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Independent power producers and deregulation in an island based small electricity system: The case of Papua New Guinea

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  • Nepal, Rabindra
  • Sofe, Ronald
  • Jamasb, Tooraj
  • Ramiah, Vikash

Abstract

The small island economy of Papua New Guinea (PNG) is facing severe electricity shortages and is therefore turning to implementing broader power sector reforms as a vehicle to attract private capital and investments in electricity generation. This study, based on a case-study approach, revisits the reform progress and plans in the electricity sector of PNG alongside the development and integration of IPPs in its small power system. Lessons of reform experiences and IPPs integration are drawn from three other smaller systems of Nepal, Nicaragua and the Northern Territory of Australia including stakeholder consultations, which includes two IPPs of PNG. We find a widening gap between reform ‘theory’ and ‘practice’ in the PNG power sector. Cost reflective pricing is implemented while cost recovery is never achieved by the vertically integrated state-owned utility and the insolvency of this state-owned single buyer poses the greatest perceived revenue risk to the IPPs. This lack of revenue reimbursement to the IPPs by the single buyer is a barrier towards attracting private capital into electricity generation. We recommend that strong political will and strengthening of institutional arrangements are urgent reform measures to attract private capital in power generation as political instability continue.

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  • Nepal, Rabindra & Sofe, Ronald & Jamasb, Tooraj & Ramiah, Vikash, 2023. "Independent power producers and deregulation in an island based small electricity system: The case of Papua New Guinea," Energy Policy, Elsevier, vol. 172(C).
    • Handle: RePEc:eee:enepol:v:172:y:2023:i:c:s0301421522005109
    DOI: 10.1016/j.enpol.2022.113291
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    More about this item

    Keywords

    Reforms; Small systems; Political instability; Independent power producers; Regulation;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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