|Project Rationale and Linkage to Country/Regional Strategy
In Papua New Guinea (PNG), approximately 10% of the population has access to electricity. Lack of access to affordable, reliable power is limiting economic growth in provincial centers, and contributing to poverty in rural areas. Access to electricity is even lower in the provincial urban centers and virtually non-existent in rural areas. Low access rates in rural areas is primarily due to (i) difficult geographical access conditions, (ii) lack of generation capacity in the Provincial centers to allow grid extension, (iii) high cost of diesel power generation in the isolated Provincial urban centers providing a disincentive to PNG Power to connect additional customers due to the uniform national tariff, (iv) high cost of extending distribution systems due to lack of suitable contractors in the provinces, and (iv) low level of Government grant funding of distribution connections .
PPL is currently implementing Tranche 1 of the Town Electrification Investment Program, which is increasing the supply of clean energy (predominantly hydropower) to three provincial centers (Popondetta in Northern Province, Kimbe in West New Britain and Buka in the Autonomous Region of Bougainville). This will (i) provide additional generation capacity to allow extension of supply to unserviced rural customers, and (ii) reduce the cost of power generation by replacing high cost diesel generation with low cost hydropower. The Town Electrification Investment Program will also construct transmission lines along main population corridors to connect the hydropower sites and the main urban areas, thereby substantially reducing costs required to connect rural communities along the alignment. Therefore, the Town Electrification Investment Program is supporting core power sector infrastructure in a number of provinces which provides the basis for increasing access to power for rural communities located along the main transmission corridors.
However, although the Town Electrification Investment Program is constructing the core transmission network, power distribution construction (low voltage connections to villages) in the Provinces is still prohibitively expensive due to isolation of the power grids and lack of qualified local contractors. Additionally, sustainability of infrastructure development in rural PNG faces ongoing issues related to lack of community ownership from local landowners. Government budget allocation for grid extension has been inadequate to significantly impact the low rural access rate. During the initial design phase of Town Electrification Investment Program, the Government recognized the opportunity to expand access to energy among rural communities along the proposed transmission lines, and therefore requested ADB to support trialing of implementation models such as community based civil works contracts to lower the cost of implementation and improve community ownership. The Government requested the trialing in 3 Provinces to demonstrate the impact in a range of different geographical and cultural settings . If successful, PPL and the Government have proposed to replicate the model in other PNG Provinces through upscaled grant financing. Project cost estimates have been based on preliminary community surveys. Detailed design will be conducted prior to project implementation. Preliminary estimates have indicated that rural communities will benefit financially from replacing expensive kerosene lighting and self generation (small diesel generators) with higher quality distributed electricity . Initial surveys have indicated a high capacity and willingness to pay for power services; however site surveys prior to community selection will confirm willingness to pay.