Should Papua New Guinea consider pumped storage hydropower for its power outages

by: Jonny Andrew

The continuous power outages in and around Papua New Guinea and most especially in Port Moresby and Lae calls for an out-of-the-box approach in power generation. The concept of Pumped storage hydropower in Australia should serve as a lesson worth considering.

Pumped hydroelectric storage facilities store energy in the form of water in an upper reservoir, pumped from another reservoir at a lower elevation. During periods of high electricity demand, power is generated by releasing the stored water through turbines in the same manner as a conventional hydropower station. During periods of low demand (usually nights or weekends when electricity is also lower cost), the upper reservoir is recharged by using lower-cost electricity from the grid to pump the water back to the upper reservoir.

Reversible pump-turbine/motor-generator assemblies can act as both pumps and turbines. Pumped storage stations are unlike traditional hydroelectric stations in that they are a net consumer of electricity, due to hydraulic and electrical losses incurred in the cycle of pumping from lower to upper reservoirs. However, these plants are typically highly efficient (round-trip efficiencies reaching greater than 80%) and can prove very beneficial in terms of balancing load within the overall power system. Pumped-storage facilities can be very economical due to peak tand off-peak price differentials and their potential to provide critical ancillary grid services.

Papua New Guinea should seriously consider Pumped Storage Hydropower to sustain and supplement the current hydro power stations

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Author – Nick West 
22nd February 2017

OVERCOMING THE BARRIERS TO PUMPED STORAGE HYDROPOWER

With energy reliability a hot topic in Australia, eyes are now turning to pumped storage hydropower… but what has been holding it back?
There are only three pumped storage hydropower projects in Australia, with the most recent completed more than thirty years ago. This is despite the ability of pumped storage hydropower projects to provide the large-scale storage that would complement increasing levels of renewable energy. Why is this, and what are the barriers to developing more Australian pumped storage hydropower projects?

Around the world, pumped storage hydropower projects make up the vast majority of grid energy storage and have traditionally been used by energy utilities to supply additional power to a grid during times of highest demand.

As part of a portfolio of power stations, a utility might operate a pumped storage project infrequently only, if the cost of pumping the water back to the upper storage exceeds the revenue that can be generated from its release.

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The main issue facing developers trying to prove the viability of a new pumped storage project is that a sufficient price differential is required to pay for the pumping and to account for the efficiency losses in transmission, pumping and generation. The generation price needs to be sufficiently higher than the pumping price just to repay the variable pumping costs. To repay the heavy capital investment, a margin is required over and above the break-even cost of pumping. This is particularly true where proposed developments are ‘stand-alone’ and cannot be optimised as part of a corporate generation portfolio.

In recent years, electricity price spikes have been irregular with few occurrences each year. Due to the significant capital costs, a pumped storage scheme would require a certain number of pumping/generation cycles at high or maximum pricing to pay a return on investment. These price spikes are unpredictable, so building a business case around these events is risky.

Historically, the daily fluctuation of power prices has not been sufficient or regular enough to attract pumped storage developers. This is beginning to change with increasing penetration of renewable energy leading to an increase in both low and high price periods. More frequent, sustained periods of hot weather (as predicted by climate change models) will also drive up demand for power and therefore the market price.

In the last few months, volatility has greatly increased, creating a greater differential between baseload and peak pricing. This will increase the viability of pumped storage schemes, although the unpredictability and challenges of financing capital intensive assets will remain.

But, even when the economics are right, there are still some other barriers that proponents of pumped storage projects need to overcome:

FINDING THE RIGHT SITE

Pumped storage projects require significant capital for development. Minimising the cost of construction and operation is key to the successful development of a project. Choosing the right location is a matter of identifying a site with ideal topography, a source of water and good proximity to and location within the transmission network.

A wealth of information is available that is relevant to identifying potential pumped storage hydropower sites. Concept studies for pumped storage hydropower sites can screen potential sites quickly and offer developers greater insight into possible opportunities.

NEGOTIATING ACCESS TO APPROPRIATE SITES FOR PUMPED STORAGE

While a pumped storage project generally has a significantly smaller footprint than a traditional hydropower project, the features of natural topography that are ideal for pumped storage – high, steep hillsides or cliffs – tend also to be places of great natural beauty and are often designated as reserves, are expensive private land, or have high environmental or social value.

State governments can assist here through streamlined planning and approvals processes for infrastructure developments. This can make sure that the challenges of developing sites do not become insurmountable for developers.

PERCEIVED ENVIRONMENTAL IMPACTS

Pumped storage projects can occupy many square kilometres and also require transmission lines to connect to the electricity market. Like traditional hydropower projects, pumped storage projects need to attend to environmental issues associated with the project. Environmental impacts for pumped storage projects are assessed in the same manner as for all infrastructure developments.

If the impacts of a project can be mitigated to the satisfaction of the relevant regulatory body and international Standards (such as the International Hydropower Association and International Finance Corporation), a pumped storage hydropower project should face no greater hurdle than any other infrastructure project in this respect.

A pumped storage project may also have to deal with the perception that it uses carbon-intensive thermal power to pump water during the pumping cycle. This may be true unless there is a surplus of renewable energy available, in which case the pumped storage project could be seen to be using this excess renewable energy for pumping. As renewable energy penetration grows, the opportunities for storing surplus renewable energy will increase.

AN UNFAVOURABLE REGULATORY FRAMEWORK

Inconsistent and uncertain policy positions of the major political parties at both federal and state levels reduce confidence in the energy industry, which deters investment. With debate raging over energy security, a bipartisan view on energy policy, which transcends party politics and the electoral cycle, is urgently needed.

Existing mechanisms are in place to support the renewable energy industry. The Renewable Energy Target (RET) promotes investment in renewable energy projects; however, pumped storage is specifically excluded from the RET where the energy used for pumping exceeds the energy generated. Current policy would have to be amended or complementary legislation enacted in order to reward large-scale storage for the service it provides.

Such changes could include market mechanisms for large-scale storage that could offer incentives for providing inertia and ancillary services from storage at times of peak demand as well as power. Another possible change could be to ensure that large-scale storage asset owners are not penalised under the RET for energy used in the pumping process. This would encourage the development of energy storage as a complement to the growth of renewable energy.

HIGH COST OF DEVELOPMENT ACTIVITIES

The long lead times and high development costs of pumped storage projects are major deterrents to developers. Projects generally take more than 4 to 5 years from the point of conception to ‘power on’, and require millions of dollars of capital for development and hundreds of millions for construction. In other words, when funding is first committed, it may not see a return for five years or more. In an effort to overcome this barrier, the Clean Energy Finance Corporation (CEFC) has committed $20 million to finance the accelerated development of flexible capacity and large-scale storage projects.

With an increasing interest and emphasis on storage in a power system that is becoming increasingly unreliable (e.g. load shedding in South Australia and lack of reserve events in New South Wales), and with finance from the CEFC for large-scale storage, the barriers to pumped storage development are gradually diminishing. This action can’t come soon enough for residents suffering through blackouts on days over 40°C.

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Court approves ExxonMobil buyout of InterOil’s assets in Elk-Antelope gas fields

BY: Cedric Patjole – 15:00, February 21, 2017

ExxonMobil will by the end of this week takeover InterOil after the commercial arrangement between the two companies, worth more than K6 billion, was approved yesterday.

ExxonMobil will now own InterOil’s assets in the undeveloped Elk-Antelope gas fields, in the Gulf Province, and exploration licenses covering about 16,000sqkm.

In a statement today, InterOil announced that the Supreme Court of Yukon in Canada, granted a final order approving the arrangement between InterOil and ExxonMobil.

In November 2016 the Yukon Supreme Court had initially upheld an appeal by InterOil founder, Phil Mulacek, against an original takeover offer.

Last week InterOil shareholders overwhelmingly approved a revised transaction agreement with Exxon Mobil with more than 91 per cent of  votes cast in favour.

Previously 80 per cent of shareholders voted to approve the original transaction  at a Special Meeting on September 21, 2016.

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According to the amended agreement Exxon Mobil lifted the maximum price payable for InterOil by about 10 per cent to US$78.94 (K236) per share.

The offer was structured as a US$45 (K135) per share flat cash payment, plus an extra US$7.07 (K21) per share for each trillion cubic feet (tcf) of gas certified as being held in Elk-Antelope.

Under the approved arrangement, ExxonMobil now becomes a Joint Venture in the Papua LNG Project, operated by Total SA, and the PNG Government, with expected first gas in the early 2020s.

The Papua LNG will be supported by the Elk-Antelope gas field, located in the Eastern Papuan Basin.

ExxonMobil now has a commanding position in the basin with a record of five successful discoveries originally by InterOil – Triceratops, Elk, Antelope, Raptor and Bobcat.

This afternoon, an ExxonMobil spokesperson informed Loop PNG that “the acquisition of InterOil as envisioned in the amended agreement continues to represent a significant value to the government and people of Papua New Guinea, as well as to InterOil shareholders.  ExxonMobil looks forward to closing the transaction in accordance with the Plan of Arrangement.”

Pictures credit: http://www.offshorepost.com/

Kroton Option Exercise by Interested Beneficiary Groups

January 06,2017, 06:46 pm

The Managing Director of Kumul Petroleum Holdings Limited (KPHL), Mr Wapu Sonk today announced that the Company has been working with beneficiary groups that have expressed their interest to exercise the Kroton Option Equity.

These groups will be called in over the coming weeks to sign up on the share transfer documents as well as the vendor note being offered by KPHL.

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The following beneficiary groups have come forward;

(1) PNG LNG Plantsite

(2) PNG LNG Pipeline

(3) PDL 9 – Juha

(4) PDL 4 – Gobe and,

(5) Fly River Provincial Government.

The option to acquire shares in Kumul Petroleum (Kroton No 2) Holdings Limited is one of the benefits agreed to by the PNG Government and set out in the Umbrella Benefits Sharing Agreement (UBSA) in 2009 for landowners and Provincial Governments along the footprint of the PNGLNG Project.

Under the UBSA the PNG Government granted the landowners and Provincial Governments a commercial option to buy 25.75% of the shares in Kroton No 2 Limited, the special purpose company that holds the State’s 16.57% interest in the PNG LNG Project.

In addition to the beneficiary groups who have registered interest to sign up in the coming weeks, one landowner beneficiary group and four provincial governments have already taken up their Options. They are PDL 5 (Moran); and Southern Highlands, Hela, Gulf and Central provincial governments.

Mr Sonk said; “The Beneficiary Groups who have expressed their intention before the 31st of December 2016 to exercise the Kroton Option using KPHL’s Vendor Finance Facility are hereby advised that signing of the share transfer documents and the Vendor Finance Facility is scheduled in the coming weeks until the 31st of January 2017.”

He pointed out that KPHL’s role was to implement the agreement that was reached in the UBSA and, provide additional benefits for the Landowners and relevant Provincial Governments if they elect to invest in Kroton.

KPHL will work with those beneficiary groups that have signed up to complete the transaction and arrange necessary governance aspects of the interest holdings in Kumul Petroleum (Kroton No 2) Holdings Limited.

http://www.postcourier.com.pg/News/kroton-option-exercise-by-interested-beneficiary-groups/#.WHMwrVN96Ul