A profile of the energy sector in Papua New Guinea, including an overview, key players, peak bodies, funding sources and incentives.

Industry snapshot

According to the World Bank as of 2022, about 19% of PNG’s population has access to electricity, but grid penetration in provincial capitals is less than 14%. PNG’s per capita consumption ratio of electricity is also one of the lowest in the world.

However, PNG’s energy sector is currently undergoing a significant transition due to two major recent developments. These are PNG’s entry into the family of LNG-producing nations in 2014 and the announcement at APEC 2018 of the PNG Electrification Partnership, a program which has as its aim the roll-out of electricity to 70% of PNG’s population by 2030.

State-owned PNG Power Ltd is the major power utility in PNG, with responsibility for power generation, transmission, distribution and retailing. It is one of a number of state-owned companies owned by the state-owned umbrella company, Kumul Consolidated Holdings.

While PNG Power has an effective monopoly in most population centres areas, there are opportunities for the private sector in PNG’s energy market, both for power generation and power wholesale outside of populous areas (e.g. to mines).

The past decade has seen the emergence of several Independent Power Producers (IPPs), which have executed power purchase agreements to supply PNG Power with electricity. The peak body for IPPs in PNG is IP3.

PNG Power runs just two major power grids: Port Moresby (which services the National Capital District and Central Province) and Ramu (which services PNG’s MOMASE region and parts of the Highlands). Other parts of PNG are serviced by 19 independent power systems, many of which rely on costly diesel power.

Due to frequent power outages, most larger companies in PNG own their own backup generators in addition to buying electricity from PNG Power.

Regulatory framework

Under PNG’s Vision 2050 document, PNG has a stated goal of reaching 100% renewable power by 2050.

PNG’s National Energy Policy, 2017–2027, also proposes the establishment of a National Energy Authority ‘to regulate and promote the development, dissemination of information regulation and licensing relating to all forms of energy, including non-renewable and renewable energy sources’. In this, it would take over some of the roles previously performed by the Department of Petroleum and Energy, including being ‘chief implementer’ of future energy projects.

In February 2021, the National Executive Council endorsed a National Energy Authority Bill and an amendment to the Electricity Industry Act 2002 to achieve this reform.

The electricity industry and power pricing is currently regulated by the Independent Consumer and Competition Commission (ICCC). PNG’s National Energy Policy anticipates the eventual establishment of separate Energy Regulatory Commission.

Gas

With the advent of the PNG LNG project in 2014, PNG began exporting LNG. Subsequently, arrangements were made for the use of gas for local power generation.

Two gas-fired power stations have subsequently been built in Port Moresby by IPPs: the 58MW Niupower power plant (a joint venture of Kumul Petroleum Holdings and Oil Search Ltd) and the 45MW Dirio Gas and Power (owned by state-owned Mineral Resources Development Corporation). The latter is due to be commissioned in 2021 while the former is already operational.

A proposal for a gas-fired power station in Hela Province, with first power due in early 2023, was also being explored as of the start of 2021.

In January 2021, Kumul Petroleum Holdings Limited awarded two contracts to design and develop a Floating, Storage, Re-gasification and Power (FSRP) Generation unit to be located in the northern region of PNG. This would facilitate the distribution of gas to smaller, more remote power generation projects amounting to about 75MW in total.

Hydropower

With its high rainfall and mountainous terrain, PNG is ideally suited to hydropower. Indeed, much of its existing power generation infrastructure is based on it.

However, there has been only modest investment PNG’s hydropower infrastructure in the past two decades and much of this infrastructure needs upgrading, which was a major focus on PNG Power moving into 2021.

There are several new hydropower projects under consideration, including the 50MW Edevu project (which should come online in 2022), the long-considered Naoro Brown hydropower project and PNG Forest Products’ Baime hydropower project (12MW due in 2022).

There is further potential to develop hydropower in PNG. In 2020, Australia’s Fortescue Future Industries signed a deed of agreement with the PNG government to ‘investigate the feasibility of developing hydropower resources and other industries largely for export to global markets and also for domestic consumption’. It is understood that this agreement covers investigation of the potentially massive Purari River hydro scheme.

Solar

As its costs become more competitive, solar power is increasingly replacing more expensive diesel fuel for small-scale power generation.

PNG Biomass is currently building the 25MW Markham Valley Solar Farm, PNG’s first larger solar array.

The Solar Energy Association is the peak body for the solar energy sector in PNG.

Other renewables

PNG Biomass, owned by Oil Search Ltd, has a pilot 30 MW IPP focused on generating power from plantation timber.

Legislative framework

PNG Power was established under the Electricity Commission (Privatisation) Act of 2002. It is regulated under the Electricity (Amendment) Act.

External funding

PNG Power’s revenues are insufficient to fund the planned expansion of the country’s energy infrastructure. Funding for future projects is therefore expected to be in partnership with multilateral donors, single donors, and public-private partnerships.

The PNG Electrification Partnership was announced at APEC 2018 and involves funding from the US, Australia, Japan and New Zealand to assist PNG with extending electricity to 70% of its population by 2030.

Australia’s funding under this program is being partly delivered through the AUD$2 billion Australian Infrastructure Finance Facility for the Pacific.

The Asian Development Bank (ADB)’s proposed US$249 million Power Sector Development Project is also expected to support this goal. The ADB has been a longstanding supporter of investment in PNG’s energy sector.