line with the construction of the next liquefied natural gas (LNG) plant, just as happened during the construction of the Exxon-led LNG project,” Tony Honey, CEO of PNG Forest Products, told OBG.

Strategic Plan

These projects represent just a portion of those planned. PNG’s Strategic Development Plan 2010-30 forecasts that installed capacity in that period will need to nearly quadruple, from 500 MW to 1970 MW. Hydropower is to make up the bulk of this, rising from 215 MW to 1140 MW. Use of diesel in that period is expected to tail off, from 160 MW to just 30 MW, or 1.5% of total capacity, while other renewables ( mainly geothermal) will swell to 380 MW, or 19.2%.

High Potential

These targets are doubtless ambitious, yet PNG’s untapped resources are more than enough to meet them. A study by Bloomberg New Energy Finance ranked PNG in the top 10 for potential renewable resources, with about 2.5 GW of these but only 2% of it exploited. The primary challenges going forward will thus be accessing and unlocking this potential through PPPs. Only about 5% of the country’s 4200 MW of technically and economically feasible hydro potential has so far been developed, leaving room for growth to generate up to 36,800 GWh a year, according to the International Energy Agency. The potential could easily be much higher than even these conservative estimates, if a more comprehensive assessment were made that takes full account of PNG’s pitched terrain and high rainfall (1000-9000 mm a year).

Mapping

To help identify which potential sources might be most readily developed, PNG was one of a dozen countries to participate in the World Bank’s Renewable Energy Resource Mapping (RERM) project, launched in 2012. Run by the bank’s Energy Sector Management Assistance Programme (ESMAP), the project will use more than $48m in funding from donor countries and the World Bank to map and assess the viability of renewable sources as a precursor to scaling up investment in the sector. To support assessment of renewable resources globally, the RERM initiative targets wind, solar, geothermal and small hydropower sources for mapping and geospatial planning on a national level, including the collection of ground-based data where none currently exists. As of April 2014, ESMAP had been allocated $22.5m for this scheme, which should keep it funded through at least 2018.

Early on, the project identified three priorities for development in PNG: to support the government and PPL in planning capacity additions and off-grid electrification; to improve capacity on geospatial planning; and to provide greater certainty to the private sector. Initial funding of $3.1m has been allocated to PNG to develop all four types of renewable energy. The biomass, small hydro and wind sectors will be developed in five phases, while efforts for solar will be limited to one. Significant resources are also going towards in-country stakeholder engagement and capacity-building.

Geothermal

The second major power source to be developed in PNG was geothermal, initially exploited to power the Lihir Gold Mine in New Ireland Province. Utilising a geothermal field reservoir with temperatures above 300°C, power generation at the site was commissioned in April 2003, and further expanded in February 2007 to its current gross capacity of 56 MW.

Ring of Fire

Located on the Pacific ring of fire at the junction of several tectonic plates, PNG has many active volcanoes driven by subduction of the Pacific Plate and Solomon Sea Subplate. Its geologic hotspots are located primarily on two principal volcanic arcs: the 1000-km-long Bismarck Arc, stretching west to east from PNG through New Britain Island, and an arc running along the south-eastern peninsula of New Guinea. These volcanic belts are home to significant amounts of active volcanic activity, including about 55 known geothermal sites. In all, the Geothermal Energy Association estimates PNG’s geothermal potential at 21.9 TWh – enough to meet all its electricity needs well into the future from geothermal sources alone.

Policy Needed

Despite this, lack of a policy framework to develop geothermal has delayed its use. Some exploratory work has been carried out, including geophysical and geothermal surveys, but the current limitations of geothermal regulation have tempered investor interest to date. Several private groups, including Geothermal Development Associates, KuTh Energy and Reykjavik Geothermal, have done exploration work and/or submitted licence applications under the Mining Act of 2002, but further progress is on hold, pending a new legal framework governing the sector.

In PNG, unlike in many countries, geothermal development is classified as a mineral and thus falls under the purview of the Mining Act of 2002 (partly because PNG’s initial forays into the technology were carried out by a mining firm and used largely for mining purposes). The hope is that much of the opacity surrounding the sector will be cleared up in 2015 in a revision of the current mining laws. A key part of this will be a new draft on geothermal policy, which was completed by December 2014 but had not yet been submitted to Parliament for approval, according to Ministry of Mining.

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