State Owned Enterprise, PNG Power Limited, recently hosted a Power Sector Forum witth Independent Power Producers to discuss next steps in the reform of electricity costs in the country.
At this event, the first of its kind, PNG Power’s Managing Director, Flagon Bekker, announced that after a detailed analysis of all feasible options for least cost generation of electricity for grids in the country, PNG Power was giving notice to all Independent Power Producers that their power purchase agreements were being closely reviewed.
He emphasised, “We do not see this as a meeting between PNG Power and IPPs but rather between the people of PNG and the power producers.”
Independent power producers work in partnership with PNG Power to deliver affordable and reliable power to the grid and therefore to end-users and customers. They do this through contracts with PNG Power Limited called Power Purchase Agreements.
The review analysis revealed that the price at which independent power producers sell their power to PNG Power has a major impact on the final cost to the people of PNG.
Mr. Bekker went on to state, “PNG Power has a responsibility to all electricity users to maintain the lowest possible retail tariff. Independent studies have demonstrated that hydro, gas and solar are the cheapest technologies for power production in the short, medium and long term.”
The strategy underpinning the investment policy for the Power sector in PNG is known as the Low-Cost Power Development Plan. This ever-evolving strategy is regularly reviewed to incorporate the latest emerging technologies.
Mr. Bekker continued, “We will be working collaboratively with all existing independent power producers on a pricing formula that is consistent and cost effective for all stakeholders. We want a win-win situation for the people of PNG & independent power producers, while positioning the sector for lower tariffs going in the future. The Low-Cost Power Development Plan will do exactly this.”
Mr. Bekker noted that the Biomass Project in the Markham Valley had been issued a Power Purchase Agreement in December 2015, and that this contract was conditional upon the project reaching financial close within 18 months of the start of the agreement.
“It should be noted that various studies had revealed that although biomass was cheaper than current electricity production using diesel or heavy oil, it was not a least cost option for the future any longer. Technology in the sector has evolved bringing better and cheaper options to the market.”
“PNG Power issued a PPA to this long-running project including repeated extensions to give it the best possible chance of success. However, despite these extensions this project is still unable to dispatch power into the Ramu Grid.”
“PNG Power will be working to stabilise its major electricity transmission, distribution and mini-grids under a Grid Stabilisation Plan, to be announced soon. We will be progressing development of least cost power generation options such as hydro and solar renewable technologies while exploring all short-term options to replace liquid fuels such as diesel and heavy oil with Gas/LNG powered generation.”
To get the best value for PNG taxpayers all deals will be assessed and processed following PNG Power’s tollgate process. No deal gets progressed without first being in line with the low-cost power development plan for the sector and supporting PNG’s economic needs. PNG Power plans to run its first auction for new generation capacity in Quarter 3, 2021.
To get the best value for PNG taxpayers all arrangements with independent power producers will be assessed following PNG Power’s tollgate process. All have to be in line with the low-cost power development plan for the sector and support PNG’s economic needs. PNG Power plans to run its first auction for new generation capacity in Q3 2021.
Approved for Release
Flagon Bekker, Managing Director