Corrs High Vis: Episode 36 – The Papua New Guinea Electrification Partnership

Caitlin McPhee, Associate, PNG Practice
Nick Thorne, Partner, PNG Practice
Ryan Warokra, Special Counsel, PNG Practice

My name is Caitlin McPhee and I am a lawyer in the Papua New Guinea Team. I am joined today by Partner Nick Thorne and Special Counsel Ryan Warokra. Nick and Ryan are in the Corrs PNG Team and work between our Brisbane office and our Port Moresby office in Papua New Guinea.

Thank you both for joining me.

Good to be with you Caitlin.

Likewise.

So today we are going to talk about the Papua New Guinea electrification partnership which is an agreement with Australia, New Zealand, Japan and the United States that was entered into at the APEC Leader’s Summit in support of Papua New Guinea’s objective to give more people access to electricity.

Nick we will start with you. Tell us a bit more about the background for the agreement that was reached at APEC and the timeline for the project.

Thanks Caitlin. The PNG electrification partnership was announced during the APEC Leaders’ Summit that was hosted very successfully in Port Moresby in November last year and as you say Caitlin the partners in this initiative are Papua New Guinea, Australia, the United States, Japan and New Zealand. Now at the moment around 13% of PNG’s population of 8.5 million people have access to electricity, and that’s one of the lowest rates in the region, and the PNG electrification partnership aims to lift that rate to 70% by 2030. So the target of 70% is not new. It was a key goal that was set out in PNG’s Development Strategic Plan launched in 2010 and the vision for that strategic plan was for PNG to be a prosperous middle income country by 2030 and that’s really an ambition that will remain unrealised unless power can be delivered to the country’s people.

The Australian government has indicated it will contribute around A$25 million in project funding in 2019 against a total estimated project cost in the order of US$1.7 billion over 12 years. So it is a very substantial investment by the partners in PNG.

Thanks Nick. So Ryan as someone who has both lived and worked in Papua New Guinea how is the current power situation in your experience and how do you see completion of the project benefitting the country long term?

Thanks Cait – well I’ve lived in Port Moresby for most of my life and Port Moresby being the capital of Papua New Guinea is perhaps the most developed centre in the country, but even then in years past Port Moresby has suffered from blackouts and power interruptions. Now that situation has improved over the last few years, but outside of Port Moresby and other centres it hasn’t been as good. Centres like Lae for example, which is the industrial hub of Papua New Guinea, a lot of the businesses there have to keep their own standby power generation systems just to keep businesses going and power interruptions are quite a common occurrence and that’s leaving aside other more remote areas where public infrastructure is lacking and so people have to rely more on solar powered electricity for their daily use.

So the current situation – there is a real need for better power solutions for the country as a whole and the project is quite a positive thing – if it comes off, it certainly will be transformative for Papua New Guinea.

Thanks Ryan. Back to you Nick – what are some of the challenges that you think may be faced by the electrification project?

Well there are going to be multiple challenges – for a start Papua New Guinea has one of the least urbanised populations in the world with more than 80% of its people living in rural areas and the combination of this sort of decentralised population and very rugged topography is going to present I guess particular challenges for the country’s electrification.

It’s not going to be possible, for example, simply to add generation capacity without a significant investment in upgrading transmission and distribution networks. There are further problems in that there is relatively high connection costs for individual households whose usage is actually expected to be relatively low and large scale generation will not result in cheaper power unless that is used at or near capacity, and as I said before, large scale power production might be fit for purpose for large urbanised areas, like Port Moresby and Lae, but for the majority of the population that’s just not going to be appropriate. So it is really going to be a question about trying to get the electricity mix right.

One of the other unusual things about Papua New Guinea is its current electricity mix. PNG has historically been quite heavily dependent on diesel to generate power which is both expensive and relatively environmentally dirty but also at the same time more than half of PNG’s current power comes from hydropower plants - so that points to the future.

I think what is clear is that there is going to be no one solution for the entire country. I think there is going to be a range of complementary solutions and technology that will include solar PV, microhydro, small scale LNG and even waste-to-energy. It is just about getting the mix right if you like, which will be fundamental to the success of this project.

Now there have been some significant political development in Papua New Guinea recently – Ryan how do you see the recent change in government impacting the electrification project?

That’s right Cait, we have a new Prime Minister, James Marape, who was recently appointed by the parliament – formerly the Minister for Finance in the previous government. So it’s no surprise that growth of the economy and economic growth is a key focus for him and, since his appointment, some of the key messages he has been driving is wanting to better understand the economy and be in a position to grow the economy for the betterment of the country as a whole. As recent as his State of the Nation address, he mentioned that his key focus will be on stimulating economic growth and I can only imagine that electrification will play a huge role in that. Electrification brings along with it improvement in the social welfare of people, kids having access to electricity, to technology and education, as well as for businesses, a more reliable source of electricity which will help them reduce the cost of their own power generation needs within businesses. So in short, I think – so long as the Prime Minister is interested in developing the economy for the country electrification will form a cornerstone for that.

It’s also interesting Ryan – not only is it an interesting time for PNG with a change of government but it comes at an interesting time for I guess PNG and its regional neighbours as China looks to sign up Pacific nations to the Belt and Road initiative and in fact I think I am right in saying that PNG was the first South Pacific country to sign up to the BRI and in some quarters I think the electrification partnership is seen as an attempt to counter-balance China’s investment in the region, but I think whatever the motivation, the electrification project if successfully implemented could have this transformative effect on PNG that we hope it will lead to very substantive economic and social development for Papua New Guinea.

Thanks Nick and Ryan for explaining the proposed project and giving us an insight into what this means for our neighbours in Papua New Guinea and thank you to our listeners for tuning in – until our next High Vis Podcast, good bye.

This podcast is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice about your specific circumstances.