Hydropower leads renewable energy push in PNG

Papua New Guinea’s rugged mountainous highlands are ideal for hydroelectric power generation, and the government has been keen to capitalise on its abundant hydro resources as it develops new renewable energy projects. A large number of hydropower projects are under the management of Kumul Consolidated Holdings (KCH), the statutory body responsible for overseeing public infrastructure projects. They are planned for development under a public-private partnership (PPP) framework, a promising indication that the PPP model could be expanded into major transportation and infrastructure projects in the coming years. The government’s long-term economic development plans foresee meeting PNG’s total energy needs via renewable resources.

In addition to hydropower, the country is making steady progress towards launching new solar and geothermal projects, with rising investor interest in renewables development expected to support a robust mid-term capacity growth in production.

High Hydro Potential 

PNG’s challenging geography has given it significant hydroelectric potential. The country’s topography includes nine large hydrological drainage basins, fed by a vast network of large rivers. PNG’s largest river basins include the Sepik, with a 78,000-sq-km catchment area; the Fly River basin, which extends for 61,000 sq km; the Purari River basin, covering 33,670 sq km; and the Markham River basin’s catchment area, which covers 12,000 sq km. Additional river catchments are located in extremely steep terrain, according to the APEC forum, although these are generally less than 5000 sq km. Average annual rainfall on mainland PNG fluctuates from less than 200 cm in the driest areas to 800 cm in mountainous regions, while the island regions receive around 300 cm to 700 cm. Additionally, better management of the countries water resources would be welcome, especially in terms of energy production. “Non-water revenue (NRW), from water loss to theft, stands at about 35% in PNG. To put this in perspective of room for development, Cambodia leads the world at 4% NRW,” Raka Taviri, CEO of Water PNG, told OBG.

Hydropower currently accounts for approximately 40% of total installed capacity in the country, with hydro plants operating in each of the country’s three main national grids: the Port Moresby, Ramu and Gazelle Peninsula systems.

National Grids 

The Port Moresby system’s generation comes from four hydropower stations; the 62.2-MW Rouna system, located along the Laloki River; the controlled water storage in the Sirinumu Reservoir; the 30-MW diesel and gas turbine thermal power station at Moitaka; and the generator located at the Sirinumu Dam. In addition, a privately owned, diesel-operated power station at Kanudi offers 24 MW of capacity to the capital.

The Ramu system is mainly fuelled by the Ramu Hydro Power Station, which offers 75 MW of installed capacity divided between five 15-MW units. Hydro energy to the system is also supplied by the 12-MW Pauanda run-of-river station in the Western Highland Province and purchased from the privately-owned Baiune hydropower station in Bulolo in Morobe Province. The station generates between 1-2 MW of power. Additionally, diesel plants located in Madang, Lae, Mendi and Wabag offer standby power options.

The smallest grid, the Gazelle Peninsula system, sources electricity from the 10-MW Warangoi hydro plant and two diesel plants: an 8.4-MW facility in Ulagunan and a 0.5-MW facility in Kerevat. Oil-based power stations also serve isolated communities in the region, according to APEC.

Renewable Prospects 

According to the Asian Development Bank (ADB), PNG’s hydropower resources could have the potential for up to 10,000 MW of generation capacity, although at present that number is closer to 215 MW. The country is also looking to geothermal energy as a potential new source of energy. APEC reported that PNG’s gross theoretical hydropower potential is 175 TWh annually, while the Geothermal Energy Association has estimated the country’s geothermal potential at 21.9 TWh. This means the country could theoretically meet all its domestic energy needs via geothermal sources well into the future.

By 2035 the government hopes to have developed 500 MW of new geothermal electricity generation capacity, and has targeted meeting 100% of domestic energy demand via renewable resources by 2030, according to APEC’s 2016 “Energy Supply and Demand Outlook.” However, these goals depend on international financial support.

Additionally, APEC projects that natural gas is set to play a much larger role in energy generation until 2040, reporting that the share and volume of gas in PNG’s total primary energy supply (TPES) is set to rise from 5%, or 928,570 barrels of oil equivalent (boe) in 2013, to 37%, or 32.1m boe, by 2040. Oil’s share is set to fall from 78% of TPES in 2013, to 45% in 2040. Renewable energy’s share of TPES is also forecast to fall, from 18% in 2013 to 16% in 2040, even as its volume rises from 3.2m boe to 13.6m boe.

Hydro Projects 

With solar and renewable energy lacking clear strategic development plans, hydro-power is expected to drive future renewable energy generation, as evidenced by the launch of several new hydro projects in recent years. Critically, many of these projects are under development by KCH, with private sector participation enabling PNG to move forward on projects which might otherwise be too capital-intensive.

In a February 2017 assessment of PNG’s PPP Act 2014, Australia’s Pacific Legal Network wrote that PPP project implementation has been limited so far, with the government’s planned PPP centre yet to be established. The firm noted that a “shining light” in the PPP space is KCH, which manages a portfolio of critical infrastructure projects valued at more than $7bn, of which $6bn are planned to be delivered using a shared public and private investment model. A large share of these are hydroelectric power projects, including the Karimui, Ramu 2 and Mendi hydro projects.

Karimui 

The largest hydro project currently under development in PNG is the 1800-MW Karimui project in Simbu Province. The dam will be located upstream from the confluence between the Waghi and Asaro Rivers, with its layout including an area of rockfill dam, two 130-km power tunnels and a powerhouse area. Site access will be through a new 90-km permanent access road connected to the 50-km Chuave section of the Highlands Highway.

The $2bn project is expected to begin construction in 2017, with a completion date set for 2023. KCH signed a memorandum of understanding (MoU) with Italian construction company Salini Impregilo in April 2015, and in February 2016 the company released a feasibility study for the project, which highlights requirements beyond dam construction, including the construction of roads and bridges leading to the dam. The study calls for the upgrade or replacement of 42 bridges between second city Lae and the dam site. Although the project’s financing scheme has not yet been made public, KCH reported in February 2016 that it aimed to formalise a PPP modality by the end of the year, either under a build-operate-transfer model or a build-own-operate-transfer model.

Ramu 2

Another significant hydro project under development is the Ramu 2 scheme, which will be located downstream from the existing Yonki Dam on the Ramu River near Kainantu in Eastern Highlands Province. The $2bn, 180-MW project is expected to boost the facility’s capacity by 194%, to hit 273 MW and boost PNG’s total generation capacity by 36%. It is being developed under a PPP model in partnership with China’s Sinohydro Corporation and Shenzhen Energy Group. Developers had originally planned to begin construction on the project in 2017; however, delays have set this date back. PNG Power reported in May 2017 that contract negotiations are still ongoing, although the company anticipates the project will still move forward.

Edevu

Private sector interest in hydro projects outside of KCH’s portfolio has also increased in recent years. In February 2017, for example, state-owned PNG Power officially launched the 50-MW Edevu hydropower project, located in the mountainous Kairuku-Hiri District in Central Province. It is expected to provide an additional 50 MW of supply to Port Moresby.The PGK640m ($202.9m) project is being developed by Chinese company PNG Hydro Development, with plans to use the Edevu River to generate new electricity at the site.

According to Andrew Ogil, chairman of PNG Power, the state is currently negotiating a power purchasing agreement to supply Port Moresby starting in 2020. It is being financed by the Hunan Provincial Government and the Export-Import Bank of China, along with AG Investment Group.

Small-scale Projects 

It is not just large-scale projects that are important to the country’s energy mix. Small-scale hydro projects are also proliferating across the country, playing an important role in reducing use of costly diesel generators.

The Korean Southern Power Company (KOSPO), for example, announced in September 2016 that it had signed an MoU with the government of PNG to secure additional sources of electricity using hydro-power, with the company focusing on rapid construction of small-scale hydropower projects, which have the potential to be located all across the country. Local firm PNG Forest Products has already established three small hydro stations with a combined installed capacity of 15 MW in Morobe Province, and PNG Power has also begun construction on the 3-MW Divune hydropower plant at Popondetta in the country’s Oro Province.

Solar & Biomass 

The government is also making steady progress in expanding its renewables base. In May 2014, for example, the International Finance Corporation announced it had launched a new project aimed at attracting private investment into rooftop solar generation, and in February 2017, PNG Power signed an MoU with South Korea’s K&P Investment Company to conduct a feasibility study for a 50-MW solar farm, which would feed into the Port Moresby system. PNG Biomass, a subsidiary of local oil and gas company Oil Search, is also moving forward on the 15-MW Markham Valley biomass project, located roughly 55 km north-west of Lae. The plant would be fuelled by trees grown in the valley, and feed into the Ramu system. According to local media reports, front-end engineering and design work is expected to be completed before 2018.