Trade Minister Richard Maru has called for proposal and costings on a feasibility study from Australia's Snowy Mountains Engineering Corporation.
The National newspaper reports that Maru highlighted the cost of power as a major hindrance to trade and investment in the country.
"PNG's electricity sector is unreliable, expensive and has very low access, making the country one of the least electrified countries in the world with only 13% of the population having access to electricity," he said.
"We continue to rely on expensive diesel generators when we have vast options for cheaper and cleaner energy - rivers for hydro and the sun for solar."
Maru has met with a team from Snowy to discuss the feasibility study into the hydro project. Snowy conducted an initial feasibility study in 2014 into the potential of the hydro project along the Sowom River.
"The government is keen to have a full feasibility study done on the viability of one or two hydro projects along the Sowom River," Maru said.
Power requirement in East Sepik is about 10 megawatts which is provided by diesel generators in Wewak and Maprik.
"It is difficult to attract major investment projects in East Sepik without reliable and cheaper power," he said.
"The Greater Sepik region cannot continue to depend on expensive diesel generators for electricity.
"I have briefed the Governor (Allan Bird) on this study, and he is very supportive. A combination of hydro, solar and gas-fired electricity supply is the way to go."