Power Sector Transition in Papua New Guinea – Global Energy …

Unlocking Papua New Guinea’s Renewable Potential Amidst Climate Vulnerabilities

Papua New Guinea (PNG) faces a critical juncture in its energy development as it seeks to rapidly expand electricity access and transition towards a low-carbon future. With only 13% of the population currently connected to the grid, the country has set an ambitious target of achieving 70% electrification by 2030. This transition, however, is complicated by Papua New Guinea’s vulnerability to the impacts of climate change and the complex landscape of energy policies and stakeholders.

Navigating Climate Risks and Emissions Reduction Targets

As the tenth most climate-vulnerable country in the world, Papua New Guinea is already experiencing the effects of a changing climate. Landslides, soil erosion, deforestation, biodiversity loss, and flooding are all projected to increase in frequency, posing significant threats to the country’s predominantly rural population and its agriculture-based economy. The Asian Development Bank estimates that climate change could lead to a 15.2% annual loss in Papua New Guinea’s GDP by 2100.

In response to these challenges, the government has outlined bold targets to transition the country’s energy sector towards carbon neutrality. By 2030, PNG aims to increase the share of renewables in its national energy mix to 78%, a significant shift from its current reliance on diesel-powered generation. This ambitious goal aligns with the country’s Nationally Determined Contribution (NDC) under the Paris Agreement, which calls for urgent action to combat climate change and its impacts.

Renewable Energy Potential and Project Pipeline

Papua New Guinea’s renewable energy potential is vast and largely untapped. Estimates suggest the country has the capacity to generate over 15 gigawatts (GW) of hydropower, 1 GW of geothermal power, and 800 megawatts (MW) of solar energy. If all the proposed renewable energy projects in the pipeline were to be realized, they could provide up to 78% of the country’s grid-connected electricity by 2030.

As of 2022, the Climate Change Development Authority of Papua New Guinea had identified 15 renewable energy projects in the pipeline, totaling 427.275 MW of installed capacity, as well as 21 proposed projects totaling an additional 45.15 MW. These projects range from hydropower and solar to biomass and wind, demonstrating the diversity of the country’s renewable resources.

However, the realization of these ambitious plans faces several challenges, including securing financing, navigating complex land ownership structures, and addressing capacity gaps in project management and grid integration.

Navigating the Regulatory Landscape and Stakeholder Dynamics

Papua New Guinea’s energy sector is governed by a complex web of policies, regulations, and institutions. The National Energy Policy 2017-2027 outlines strategies for promoting sustainable energy resources, while the National Energy Authority Act of 2021 establishes the regulatory body responsible for overseeing the electricity industry.

Notably, the state-owned utility, PNG Power Limited (PPL), currently holds an exclusive right to sell electricity to customers with a load of 10 MW or less, within 10 kilometers of its existing grid. This monopolistic structure has hindered the growth of independent power producers and the diversification of the energy mix.

Navigating the land tenure system, which is predominantly customary-owned, also poses challenges for renewable energy project development. Prospective developers must engage with local communities and negotiate land leases, a process that can be time-consuming and fraught with potential conflicts.

Additionally, the presence of major fossil fuel projects, such as the proposed Papua LNG project, and the potential for these projects to “lock in” further fossil fuel dependence, has raised concerns among civil society organizations and international financial institutions.

Financing the Energy Transition

Upgrading and expanding Papua New Guinea’s power sector to achieve the 70% electrification target by 2030 will require significant investment, estimated at around $1.7 billion. However, there is currently a funding gap of approximately 400 million Kina (equivalent to over $100 million) needed to complete all the proposed projects in the pipeline.

Accessing international climate finance and development assistance has been a challenge for Papua New Guinea, as Small Island Developing States often face barriers in securing such funds. Nevertheless, the country has received support from the Asian Development Bank and the Government of Australia for the Power Sector Development Project, which aims to increase electricity access and improve system efficiency.

The Green Climate Fund, the world’s largest climate finance mechanism, has only funded one project in Papua New Guinea to date, totaling $2.4 million. Unlocking additional climate finance will be crucial for the country to realize its renewable energy ambitions and build resilience to the impacts of climate change.

Community Engagement and Capacity Building

Meaningful community engagement and capacity building will be essential for the successful implementation of Papua New Guinea’s energy transition. With 97% of the land area under customary ownership and 75-80% of the population living in rural areas, empowering local communities to participate in and manage their electricity systems is key.

The Pawarim Komuniti program, for example, provides grants to civil society organizations for off-grid electrification projects, emphasizing local ownership and community involvement. Similarly, the Town Electrification Investment Program has focused on building the capacity of provincial and local governments to manage and maintain renewable energy infrastructure.

Ensuring that women, youth, and marginalized groups are included in these efforts is crucial, as they are often disproportionately affected by energy poverty and climate change impacts.

Navigating a Sustainable Future

Papua New Guinea’s energy transition is a complex endeavor, fraught with challenges but also vast potential. By harnessing its renewable resources, building resilience to climate change, and empowering local communities, the country can chart a path towards a sustainable and equitable energy future.

As the world grapples with the imperative to address climate change, the lessons and experiences from Papua New Guinea’s journey can provide valuable insights for other nations seeking to transition their energy sectors and unlock the benefits of clean, accessible, and reliable electricity for all.

Exploring Key Policies and Stakeholders Shaping Papua New Guinea’s Energy Landscape

Guiding Policy and Regulatory Frameworks

Papua New Guinea’s energy sector is governed by a suite of policies and regulatory frameworks, each playing a crucial role in shaping the country’s transition towards a low-carbon future.

The Papua New Guinea Development Strategic Plan 2010-2030 outlines two major energy- and climate change-related goals: ensuring all households have access to reliable and affordable energy, and adapting to the domestic impacts of climate change while contributing to global efforts to reduce greenhouse gas emissions.

The National Energy Policy 2017-2027 aims to promote the development of sustainable energy resources, including the creation of a renewable energy master plan, green energy certification schemes, and feed-in tariff programs. However, the policy also reaffirms the exclusive rights of the state-owned utility, PNG Power Limited, to sell electricity to smaller customers.

The National Energy Authority Act of 2021 establishes the National Energy Authority as the regulator of the electricity industry, responsible for overseeing generation, transmission, distribution, and retailing for both renewable and non-renewable energy resources.

The Climate Change (Management) Act of 2015 (amended in 2021) provides a regulatory framework for managing climate change, including the creation of the Climate Change Development Authority to implement clean energy programs and procedures.

These policies and regulations form the foundation for Papua New Guinea’s energy transition, guiding investments, regulations, and institutional responsibilities.

Key Stakeholders and Their Roles

PNG Power Limited (PPL): The state-owned utility that manages the generation, transmission, and distribution of the country’s three main grids and 16 mini-grids. PPL’s monopolistic structure and reliance on diesel-powered generation have been identified as barriers to the growth of renewable energy.

Department of Petroleum and Energy: This government department is responsible for administering and regulating all petroleum-related projects, as well as overseeing non-fossil and renewable forms of energy.

Climate Change Development Authority (CCDA): Formerly the Office of Climate Change and Development, the CCDA coordinates climate change-related policies, procedures, and actions across the country.

National Energy Authority (NEA): The regulatory body established by the National Energy Authority Act, responsible for promoting transparency, ensuring a reliable energy supply, and encouraging the development of a dynamic energy sector.

Customary Landowners: With 97% of Papua New Guinea’s land area under customary ownership, local communities play a crucial role in renewable energy project development, requiring extensive engagement and negotiation.

Development Partners: Organizations such as the Asian Development Bank, the World Bank, and the PNG Electrification Partnership provide financial and technical assistance to support Papua New Guinea’s energy transition.

Civil Society Organizations: Groups like the Center for Environmental Law and Community Rights (CELCOR) have raised concerns about the impacts of fossil fuel projects and the need for a greater emphasis on renewable energy development.

The interplay and coordination between these diverse stakeholders will be essential for navigating the complex challenges and realizing Papua New Guinea’s energy transition goals.

Harnessing Renewable Energy Potential Amidst Grid Modernization Efforts

Mapping the Existing Power Infrastructure

Papua New Guinea’s existing power infrastructure is predominantly centered around three main grids managed by the state-owned utility, PNG Power Limited (PPL):

1. Port Moresby Grid: The largest grid, with a peak demand of around 125 MW in 2019, serving the capital city and its surrounding areas.
2. Ramu Grid: Covering the largest geographic area, with a peak demand of approximately 97 MW in 2019.
3. Gazelle Grid: Serving East New Britain and the Gazelle Peninsula, with a peak load of around 10 MW.

In addition to these main grids, PPL also operates 16 mini-grids serving 26 provincial centers, which are almost entirely powered by diesel generators.

Despite the country’s efforts to expand electricity access, the existing transmission and distribution infrastructure is currently “deteriorating,” according to experts. This aging network, combined with the low population density and dispersed nature of rural communities, has hindered the expansion of the grid to reach the country’s unserved regions.

Grid Modernization and Expansion Initiatives

To address these challenges, the Government of Papua New Guinea, with the support of development partners, has launched several initiatives aimed at upgrading and expanding the country’s power infrastructure:

1. Power Sector Development Project: Funded by the Asian Development Bank and the Government of Australia, this project aims to increase electricity access and improve system efficiency across Papua New Guinea. It includes the construction of new transmission lines, substations, and the installation of smart meters.

2. Improved Energy Access for Rural Communities Project (IEAP): This previous initiative, supported by the governments of Japan, New Zealand, and Papua New Guinea, focused on piloting community-based contracts and prepayment meters to expand grid connections in rural areas.

3. Town Electrification Investment Program: Implemented with the assistance of the Asian Development Bank, this program aims to replace diesel generation with the construction of six run-of-river hydropower plants and associated transmission infrastructure in provincial centers.

4. National Electrification Rollout Program: Designed to help achieve the government’s 70% electrification target by 2030, this program seeks to connect underserved and vulnerable populations through least-cost methods.

These projects, while making progress, have faced challenges in securing sufficient financing and addressing land acquisition issues, which have hindered their full-scale implementation.

Navigating Land Tenure and Environmental Considerations

The vast majority of land in Papua New Guinea is under customary ownership, which presents unique challenges for grid expansion and renewable energy project development. Acquiring land for infrastructure often requires lengthy negotiations with local communities and the establishment of “lease-lease back” agreements.

Environmental permitting and impact assessments are also essential, with projects classified into different levels based on their potential environmental risks. All projects must undergo environmental monitoring, and higher-level projects require comprehensive Environmental Impact Statements.

Balancing the need for energy infrastructure with environmental and social considerations is a delicate process that requires close collaboration between project developers, regulatory bodies, and local communities.

Capacity Building and Community Ownership

Empowering local communities to participate in the management and ownership of their electricity systems is a crucial aspect of Papua New Guinea’s energy transition. Initiatives like the Pawarim Komuniti program provide grants to civil society organizations for off-grid electrification projects, emphasizing community involvement and capacity building.

Ensuring that women, youth, and marginalized groups are included in these efforts is essential, as they are often disproportionately impacted by energy poverty and climate change.

Developing the skills and knowledge of local technicians, engineers, and managers is also vital for the long-term sustainability of the country’s power infrastructure. Training programs and technical support can help build the necessary capacities to install, operate, and maintain renewable energy systems.

Unlocking Financing for Grid Modernization and Renewable Energy

Addressing the funding gap for Papua New Guinea’s energy transition will require a multi-pronged approach, leveraging a variety of financing sources and mechanisms.

While the state-owned utility, PNG Power Limited, is able to fully recover its investment costs, this model may not be sufficient to drive the level of investment needed to achieve the country’s ambitious electrification and renewable energy targets.

Grants-based financing, particularly for renewable energy projects, can help address the high upfront costs without requiring repayment. Development partners, such as the Asian Development Bank and the World Bank, as well as international climate finance mechanisms like the Green Climate Fund, can play a crucial role in providing grant-based support.

Attracting private sector investment through public-private partnerships and innovative financing models, such as feed-in tariffs and carbon financing, can also help bridge the funding gap and catalyze the deployment of renewable energy technologies.

By leveraging a diverse range of financing sources and engaging with the private sector, Papua New Guinea can unlock the resources needed to modernize its grid, expand electricity access, and harness its abundant renewable energy potential.

Navigating the Fossil Fuel Landscape and Climate Risks

The Proposed Papua LNG Project and Its Implications

Amidst Papua New Guinea’s efforts to transition towards renewable energy, the country is also grappling with the potential development of a large-scale liquefied natural gas (LNG) project, known as the Papua LNG.

The Papua LNG project, led by TotalEnergies and its partners (ExxonMobil, Santos, and JX Nippon), aims to extract natural gas from the Elk-Antelope Gas Field and transport it via a 320-km pipeline to a liquefaction facility near Port Moresby. The project has a planned capacity of 5.6 million tonnes per annum (Mtpa) and is expected to be the country’s second large-scale LNG venture, after the existing PNG LNG project.

However, the Papua LNG project faces several challenges:

1. Timing and Market Risks: Experts predict that by the time the project comes online, the global natural gas market may be oversaturated, leading to lower-than-anticipated pricing and revenue. The International Energy Agency also forecasts a 55% decrease in global gas demand by 2050.

2. Financial Risks: The project’s estimated cost of $13 billion poses significant financial risks for Papua New Guinea, which is already burdened by a severe debt of $51.2 billion. The government’s ability to acquire a 22.5% stake in the project upon approval is also uncertain.

3. Environmental and Social Impacts: The project’s infrastructure is planned to be constructed in dense jungle areas near the Purari River, raising concerns about its potential impact on biodiversity and local communities. There are also worries about the project’s contribution to Papua New Guinea’s greenhouse gas emissions.

These challenges have led several major banks, including BNP Paribas, Crédit Agricole, and Société Générale, to announce that they will not finance the Papua LNG project.

Assessing Climate Vulnerabilities and Adaptation Efforts

As one of the world’s most climate-vulnerable countries, Papua New Guinea is already experiencing the impacts of a changing climate, including landslides, soil erosion, deforestation, and floods. These events are projected to become more frequent and severe, threatening the country’s predominantly rural population and its agriculture-based economy.

To address these challenges, the Government of Papua New Guinea has outlined several key actions in its Nationally Determined Contribution (NDC) and National Adaptation Plan:

1. Strengthening Institutional Capacities: Enhancing the ability to mainstream climate change adaptation and disaster risk reduction into decision-making processes.

2. Building Resilience at Multiple Levels: Increasing awareness, providing early warning systems, and facilitating public and private investments in climate change adaptation.

3. Prioritizing Vulnerable Sectors: Focusing on the agriculture, infrastructure, transportation, and health sectors, which are particularly susceptible to climate impacts.

These efforts, if implemented effectively, can help Papua New Guinea build resilience and adapt to the evolving climate risks. However, securing the necessary financing and technical assistance remains a significant challenge for the country.

Transitioning Away from Fossil Fuels

As Papua New Guinea grapples with the potential development of the Papua LNG project, the country must also navigate the transition away from fossil fuels to achieve its ambitious renewable energy targets and climate goals.

Civil society organizations, such as the Center for Environmental Law and Community Rights (CELCOR), have raised concerns about the risks of “locking in” fossil fuel infrastructure and the need for a greater emphasis on renewable energy development.

The International Energy Agency’s Net-Zero by 2050 roadmap indicates that