Degree of reliance on imported energy:
PNG is a net energy exporter. The country had a zero balance net import requirement in 2009, and no electricity was exported that year.
In 2010, oil production fell to 30,360 barrels per day, from three oil fields, a fall of 12.9% from 2009 levels. With the commissioning of its first refinery (Napanapa Oil Refinery, owned by InterOil) in 2004, crude is now refined locally. Around 72% (2313 ktoe) of indigenous crude oil and LNG production is exported. Interoil aims to construct a new LNG production facility by 2012, with a capacity of 32,500 barrels per day. To sustain the economy’s export goals, the government allocates an estimated US$20 million of its annual budget to oil and gas exploration. PNG’s total proven and probable gas reserves are over 14 trillion cubic feet, half of which constitutes the proven reserve. Much of this reserve is undeveloped, except for the Hides gas field, which supplies around 14–15 million standard cubic feet a day for power generation.
Main sources of Energy:
Total installed electricity capacity (2010): 582 MW
Natural gas: 14.1%
Total primary energy supply (2009): 2,270 ktoe
Oil and petroleum products: 77%
Natural Gas: 15%
Hydro & others: 8%
In 2009, PNG generated 3,445 GWh of electricity (a 9.9% increase from 2008). The sources of generation were thermal at 64% (oil 48%, gas 16%), hydropower at 25%, and geothermal at 11%.The hydropower contribution to electricity generation has remained stable in recent years, with new thermal investments accounting for rising demand.
Extent of the network:
In PNG, more than 90% of the population (mostly rural dwellers) have no electricity. There are three grids: one for Port Moresby, the capital; the Gazelle network, covering East New Britain, and the Ramu grid, which covers the cities of Lae and Madang, as well as the Highlands region. PNG Power, the national utility, operates three interconnected distribution systems, plus many provincial power systems. About a hundred small rural electricity systems (called C-centres) are operated by local authorities at government administration centres, powered by diesel generators, small hydropower facilities, and occasionally solar photovoltaics (PV). Responsibility for financing, management and planning rests with provincial authorities, however, many systems are badly managed and are inoperative. In 2008, the Japan Special Fund under the ADB provided a US$ 1.2 million grant to the Government of PNG, matched by US$ 300,000 of the Government's own money, to develop the electricity network of the islands.
Electricity is often unreliable, and relatively expensive in PNG. The lack reliable of power constrains growth in urban areas, and contributes to poverty in rural areas. The majority of electricity generation is based on petroleum products, leading to environmental issues, in terms of emissions and lack of sustainability. Baseload generation for the country's transmission network, in particular for the Port Moresby grid, is provided by hydroelectricity. A considerable proportion of the country's hydropower capacity is in excess of 30 years old, and has not been properly maintained, due to financial constraints on the part of PNG Power, the national utility. Transmission and distribution losses are around 20%, and the unreliability and inefficiency of urban power systems discourages further economic development.
In addition, system reliability problems have been observed in the national grid, in particular in the Gazelle network system. Deteriorating transmission lines have led to frequent and often prolonged power outages.
Potential for Renewable Energy:
The technical potential for renewable energy sources in PNG is enormous, but many of these resources are in remote locations with limited demand, and are not readily exploitable.
The Geothermal Energy Association estimates PNG’s geothermal potential at 21.92 terawatt-hours; the association also categorises the country as an economy that could, in theory, meet all its electricity needs well into the future from geothermal sources alone. Installed geothermal capacity in 2010 was 56 MW.
PNG has significant hydroelectric potential. Its land area includes nine large hydrological drainage divisions (basins). The largest river basins are the Serpik (with catchment area of 78,000 sq km), Fly (61,000 sq km), Purari (33,670 sq km), and Markham (12,000 sq km). There are other catchments of less than 5,000 sq km, in areas that are very steep. On the mainland, the mean annual rainfall ranges from less than 2,000 mm to 8,000 mm in some mountainous areas, while the island groups receive a mean annual rainfall of 3,000–7,000 mm. The gross theoretical hydropower potential for PNG is 175 TWh per year. There is little economic potential for the expansion of large hydro, due to the lack of substantive demand near supply sources. However, greater potential exists for developing smaller hydro schemes, with over 10 new small hydropower schemes deemed as feasible in the 2009 Power Development Plan. Combined capacity for these new schemes exceeds 20 MW.
Ocean Thermal Energy Conversion (OTEC)
There is very limited knowledge of PNG’s potential for OTEC, tidal energy or wave energy. Near Port Moresby, the tidal range is 2.7 metres, compared to 1.1–1.6m in much of the country. Reportedly, there is a 6m range in parts of the Torres Strait. There have been very preliminary proposals to tap tidal currents (peaking at 7–11 km/hour) at Buka Passage, near Bougainville.
There have been no systematic estimates of wind energy potential since the 1970s, when the best potentials were assessed in portions of Central, Western, Milne Bay and New Ireland provinces, and the Port Moresby area. A pilot wind energy project is being installed in the Duke of York islands, jointly funded by the Papua New Guinean and Chinese governments.
Solar energy is among the largest potential sources in PNG. Average insolation in much of the country is 400–800 W/m2, with 4.5 to 8 sunshine hours a day. Of 23 locations assessed, Port Moresby has the largest resource, with 2,478 sunshine hours per year. The lowest is Tambul, Western Highlands, with 1,292 hours. The best locations for solar PV are the offshore islands, and in the southern regions of the country. As of 2008, no electricity-producing installations were present in the country, although a solar home systems project for schools is in place, with help from the Sustainable Energy Financing Project from the World Bank/GEF.
Although two thirds of PNG are covered with forest, much of it is inaccessible or unsuited for energy use. 58% of land is subject to strong or severe erosion, and 18% is permanently inundated or regularly flooded. The main practical biomass energy potential is in areas such as logging and agricultural production, using either the crop output or residues. Log exports are roughly 2 million m3 per year, but very little is processed locally, leaving only small amounts of biomass for energy production. There are 18 major wood-processing facilities, but the amount of residue produced and it's availability for energy use is unknown. Traditional rural use of biomass is still relatively high, due to the low level of electricity access for cooking, lighting etc.
Potential for Energy Efficiency:
In 2007, the total primary energy supply of the country rose 12% in comparison to the previous year. Total final energy consumption was 1055 ktoe (an increase of 2.6% over 2006). The industrial sector accounted for 56% (an increase of 6% over 2006) and was the largest end user, followed by transport (33%) and other sectors, including agriculture and residential/commercial (11%). Petroleum products accounted for 76% of total consumption (an increase of 2.3% over 2006); electricity and others accounted for 24%. Petroleum products such as diesel or petrol are primarily used in the transport and electricity generation sectors.
The predominant method of lighting for much of PNG is kerosene fuel, which is highly inefficient in comparison to incandescent lamps. 90% of the population are estimated to use kerosene lighting. Energy efficiency in buildings has been identified as a potential source of energy savings, and a new building code was adopted in 2009, in line with that of Australia, in an effort to improve building energy efficiency.
PNG Power (PNGP, www.pngpower.com.pg) is wholly government-owned. PNG Power is responsible for the generation, transmission and distribution of electricity in PNG. There are also a large number of IPPs, whose total installed capacity is comparable to that of PNGP. In 2010, IPPs and self-producers managed around 280 MW of capacity, with PNG Power managing approximately 300 MW.
Oil Search (www.oilsearch.com) is PNG's largest oil and natural gas producer, and operates all of the country's oil-producing fields. The company is owned in part by the government of PNG (15%).
Structure / extent of competition:
PNG Power is responsible for the generation, transmission and distribution of electricity throughout the country, operating three main interconnected systems and 19 smaller provincial systems. The company is entirely owned by the state, and is vertically integrated. PNGP holds the monopoly on the electricity sector in Papua New Guinea.
Oil Search is the sole operator in the oil production sector of the country. Oil exploration activities are carried out by a number of firms, notably the Australian companies Origin Energy and New Guinea Energy. Private companies also hold the capital in the current LNG production facility construction project, including Exxon.
Existence of an energy framework and programmes to promote sustainable energy:
The country’s Medium Term Development Strategy (MTDS) 2005–2010 recognises energy and power as critical ingredients for development and poverty reduction. The strategy invites the government to assist the disadvantaged to “lift themselves out of poverty by improving basic services, such as water and electricity.” The MTDS places high priority for government spending on non-revenue-generating infrastructure, such as roads and education, without making any financing provisions for electrification, the private sector having been expected to invest in the necessary power infrastructure requirements for development. Unfortunately, progress has been slow, and this has not yet occurred.
The Papua New Guinea Government has initiated The National Strategic Plan 2010–2050, which has seven ‘pillars’. Natural resources, climate change and environmental sustainability are among the areas of focus. In March 2010, the Papua New Guinea Government announced the Development Strategic Plan (DSP) 2010–2030, which has five ‘pillars’—one of the pillars is ‘natural resources and environment’. The DSP 2010–2030 also set this goal: All households have access to a reliable and affordable energy supply, and sufficient power is generated and distributed to meet future energy requirements and demands.
On October 2010, the Papua New Guinea Government announced its Medium Term Development Plan (MTDP) 2011–2015. The MTDP 2011–2015 will focus on increasing access to electricity for all households in the country. New investment from the private sector in solar technology is also expected during the period of the first MTDP. Comprehensive analysis is required into the cost effectiveness of various alternative sources of power.
Current energy debates or legislation:
The Asian Development Bank has recently released a Country Partnership Strategy 2011-2015 for Papua New Guinea, which includes recommendations for the development of the power sector, from both a technical and a legislative standpoint, in particular with regards to rural electrification. Technical assistance will also be provided for energy efficiency projects, and new renewable energy projects, particularly micro-hydro for rural electrification.
Major energy studies:
PNG is a country member of the SPC Applied Geoscience and Technology Division (SOPAC). SOPAC was established in 1972 as a United Nations Development Programme Regional Project for the assessment of deep-sea minerals and hydrocarbon potentials. The work programme of SOPAC has now expanded to include the assessment of oceanic and onshore mineral resource potential, coastal protection and management, and the assessment of potential geological hazards. Over the past decade, its mandate has broadened further, to include water, wastewater, sanitation, energy and disaster risk management.
Role of government:
The Energy Division of the Department of Petroleum and Energy (DPE) is responsible for energy policies and plans, data collection and analysis, and advice to the government on energy sector issues. In practice, it concentrates on electric power, although PNG Power, the national electricity utility, undertakes the majority power sector planning. The DPE itself reports that extremely limited resources have seriously hampered data collection and analysis. For renewable energy sources, data collection had nearly ceased by the mid 1980s.
The Petroleum Division of the DPE is responsible for oil and natural gas exploration and development.
Government agencies in sustainable energy:
PNG Sustainable Development Program Limited (PNGSDP) is the major shareholder of Ok Tedi Mining Limited, and its principal activity is to promote sustainable development of Papua New Guinea, particularly in the Western Province. This activity is undertaken through programs and projects in infrastructure, capacity building, health, education, and community self-reliance. Consistent with its goal, PNGSDP is providing funding to support and facilitate Phase 1 of a rural energy program for the Western Province. Phase 1 projects include the rehabilitation and development of mini grid-power systems and solar home lighting systems.
PNGSDP has appointed PNG Sustainable Energy Limited (PNGSEL) to manage PNGSDP's rural energy projects. PNGSEL is a company incorporated in Papua New Guinea. PNGSDP and the Snowy Mountains Engineering Corporation (SMEC, www.smec.com) equally own PNGSEL, and its principal activity is to participate in the energy and electricity industry in PNG.
SMEC has assisted in the preparation of documentation for a number of CDM projects, including the Lihir gold mine geothermal project in PNG. SMEC provides carbon services including project identification, structuring, monitoring and verification, and overseeing CER (Commission for Energy Regulation) issuance and registry account management.
Energy planning procedures:
The Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP) is active in supporting the energy sector of PNG in its development. PNG Sustainable Energy Limited have received technical assistance from the project for use in rural electrification programs, especially with reference to integrated biodiesel systems, and in expanding their renewable energy operations, with wind power feasibility studies for the Hula peninsula, and solar energy system design training. In addition, PNGSEL have secured US$ 673 million to enhance electricity under the electrification program in the economy.
In September 2010, Australia’s Province of Queensland and Papua New Guinea agreed to set up a 1,800 MW hydropower plant in PNG, which would supply 1,200 MW of electricity to Queensland through an undersea cable. Origin Energy, which is Australia’s 2nd largest energy producer, will submit a feasibility document by 2012. This electricity project is one of the most ambitious International Cooperation Agreements in Energy, as it will involve the construction of 250 km of undersea cable. Electricity produced by the project will also go towards spurring prosperity in PNG, as 600 MW of the plant's capacity would be used locally.
Promoting Energy Efficiency in the Pacific (Phase 2)
Under Phase 1 of this $1.4 million regional technical assistance project, the Government of PNG was supported in identifying and piloting demand-side energy-efficiency activities, including the implementation of a pilot Power Factor Correction initiative in Port Moresby. The initiative sought to improve network stability and power quality and, as a result, it reduced energy demand by 180 MWh.
Phase 2 is further supporting the government in expanding the collection of data on power use that will inform future policy decision, and in implementing policies to foster energy efficiency. With $8.75 million funding, this follow on regional technical assistance project is being implemented in PNG, as well as in the Cook Islands, Samoa, Tonga, and Vanuatu. The activities of the project include:
- establishment of database containing baseline data on energy use;
- mainstreaming of energy efficiency practices, such as the Minimum Energy Performance Standards and labelling schemes in government processes, procedures, and policies and regulations;
- evaluation of energy-efficiency pilots undertaken under Phase 1 and scale-up of the most efficient measures; and
- information dissemination and awareness raising.
Promoting Access to Renewable Energy in the Pacific
The regional technical assistance is helping the PNG Power prepare the Rouna hydropower cascade development plan, as well as build the capacity of the power utility on system management and maintenance. The project was approved in 2009 for $3.0 million, and is being implemented in PNG,
Solomon Islands and Vanuatu.
Improved Energy Access for Rural Communities
The ADB’s grant will finance the connection of households, schools, and medical clinics in rural communities to the power distribution grid which will be extended by PNG Power to rural communities. It targets 4,500 households, 20 schools, and 20 clinics connected to the grid by 2014. The project will also assist PNG Power to upscale the trials of community-based civil works contracts for distribution powerline construction. A $5 million grant was approved in the first half of 2012, co-financed by the Japan Fund for Poverty Reduction and New Zealand.
Energy regulator Date of creation:
The Electricity Industry Act 2000 authorised the Independent Consumer and Competition Commission (ICCC, www.iccc.gov.pg) as the technical regulator of the electricity sector to determine the standards, perform inspection and control applications on all matters relating to the operations of the supply of electricity. The ICCC became operational in 2002, when the government enacted the Independent Consumer and Competition Commission Act 2002 (ICCC Act).
However, because of a lack of technical capacity to perform this regulatory role, the ICCC outsourced this role to PNG Power Limited on a contractual basis for an initial period of two years ending in 2005. The contract was extended for another three-year period ending in 2008. There is no further information on whether this role has been extended.
Degree of independence:
The Commission consists of a full time Commissioner and two part time Associate Commissioners. One such Associate position is allocated to an overseas competition/regulatory expert. The independence of the Commission from ministerial control is established in law. Funding for the commission is derived from operational revenues and levies, and allocated government funds.
Regulatory framework for sustainable energy:
Sections 21 and 23 of the Electricity Industry Act 2000 outline the functions and powers of PNG Power Limited. Under the Act, PNG Power Limited’s function is to plan and coordinate the supply of electricity throughout the economy, especially in urban areas.
No dedicated law or regulation currently exists for the promotion of sustainable energy uptake.
The ICCC regulates the energy sector. It licenses electric power companies, establishes electricity tariffs and controls maximum prices of some petroleum fuels. There is a national power tariff for those served by PNG Power.
The ICCC is the only national regulatory body that acts as a consumer and business watchdog. The provisions of the ICCC Act apply to all businesses in Papua New Guinea, including the government, where it engages in trade. The ICCC Act also applies to conduct outside PNG which affects the PNG market. The objective of the ICCC Act is to enhance the welfare of Papua New Guineans through the promotion of competition and fair trade in the market, the protection of consumer interests and the regulation of prices and service delivery standards in respect of state-owned entities.
Role of government department in energy regulation:
Because of a lack of technical capacity to perform a technical regulatory role in the electricity sector, the ICCC has outsourced this role to PNG Power Limited on a contractual basis for an initial period of two years ending 2005, which was extended for another three-year period, ending in 2008. The majority of the responsibility for power sector planning, for example, rests with PNG Power.
The unbundling of PNG Power, followed by the establishment of competition within the electricity market, including the promotion of private-sector involvement, could lead to fairer electricity tariffs, as well as improved standards.
In addition, the creation of policies to promote the utilisation of renewable energy technologies, with particular relevance to financing mechanisms, would facilitate their increased usage. Suitable regulation for the creation of an enabling environment would also be required.
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