A recent report, the Asia Pacific Outlook released in April, has highlighted the crippling effects of an unreliable power supply on economic growth in Papua New Guinea’s main urban areas.
The report paints a grim picture of frequent blackouts, inadequate generation capacity, and aging networks plaguing the country’s electricity infrastructure.
The situation is dire, with businesses and residential areas resorting to self-generation and backup diesel-based power due to the unreliability of the grid. These measures, while providing temporary relief, come at a high cost both financially and environmentally.
Financial Strain on Power Utility
The report points to PNG Power Limited (PPL) as being in a deteriorating financial condition. Low tariffs, last adjusted in 2013, fail to cover PPL’s costs, leading to a deprioritization of maintenance on its network and generation assets. As a result, technical and commercial losses mount, further exacerbating the financial strain on the utility.
One of the glaring issues highlighted in the report is the absence of a national government-led plan for energy sector development. PPL’s internal generation and grid planning lack alignment with national regulatory bodies or government budget plans. Private sector participation, introduced in 2013, has led to ad hoc investments in power generation, further complicating the issue.
Despite Papua New Guinea’s abundant renewable energy resources, including hydropower, solar, wind, biomass, and geothermal energy, the transition from diesel generation remains limited. Legal barriers and restrictions hinder the development of renewable energy installations, stifling potential progress in this crucial area.
The report emphasizes the urgent need for reforms in three key areas to address the challenges facing Papua New Guinea’s power sector. Firstly, restoring the financial sustainability of the sector through tariff adjustments and improved operations is paramount.
Secondly, creating a national transition plan towards a low-carbon power sector is essential, including removing legal barriers to renewable energy installations. Finally, enabling efficient private sector involvement through competitive bidding and transparent tenders is crucial for attracting much-needed investment.
The Asia Pacific Outlook report underscores the critical importance of addressing the challenges plaguing Papua New Guinea’s power sector. Without swift and decisive action, the country risks further economic stagnation and continued reliance on unreliable and environmentally damaging energy sources.