Power play that turns on the lights

The National Business

By PETER ESILA
INDEPENDENT power producers (IPPs) are critical to the electrification of the country by ensuring that PNG Power Ltd does not have to use its capital by building new power plants.
This helps PNG Power to save millions annually.
Chairman of the Independent Power Producers of PNG (IP3) industry group, David Burbidge, says IP3 is a peak industry group to represent the interests of IPPs.
This comes with assisting with public policy formation and implementation, and serve as a platform for information dissemination to its members, with due regard for the prescripts and limitations imposed by the Competition Act.
“We pro-actively engage with legislators, government officials, planners, regulators, PNG Power Ltd, and the Business Council of PNG as part of our initiatives to achieve energy security and independence in Papua New Guinea,” Burbidge said.
He said IP3’s objectives were to:

  • Provide equal opportunity to all industry players participating in the energy sector to achieve affordable and sustainable power generation;
  • Meet quarterly to discuss strategic engagement with the Government;
  • Assist Government in developing a streamlined and best practice IPP application process;
  • Represent members in various platforms including at national and provincial government levels;
  • Inform members on latest policy, legislation and regulatory developments;
  • Make representations to key decision-makers on appropriate policies to develop a sustainable independent power production market;
  • Mobilise the independent power production sector via working groups, seminars and workshops to define clear positions on political, technical and economic issues;
  • Promote all sustainable power technologies;
  • Organise networking events including breakfasts, seminars, conferences where topical issues on independent power production are highlighted and discussed;
  • Promote competition in the generation sector. Driven by the belief that competition rewards innovation, provides new choices, and creates a downward pressure on market prices for consumers;
  • Review and provide input into new policies impacting power generation;
  • Operate ethically and respect Independent Consumer and Competition Commission (ICCC) competition regulations; and
  • Ensure a high standard of governance.

IP3 was founded in 2018 as an informal industry group by four IPPs: NiuPower, PNG Biomass, PNG Forest Products and Posco-Daewoo Power.
He said each member of IP3 Industry Group, including associates and experts, had extensive experience from around the world that could be used to help shape PNG’s energy policies and provide insight into effective implementation.
“We work closely with ICCC, PNG Power, and the Business Council of PNG – all whom are members of IP3,” Burbidge.
Industry Members:

  • NiuPower is an independent power producer owned jointly by Kumul Petroleum and Oil Search. It is focused on development of power generation facilities in PNG fuelled by PNG-produced natural gas. NiuPower is currently developing the Port Moresby Power Station as its foundation investment.
    The Port Moresby Power station is a nation-building infrastructure project.
    It uses natural gas supplied by the PNG LNG project to feed six high-efficiency reciprocating gas engine generators.
    It will produce 58MW base load power to the Port Moresby power grid through a new 66kV power line and substation network being developed by PPL.
    The power station reached mechanical completion in Dec 2018 and is currently due to commence commercial operations in March 2019.
  • PNG Biomass is a wholly-owned Oil Search subsidiary that operates the Markham Valley Power Project as a low carbon, renewable and sustainable energy initiative.
    It is a long-term renewable energy initiative that will use wood chips from tree plantations, grown and sustainably harvested in Morobe, to provide low-cost, renewable and reliable biomass power.
    PNG Biomass will use wood chips harvested from sustainably-grown trees in surrounding plantations to fuel a biomass power plant to provide up to 30MW into Lae and the Ramu grid, with generation due to commence in 2020.
  • PNG Forest Products operates three hydro power stations with a combined installed capacity of 14.9MW at Baiune.
    Firstly a 9.4MW hydro power station was rebuilt at Pine Tops and commissioned in 2012, and then the present 3.5MW Lower Baiune and 2MW Upper Baiune hydro- power stations were built.
    This was a major undertaking for the company and is the first such project in PNG whereby a hydro power station has been built by a private organisation as a commercial venture for the sole purpose of supplying power to PNG Power.
  • PNG Hydro Development
  • Posco Daewoo Power has supplied 24MW internal combustion electric power to meet the power grid demand through a plant situated in Kanudi, Port Moresby.
    Upon serving a 15-year contract from 1999 to 2014, it accomplished to secure the basis for stable power production for additional five years through successful rehabilitation, operation, maintenance and management (ROMM) by life extension and efficiency enhancement of the power plant.
    POSCO Daewoo also signed another power purchase agreement to establish and operates a 30MW internal combustion electric power plant in Lae, the country’s second largest city, which started commercial operation in June 2018, solidifying its position as a power producer in PNG.

Associate Members:

  • PNG PPL
  • ICCC (application received)

Expert Members:

  • Sarah Kuman, partner, Allens Lawyers
  • Vaughan Mills, partner and head of PNG Practice, Corrs Chambers Westgarth (application received)
  • Christian Lohberger president, Solar Energy Association of PNG (application received)
  • P3 also hopes that New Britain Palm Oil Ltd to be an IP3 member as well.

Burbidge said IP3 would promote competition in the generation sector by helping streamline the development process, and making sure that permitting and due process happened smoothly and without any political interference.
This will then attract new players to the market bringing new technology, speeding up developments and driving competition.
PNG Power released its Independent Power Producer and Major Infrastructure Policy (IPP Policy) in Oct 2018.
The policy clarifies the situations and manner in which private sector partners can participate in implementing PNG Power’s least cost development plan and other strategic and economic enhancing opportunities in the power sector.
“The IPP Policy has an essential role in meeting PNG’s long-term objectives of making electricity reliable, safe and affordable to all Papua New Guineans,” Burbidge said. “PNG Power insists that its partners comply with the IPP Policy.
“However, compliance alone is not sufficient to get PNG Power’s approval on any one project.
“For every project, PNG Power will adhere to its normal statutory governance approval process.
“Electricity constitutes one of the most-important components of infrastructure and plays a key role in national growth and development.”
According to the policy, with only 13 per cent of Papua New Guineans having access to electricity, significant load growth in key demand centres, and an aging asset base, the expansion of electricity generation was a key factor in future development of PNG.
It stated that the growing pace of urbanisation and industrialisation also put a premium on demand for electricity with challenges involved in meeting the country’s energy demand providing motivation for resource mobilisation, and improving efficiency through involvement of the private sector to meet consumer expectations within affordable limits of tariff.
“The GoPNG has set a target of 70 per cent access to electricity by 2030 and achieving this target will require massive capital investment,” the policy said.
“The World Bank estimates that it will cost from US$1.4 to US$1.7 billion to connect these households, which does not include the cost of expanding generation and transmission.
“The World Bank further estimates that this increase in electricity access will grow demand by about 300MW, which does not include additional commercial, industrial and mining projects which might appear from the country’s electrification.
“The GoPNG has also set a target of 100 per cent renewables generation by 2050. As recently as 2013, PNG Power generated 70 per cent of its energy from renewable sources.
“However, due to inadequate maintenance of our hydropower assets, this ratio has dropped to 46 per cent. This shortfall has been made up by thermal generating assets that burn either diesel or fuel oil.
‘Not only has this made it more difficult for PNG Power to achieve the Government’s renewables target, but it has raised our cost of generation and increased our exposure to international oil price volatility.’
“To reach the Government’s targets and also meet our mission of delivering safe, affordable and reliable power, we recognise the importance of having in place policies
that clearly define avenues and extent of participation of our development partners and the private sector.”
PPL acting managing-director Carolyn Blacklock said late last year: “We are thrilled to see responsible cornerstone members of the IPP Group. It signals a new era in power generation in our country.
“We welcome the opportunity to engage with the IPP Group and ensure ongoing dialogue.”
“I would expect a number of new IPPs will be entered into across our country as we ramp up the consumption of electricity allowing the switch from high cost, non-renewable fuels such as diesel and replaced with lower cost, more sustainable fuels.”