Interview: Carolyn Blacklock, Acting Managing Director, PNG Power
What are the top priorities for the sector with regard to power generation and infrastructure?
CAROLYN BLACKLOCK: The main priority for the power sector is to meet demand, while undertaking a least-cost planning exercise. In the past we simply set up poles and wires and added generation to the grid, but nowadays this is not how it works. The reason for going down a least-cost planning path is to ensure that the price customers and businesses pay for electricity can be reduced over time. The current tariff makes starting and running a business difficult, and thus reduces the attractiveness of Papua New Guinea as an investment destination.
One of the biggest constraints for businesses and individuals is power outages. We experience the most challenges on the Ramu Grid, to which Lae is connected, and one small problem can take down the entire system. As Lae is the centre of industry, it is important to provide it with reliable power.
Several industrial players now want to come back to the grid, and therefore we will need more generation over the coming months. Many people think that adding generation solves the problem, but that is only the case when you have a deficit. If we experience an outage, we often have to drive long distances to locate the problem.
Repair and maintenance are difficult without surplus capital, and we have to be more efficient in managing the system. With this strategy we are better able to protect the main power consumers on the grid. Port Moresby is easier to handle because it has a circular system, which will help us when we host the APEC 2018 summit here in PNG.
How do you view the potential to use more domestic gas resources to fuel new power projects?
BLACKLOCK: Within the least-cost planning exercise, we want to transit from a high-cost fossil fuel environment, to a low-cost renewable environment. PNG signed the Paris Agreement on climate change, and we should honour our commitment, although that does not mean we cannot have a mixed bag. In the medium term the expectation is 20-30% diesel, 30-40% gas, and the rest will be hydro and small amounts of geothermal, solar and other sources. The new 58-MW gas power station in Port Moresby debunked the myth that gas-to-power generation can only occur when there is a domestic gas obligation. The energy sector has shown that it can move ahead of legislation; however, having regulations in place to do so is important because you cannot make the transition if you do not leverage PNG’s own gas. In the long term, renewables make sense in PNG, not least because giving back to the Earth is well entrenched in our country’s way of life. The main challenge, however, is ensuring the availability of cheap renewable power. The initial step is to provide access to power, but it is also important to succeed in tendering, structuring and preparing a project for delivery. If these different stages are completed successfully, the ambition to have renewables as the main source of power by 2050 can be realised.
To what extent are tax credit schemes necessary to build up power infrastructure?
BLACKLOCK: Tax credit schemes are useful for projects like bridges and roads, although electricity is different because people will pay for it. Using such schemes for power projects should therefore be the exception to the rule. Nonetheless, it is important to think about alternative ways to source funds if we want to connect 70% of the population to the grid by 2030. Our procurement in the past has been sloppy. Some past projects were expensive because we were not clear about what we needed, where we needed it and at what price. These factors need to be clear when setting up public-private partnerships, power purchase agreements and build-operate-transfers.
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