MOVING away from diesel power generation and towards alternative sources of energy provision will help Papua New Guinea meet its ambitious electricity supply targets, a new report has found.

In its in the Papua New Guinea Development Strategic Plan, released in 2010, the PNG government set itself the target of giving 70 per cent of the population access to electricity by 2030.

But the nation would find it very difficult to meet this guideline, according to the Powering PNG into the Asian Century report, prepared by Port Jackson Partners for ANZ Bank.

One of the major obstacles for this occurring was the fact that only about 8% of the PNG population had any access to a permanent power source – compounded by the fact that about 85% of the population lives in rural areas.

Assuming 100% of people living in urban areas were able to access electricity, PNG would need to provide access to 65% of people living in rural areas to make the target by 2030.

Only 7.6% of rural Papua New Guineans have access to electricity at present, while those without it relied on energy sources such as kerosene, candles and biomass – a combination of wood, dung and agricultural waste burnt for heat.

On current levels, the report says electricity supply would need to increase by 225% to meet the 2030 target – a position the report said would put state-owned utility PNG Power Ltd (PPL) under particular pressure.

“PNG will find demand growth of this pace and scope difficult to deliver, as capacity must be added at a pace never before achieved in PNG,” the report said.

Of the electricity generated in PNG at the moment, 40% was from diesel fired power stations and 37% was hydroelectricity, with both used in the Port Moresby grid – where diesel dominates – and the Ramu grid, where hydropower contributes more to the energy mix.

For these two power generation options to meet the 2030 target, over 1,300 megawatts of capacity would need to be built over 15 years, set to cost over US$15 billion on the current energy mix and current costs.

While diesel generation was cheap to build and to install, the cost of the fuel makes it the most expensive alternative across the life of the plant, the report said.

LNG power stations made up 16% of power generated and geothermal energy was 7% – but both of these energy sources are uniquely from private industrial activities, though some energy is being sold into the domestic market.

Instead, using solar power, hydro power and biomass energy sources would see emissions halve and one third of expected expenditure saved.

But to make these savings, PNG must be prepared to move beyond a plan to keep most of its population on an extended power grid.

“As off-grid solutions improve in cost and reliability, the area for which grid extensions make sense is shrinking,” the report said.

“For PNG, this area now ends much closer to the current electricity area than often thought. Outside urban areas, it is likely that most people currently off the grid should remain off the grid.”

Research from the report suggested that for villages with populations of fewer than 2,000 people located further than 5 kilometres from the existing grid, even the highest cost stand-alone alternative was more cost efficient than extending the grid.

Instead, the report found that while many emerging technologies had large upfront investments, ongoing costs were low, leading to lower costs overall.

For those centres likely to remain off-grid, the report suggested a variety of different options, depending on the nature involved.

Larger remote provincial towns with sufficient industrial or residential waste could consider waste-to-energy plants, while urban centres outside the highlands could consider using solar power to complement existing diesel capacity.

By the same logic, agricultural residues from cocoa, palm oil and coffee production could be used to fuel biomass plants to provide energy for crop processing.

Solar power and micro-hydro facilities could also be used in more remote centres to replace kerosene – delivering over six times the energy for the same price, the report said.

“Where sufficient sunlight exists, solar and storage systems provide better economics and are otherwise more practical than diesel generation.”

Using these new power generation and storage techniques could reduce the required expenditure from around US$15 billion to US$10 billion, saving around US$5 billion over 15 years, as well as halving carbon dioxide emissions over the same period, the report said.

However, the report also said it was pragmatic to retain some diesel power generating capacity in case other technologies were unreliable – recognising that power would be more expensive as a result.

To facilitate this, the report advocated the creation of a Rural Electrification Agency (REA) to help support the establishment of new rural electrification models by facilitating a tender process for different potential service providers.

This would be part of a broader restructure of PPL recommended by the report, separating its power generation, transmission and retail divisions in to three separate entities in a bid to make the company more efficient.

Creating extra competition in the sector and a potential privatisation of PPL could also be considered, though the report said that privatisation of power transmissions should be done with “extreme care, if at all.”

“If managed poorly privatisation of transmission assets can lead to wasteful duplicative infrastructure,” the report said.

“Privatisation of transmission is not, nor should it be, the first priority in a broader electricity reform program.”

Instead, these priorities should be on creating a concerted planning effort on behalf of local and international stakeholders for energy provision.

“With PNG’s development challenge being primarily rural, new delivery models capable of delivering success in economically and geographically challenging contexts are central to success,” the report said.

“With new models emerging for electricity provision now is the time to reassess PNG’s electricity approach. The size of the prize necessitates an immediate and focused evaluation, allowing PNG to set the course for decades to come.”