IDEAS home Printed from https://ideas.repec.org/p/hhs/cbsnow/2022_014.html
   My bibliography  Save this paper

Independent Power Producers and Deregulation in an Island Based Small Electricity System: The Case of Papua New Guinea

Author

Listed:
  • Nepal, Rabindra

    (School of Business, Faculty of Business and Law, University of Wollongong, Australia)

  • Sofe, Ronald

    (National Research Institute, Papua New Guinea)

  • Jamasb, Tooraj

    (Department of Economics, Copenhagen Business School)

Abstract

The 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 power systems belonging to 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 but cost recovery is never achieved by the vertically integrated state-owned utility while 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.

Suggested Citation

  • Nepal, Rabindra & Sofe, Ronald & Jamasb, Tooraj, 2022. "Independent Power Producers and Deregulation in an Island Based Small Electricity System: The Case of Papua New Guinea," Working Papers 14-2022, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:2022_014
    as

    Download full text from publisher

    File URL: https://hdl.handle.net/10398/fb5d82af-4040-4ca1-9c7b-752163cebba6
    File Function: Full text
    Download Restriction: Full text not avaiable
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. David M Newbery, 2018. "What future(s) for liberalized electricity markets: efficient, equitable or innovative?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    2. Roques, Fabien & Finon, Dominique, 2017. "Adapting electricity markets to decarbonisation and security of supply objectives: Toward a hybrid regime?," Energy Policy, Elsevier, vol. 105(C), pages 584-596.
    3. Nepal, Rabindra & Jamasb, Tooraj, 2015. "Caught between theory and practice: Government, market, and regulatory failure in electricity sector reforms," Economic Analysis and Policy, Elsevier, vol. 46(C), pages 16-24.
    4. Stern, Jon & Holder, Stuart, 1999. "Regulatory governance: criteria for assessing the performance of regulatory systems: An application to infrastructure industries in the developing countries of Asia," Utilities Policy, Elsevier, vol. 8(1), pages 33-50, March.
    5. Singh, Anoop & Jamasb, Tooraj & Nepal, Rabindra & Toman, Michael, 2018. "Electricity cooperation in South Asia: Barriers to cross-border trade," Energy Policy, Elsevier, vol. 120(C), pages 741-748.
    6. Do, Hung Xuan & Nepal, Rabindra & Jamasb, Tooraj, 2020. "Electricity market integration, decarbonisation and security of supply: Dynamic volatility connectedness in the Irish and Great Britain markets," Energy Economics, Elsevier, vol. 92(C).
    7. Timilsina,Govinda R. & Deluque Curiel,Ilka Fabiana & Chattopadhyay,Debabrata, 2021. "How Much Does Latin America Gain from Enhanced Cross-Border Electricity Trade in the Short Run ?," Policy Research Working Paper Series 9692, The World Bank.
    8. Rudnick,Hugh & Velasquez,Constantin, 2018. "Taking stock of wholesale power markets in developing countries : a literature review," Policy Research Working Paper Series 8519, The World Bank.
    9. Rabindra, Nepal & Tooraj, Jamasb, 2013. "Caught Between Theory and Practice: Government, Market, and Regulatory Failure in Electricity Sector Reforms," SIRE Discussion Papers 2013-22, Scottish Institute for Research in Economics (SIRE).
    10. Paul L. Joskow, 2008. "Lessons Learned from Electricity Market Liberalization," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 9-42.
    11. Steinbuks, J. & Foster, V., 2010. "When do firms generate? Evidence on in-house electricity supply in Africa," Energy Economics, Elsevier, vol. 32(3), pages 505-514, May.
    12. Preetum Domah & Michael Pollitt & Jon Stern, 2002. "Modelling the Costs of Electricity Regulation: Evidence of Human Resource Constraints in Developing Countries," Working Papers EP11, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    13. Bohi, Douglas R. & Palmer, Karen L., 1996. "The efficiency of wholesale vs. retail competition in electricity," The Electricity Journal, Elsevier, vol. 9(8), pages 12-20, October.
    14. Ioannis N. Kessides, 2004. "Reforming Infrastructure : Privatization, Regulation, and Competition," World Bank Publications - Books, The World Bank Group, number 13525, December.
    15. Rabindra Nepal & Flavio Menezes, 2016. "Small Energy Markets, Scattered Networks and Regulatory Reforms: The Australian Experience," Discussion Papers Series 561, School of Economics, University of Queensland, Australia.
    16. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Reforming the power sector in transition: Do institutions matter?," Energy Economics, Elsevier, vol. 34(5), pages 1675-1682.
    17. Pollitt, Michael & Stern, Jon, 2011. "Human resource constraints for electricity regulation in developing countries: Developments since 2001," Utilities Policy, Elsevier, vol. 19(2), pages 53-60, June.
    18. Beatriz Arizu & William H, Jr. Dunn & Bernard Tenenbaum, 2001. "Regulating Transmission : Why System Operators Must Be Truly Independent," World Bank Publications - Reports 11404, The World Bank Group.
    19. Nepal, Rabindra & Jamasb, Tooraj & Sen, Anupama, 2018. "Small systems, big targets: Power sector reforms and renewable energy in small systems," Energy Policy, Elsevier, vol. 116(C), pages 19-29.
    20. Laffont,Jean-Jacques, 2005. "Regulation and Development," Cambridge Books, Cambridge University Press, number 9780521840187, January.
    21. Catherine Waddams Price & Minyan Zhu, 2016. "Empirical Evidence Of Consumer Response In Regulated Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 12(1), pages 113-149.
    22. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
    23. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Interconnections and market integration in the Irish Single Electricity Market," Energy Policy, Elsevier, vol. 51(C), pages 425-434.
    24. Timilsina, Govinda & Steinbuks, Jevgenijs, 2021. "Economic costs of electricity load shedding in Nepal," Renewable and Sustainable Energy Reviews, Elsevier, vol. 146(C).
    25. Chang, Ha-Joon, 1997. "The Economics and Politics of Regulation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(6), pages 703-728, November.
    26. Rabindra Nepal & Flavio Menezes, 2017. "Regulatory Reforms in Small Energy Systems: Experience from Australia's Northern Territory Electricity Market," Economic Papers, The Economic Society of Australia, vol. 36(3), pages 300-316, September.
    27. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Reforming small electricity systems under political instability: The case of Nepal," Energy Policy, Elsevier, vol. 40(C), pages 242-251.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tooraj Jamasb & Rabindra Nepal & Govinda R. Timilsina, 2017. "A Quarter Century Effort Yet to Come of Age: A Survey of Electricity Sector Reform in Developing Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Tooraj Jamasb & Rabindra Nepal & Govinda Timilsina & Michael Toman, 2014. "Energy Sector Reform, Economic Efficiency and Poverty Reduction," Discussion Papers Series 529, School of Economics, University of Queensland, Australia.
    3. Asantewaa, Adwoa & Jamasb, Tooraj & Llorca, Manuel, 2022. "Reforming Small Electricity Systems: Market Design and Competition," Working Papers 12-2022, Copenhagen Business School, Department of Economics.
    4. Jamasb,Tooraj & Nepal,Rabindra & Timilsina,Govinda R., 2015. "A quarter century effort yet to come of age : a survey of power sector reforms in developing countries," Policy Research Working Paper Series 7330, The World Bank.
    5. Hasan, Mudassar & Arif, Muhammad & Naeem, Muhammad Abubakr & Ngo, Quang-Thanh & Taghizadeh–Hesary, Farhad, 2021. "Time-frequency connectedness between Asian electricity sectors," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 208-224.
    6. Mahmud I Imam & Tooraj Jamasb & Manuel Llorca, 2019. "Political Economy of Reform and Regulation in the Electricity Sector of Sub-Saharan Africa," Working Papers EPRG1917, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    7. Nepal, Rabindra & Jamasb, Tooraj, 2015. "Caught between theory and practice: Government, market, and regulatory failure in electricity sector reforms," Economic Analysis and Policy, Elsevier, vol. 46(C), pages 16-24.
    8. Juan C. Percino-Picazo & Armando R. Llamas-Terres & Federico A. Viramontes-Brown, 2021. "Analysis of Restructuring the Mexican Electricity Sector to Operate in a Wholesale Energy Market," Energies, MDPI, vol. 14(11), pages 1-26, June.
    9. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Reforming small electricity systems under political instability: The case of Nepal," Energy Policy, Elsevier, vol. 40(C), pages 242-251.
    10. Rabindra, Nepal & Tooraj, Jamasb, 2013. "Caught Between Theory and Practice: Government, Market, and Regulatory Failure in Electricity Sector Reforms," SIRE Discussion Papers 2013-22, Scottish Institute for Research in Economics (SIRE).
    11. Sirin, Selahattin Murat & Camadan, Ercument & Erten, Ibrahim Etem & Zhang, Alex Hongliang, 2023. "Market failure or politics? Understanding the motives behind regulatory actions to address surging electricity prices," Energy Policy, Elsevier, vol. 180(C).
    12. Keppler, Jan Horst & Quemin, Simon & Saguan, Marcelo, 2022. "Why the sustainable provision of low-carbon electricity needs hybrid markets," Energy Policy, Elsevier, vol. 171(C).
    13. Rabindra Nepal & Han Phoumin & Abiral Khatri, 2021. "Green Technological Development and Deployment in the Association of Southeast Asian Economies (ASEAN)—At Crossroads or Roundabout?," Sustainability, MDPI, vol. 13(2), pages 1-19, January.
    14. Jamasb, Tooraj, 2006. "Between the state and market: Electricity sector reform in developing countries," Utilities Policy, Elsevier, vol. 14(1), pages 14-30, March.
    15. Stern, Jon & Cubbin, John, 2005. "Regulatory effectiveness : the impact of regulation and regulatory governance arrangements on electricity industry outcomes," Policy Research Working Paper Series 3536, The World Bank.
    16. Mohamad, Noorihsan, 2014. "Telecommunications reform and efficiency performance: Do good institutions matter?," Telecommunications Policy, Elsevier, vol. 38(1), pages 49-65.
    17. Anupama Sen & Rabindra Nepal & Tooraj Jamasb, 2016. "Rethinking electricity sector reform in developing Asia: Balancing economic and environmental objectives," ASARC Working Papers 2016-06, The Australian National University, Australia South Asia Research Centre.
    18. Gaffney, F. & Deane, J.P. & Gallachóir, B.P.Ó, 2017. "A 100 year review of electricity policy in Ireland (1916–2015)," Energy Policy, Elsevier, vol. 105(C), pages 67-79.
    19. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.
    20. Nepal, Rabindra & Jamasb, Tooraj & Sen, Anupama, 2018. "Small systems, big targets: Power sector reforms and renewable energy in small systems," Energy Policy, Elsevier, vol. 116(C), pages 19-29.

    More about this item

    Keywords

    reforms; small systems; political instability; independent power producers; regulation;
    All these keywords.

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:cbsnow:2022_014. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CBS Library Research Registration Team (email available below). General contact details of provider: https://edirc.repec.org/data/incbsdk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.