Noting a few commentaries on the horrible state of electricity services in PPL C-centres, we thought we’d share a few observations and suggestions moving forward.
What is the current state of the service quality? PNG Power service is much much worse (than in Pom and Ramu) in our smaller towns (known as c-centres ) with daily load shedding, frequent total blackouts and continuous bad power quality. Technically the source of these issues are faults from the ageing generators and distribution (poles and wires), and the rationing of fuel(due to supply logistics or nonpayment of bills). Apart from the desperate need to improve existing services, there is a huge opportunity to electrify almost a million people within 1 km of the grid…yes only 1000 metres within these c-centre grids!
How did we get here? Short answer, Underinvestment! Historically they are loss-making centres due to their small size and dependence on diesel generators, and for these reasons, the operations have been subsidized by the larger grids (Mainly Ramu and Pom) through the regulated unified tariff system. This situation has been exasperated by an increase in the average price of diesel over time, tariffs have been frozen since 2013 by NEC, the ageing infrastructure, an increase in demand, inefficient operations and profits dwindling in the larger grids.
What have been the efforts to improve? PPL ground staff are doing the best they can based on the almost insolvent position of the organisation. Subnational governments and donors have assisted on ad-hoc bases (short-term fixes) with parts, fuel and diesel generators but have had limited lasting impacts. Members of Parliament have extended the grid without realising that the existing ageing distribution they’re connecting from is about to fall apart and there simply isn’t enough generation. There are also ongoing activities to add solar arrays/farms on some sites to mitigate diesel consumption but are having implementation challenges, however, that alone won’t entirely resolve the underlying issues.
What is required to improve electricity services? We need a holistic sustainable approach/plan to address generation, and distribution (poles and wires) but more importantly, an overall business model to turn the ship around to either reduce the current losses (K250m/year combined losses according to PPL), break-even or the best-case scenario make a profit. We won’t delve into the specifics of an overarching plan but suggest key ingredients to the holistic plan to resolve the power woes of PPL-run c-centres.
- A well-coordinated investment strategy that ties all stakeholders towards a long-term sustainable grid. PPL, Donors and their implementors, IMOs, subnational governments, GoPNG and local/international private investors need to collaborate towards a lasting solution for citizens of PNG and taxpayers of where the donor funds are coming from. Current ad hoc investment is focused on the generation and only solves half of the technical issues (Let’s not end up like the Pom Grid). We also need investment in the existing distribution system. Lastly, this issue isn’t PPLs alone.
- Immediate increase in the contribution of renewables (and batteries) to reduce diesel consumption. Cheap solar perfectly meets peak demand in PNG and is fast to implement (within 3-6 months) and can be integrated through rooftops or utility scale, as long as the grid is upgraded. However, thermal generators should not be neglected, and are still the cheapest technology to maintain momentum in the grid (grid stability), unless of course, a donor decides to splash big on batteries.
- We need a new motivated operator. PPL is overstretched and needs to concentrate on where it’s making money. Moreover, operating grids of this scale is highly technical and experienced entities are required, and some subnational governments who claim they can run the grid simply do not have the capacity or resources to manage on their own (Oh btw provincial administration did run many of these grids before but simply couldn’t manage so handed to ELCOM). This operator could potentially bring in investment(with potential support from donors and subnational governments to attract them in) if conditions are right and more importantly introduce efficient operations.
- Bundling of c-centres to increase scale for a new operator thus improving the business case.
- Tariff reform is required to strengthen the business case. GoPNG, Donors and potential private entities cannot fund this massive investment all on their own. Moreover, we suspect many long-suffering customers of PPL would be willing to pay a bit more for improved reliability. A business in Pom recently complained that for every kina they spend on PPL tariffs, they add on another for their backup diesel generators (probably higher in PPL c-centres) so we’re pretty sure PPL’s biggest revenue providers (General customers) can pay a bit more for improved reliability. Before anyone complains about neglecting low-income and new rural customers with increased tariffs, some strategies can accommodate this vulnerable group. For example, within the existing domestic credit-metre tariff, the first 30 kWh is sold at K0.4794/kWh (low-income households use at most about 1 kWh a day in PNG).
- Subnational Government Subsidies are required (probably make use of the recently increased DSIP/PSIP). Based on vulnerable customers and the opportunity to reach more households within the grid, this is where the subnational governments will need to play a more active role. This could be through capex subsidies for grid extension (which has been happening but not properly planned and implemented) and generation increase projects, and tariff subsidies to cater for ongoing opex (assuming tariff is fixed at current rates or too expensive for vulnerable households if increased). Therefore, its critical subnational governments must ensure ‘to have annual budgetary support for the grid. Just as importantly subnational governments need to understand that these c-centre grids especially with their current size are not going to be a highly lucrative investment but must focus on the indirect benefits of a highly reliable grid. Such as economic growth of the respective towns and the province (that’s where the money is!) as well as improved social services such as health and education leading to a wealthy, informed and healthy population.