Let there be light: Power generation projects are in the works to meet the country’s development goals


Numerous opportunities in Papua New Guinea’s power sector, both in the public and private sector, hold substantial potential for companies willing to supply new generation capacity to a country still undersupplied in 2016. Currently, PNG operates around 580 MW of nameplate power capacity, serving only a small fraction of the population within three isolated grids.

With limited capacity expansion over the past decade, compared to impressive economic growth over the same time period, this latent demand continues to hamper further economic development, particularly in urban centres where access to reliable power supplies plays an important role in industrial and financial expansion. These power requirements are further amplified by the country’s low electrification rate, which hovers around just 12%, implying a huge block of potential power consumers once more homes are connected.

In spite of this demand, power generation has increased slowly, limited by numerous delays in new generation projects, along with budgetary and administrative constraints at the country’s primary power provider, PNG Power Limited (PPL). Energy generated by the company increased from 1018 GWh in 2011 to 1227 GWh in 2014, from a nameplate generation capacity of 390 MW.

Development Plan

As consumption and electrification rates increase over time, and higher industrial activity boosts the nation’s energy intensity, the government and PPL will need to add a significant amount of new generation capacity over the ensuing decades to keep pace. According to the country’s Strategic Development Plan 2010-30, energy consumption is projected to increase by an average of 10.5% per annum through to 2030, with a peak load in excess of 1400 MW, up from less than 400 MW in 2012. To accommodate this, the strategy calls for the construction of an additional 610 MW of installed capacity by 2020 and reaching a total installed capacity of 1970 MW by 2030, split between 1020 MW of hydropower, 500 MW of other renewables, 390 MW of gas-fired thermal and 30 MW each of diesel- and coal-fuelled thermal power. For the country to meet its development goal of 70% electrification by 2030, generation capacity must increase by 225% from 2015 levels, or 7.2% per annum. Achieving this target in the allotted timeframe would entail rural access rates increasing from 7.6% to close to 65%. More than two-thirds of this new demand is likely to arise beyond PNG’s current or future electricity grid.

In spite of a clear need for private investment in the power generation segment to help meet these challenges, the private sector has so far shown little interest, apart from selling excess electricity – generated to supply private enterprises such as mining camps, agriculture plantations and light industry – to local townships. Hanjung Power, which started operations in 1999 with a 28-MW diesel power station under a 15-year build-operate-transfer agreement to supply power to the Port Moresby grid, remained the only private developer of power in PNG until ExxonMobil constructed its 25-MW gas-powered plant as a condition of the PNG Liquefied Natural Gas project.

Power Up

The majority of those who have access to power are connected to one of PPL’s three main grids: the Port Moresby system serving the National Capital District, the Ramu system and the Gazelle Peninsula system. The largest of these is the Port Moresby system, which derives most of its electricity from the 62-MW Rouna power station powered by four primary hydro units on the Laloki Rive. This is supplemented by another 26-MW diesel power plant at Moitaka, along with the temporary 13-MW Moitaka Aggreko plant. Another set of diesel-powered gas turbine generators provide another 46 MW of supplementary power at the Kanudi site. Operated under an independent power producer agreement, the 24-MW diesel-powered Kanudi thermal power station has fed power to the Port Moresby grid since it began operations in 1999, while the 25-MW natural-gas-fuelled ExxonMobil plant has been providing power since July 2015.

Serving the Momase regional towns of Lae, Madang and Gusap as well as the Highlands population centres in Wabag, Mendi, Mt Hagen, Kundiawa, Goroka, Kainantu and Yonki, the Ramu grid is powered primarily by the 75-MW Yonki and 12-MW Pauanda hydropower plants. Supplementary power can also be added into the grid as needed from the privately operated 2-MW Baiune hydropower station at Bulolo in Morobe Province, as well as the small-scale PPL diesel-powered standby units located in Madang, Lae, Mendi and Wabag.

The third and smallest of the three major power systems is the Gazelle network, which provides electricity to Rabaul, Kokopo and Keravat. Power for the grid is generated from the 10-MW Warangoi hydropower station, along with the diesel-powered thermal plants of Ulagunan (8.4 MW) and Kerevat (0.5 MW). PPL operates another 19 independent power systems serving dozens of smaller urban centres across the country.

Off The Grid

When adding in off-grid and provincial systems, the total power generation capacity is estimated at 738 MW. Of this, 40% in 2014 and 2015 continued to be fuelled by expensive and relatively dirty diesel power generation, 17% of which was fed into the two primary power grids. Hydropower was the next largest contributor with 37% of power generated over the two-year period.

Private industrial sites were employing the greatest proportion of lower-polluting power generation facilities, accounting for the largest amount of hydropower in the country (18% of the total produced) along with all natural-gas fired (17%) and geothermal units (7%).

Capacity Boosting

While this loose network of generation stations and backup facilities has managed to keep the lights on in urban areas for the most part, the lack of reserve power, unreliability of older systems and general undersupply of electricity provide clear incentives for the government and private sector to work together to tackle this growing problem. Perhaps the most significant project is the eagerly-awaited, but often delayed, 80-MW Naoro Brown hydropower plant, which would feed into the Port Moresby grid for which PPL completed its prefeasibility study in August 2015 and initiated exploratory drilling of the site. More progress was charted in 2016 with PPL announcing that it had engaged UK-based Multiconsult as a transaction advisor to assist with the implementation phase of the hydropower project. Multiconsult and partner King & Spalding were signed to assist PPL with project development agreements, procurement processes and financing of the project. Upon completion, PPL will draft a power purchase agreement (PPA) and power development agreement and open up the bidding and procurement process.

Other projects in the early stages of consideration affecting the Port Moresby grid include the 50.7-MW Edevu hydropower plant, two gas-fired Port Moresby-based power plants of 57.8-MW capacity each, and a third combined-cycle gas turbine plant with a 32.8-MW capacity. There are also numerous opportunities for the Ramu grid, the largest of which is the long-discussed 179-MW Ramu 2 hydro project, along with the 167-MW Hela hydro project. Plans for a 55.1-MW natural gas-fired plant in the Hides gas field is also in the works, along with 10-MW solar projects in Madang and Yonki, and the 10-MW Baiune hydro project.

The well-established Oil Search is also looking to get into the private power generation segment, having taken steps to develop its own capacity with the signing of two deals in 2015. The larger of the deals was initially for the development of a 30-MW biomass power plant to be built in Markham Valley in Morobe Province. The project is to be developed by New Guinea (Petroleum), a partnership between Oil Search (70%) and Aligned Energy (30%), with the joint venture company signing a PPA with transmission operator PPL in December 2015. The biomass-fired plant will provide base load power to the Ramu grid, ostensibly to provide power primarily to the city of Lae, using wood chips from new plantation trees grown and sustainably harvested in Markham Valley. Oil Search signed a second PPA deal with PPL for a pilot project to supply electricity in the Tari and Hides areas in Hela Province in 2015. This project will use natural gas sourced from the Hides gas field, in which Oil Search has a stake, to produce an initial capacity of 2-MW with a long-term goal to boost output up to 65-MW by 2030.