Lighting Up Cambodia – How and Why Cambodia’s Fuel Mix for Electrification Misses the Mark

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Over the past ten years Cambodia has invested heavily in hydropower and coal electric generation to meet growing power demands resulting from the nation’s electrification priorities. Cambodia eagerly pursued hydropower development because its rivers offer an estimated power potential of 10,000 MW. Such capacity would help Cambodia achieve power self-sufficiency and circumvent costly import taxes thereby increasing rate affordability. [1],[2],[3],[4] Coal is an attractive complement because it’s cheap and can offset hydropower seasonality.[5] Both power sources promised massive gains in generation capacity that Cambodia needed to quickly expand access. An overemphasis on access, however, has come at the expense of reliability, affordability, and environmental sustainability meaning that Cambodia’s electric power portfolio carries risks that could be assuaged by diversifying into other renewables and energy efficiency programming.

Image courtesy of Phnom Penh Post

Image courtesy of Phnom Penh Post

Electrification is an integral part of Cambodia’s plan for nation-wide development out of poverty. [6] Cambodia is a very poor nation with 30% of the government budget sourced from external donor assistance, and 17.7% of the population below the poverty line. [7] This poverty is intricately linked with lack of access to modern energy. At the household level, 9,900,000 residents (82% of the rural population) have no electricity.[8] This can be jointly attributed to lack of grid infrastructure and the high electricity tariffs ranging from 11-27 US cents/kWh. [9]  Similarly, at the industry level, electricity costs and access are the two primary constraints on the growth of Cambodia’s manufacturing sector.[10] The industrial tariff for a “typical” garment factory in Cambodia is 17.7 US cents/kwh. Compare this to 7.9 US cents/kWh for a Vietnamese garment factory and it’s clear that Cambodia’s manufacturing sector is struggling to remain competitive.[11] This is of particular concern since garments alone account for 70% of Cambodia’s total export value. [12] Recognizing these challenges, the Cambodian government has focused significant effort and investment in expanding the grid infrastructure and capacity to rapidly increase access.[13]

This electrification goal required significant planning and strategic capacity development. Cambodia’s Ministry of Industry, Mining, and Energy (MME), the agency responsible for setting energy policy, promulgated a Power Development Plan in 2007, which forecasted demand to double between 2015 and 2020 from 1643 MW to 2770 MW. [14] ,[15],[16]  To secure enough capacity at a reasonable tariff rate to meet this increased demand, the MME turned to promoting coal and hydropower. [17], [18]  This included 4 new hydropower plants, and 3 new coal plants all to be completed by 2020 to reach a total capacity of 3576 MW. [19],[20] Total nation-wide generation capacity now hovers around 1600 MW but hydropower and coal have indeed expanded. [21], [22] In 2010, hydropower only accounted for 3% of domestic electric generation but it has grown to 43% as of 2015, and coal moved from 3 % to 51%. [23]

Although hydropower is attractive as an indigenous resource, and coal is cheap, sociopolitical dynamics pose risks to the reliability of this energy mix. Lao PDR, Cambodia’s upstream neighbor along the Mekong River, is positioning itself aggressively as the “battery of Southeast Asia” and has plans for massive dam build out.[24] Of the eleven mainstream dams to be built by 2021, 9 will be in Lao PDR. [25],[26] This upstream construction is a serious concern and will have significant impacts on water flow and access. [27] Cambodia has two dams planned for the main stem of the Mekong that are designed for particular flow rates meaning upstream flow alterations to the degree proposed by Lao PDR would render over 3000 MW of planned capacity unreliable for Cambodia. Furthermore, the existing dams in Cambodia can only operate at 10% or less of design capacity during the dry seasons leading the country to rely more heavily on coal.[28] Importantly, Cambodia has no natural reserves of coal, so while Cambodia wants to be “self-sufficient” in energy generation it is actually becoming more dependent on imports and vulnerable to supply and international dynamics to have access to power.[29]

Hydropower’s vulnerability to the impacts of climate change will likely translate into financial risks borne by the customers in the form of higher tariffs. Several studies have demonstrated that Southeast Asia is likely already experiencing the impacts of climate change with trends of decreased rainfall, increased mean surface air temperatures, and increased frequency of severe weather. This may change reservoir inflows, and rates of reservoir evaporation both of which could impact hydrodam generation capacity and predictability. Purchase power agreements between generators and distributors typically assume electricity needs will be met 95-98% of the time but these contracts could be undermined with this unpredictable flow variability.[30]  Increased uncertainty in contracts and financial planning will make projects and the cost of capital more expensive, which will likely be passed through to consumers.

This joint coal and hydropower strategy also carries significant environmental impacts. Hydropower drives environmental degradation by blocking fish migration, flooding upstream habitats, flushing sediment and altering downstream flow regimes. The Mekong River typically has a very reliable annual flood pulse from July through September which is critical to floodplain regions in Cambodia supporting aquatic ecosystems. The combination of multiple main stem dams and climate change will have significant impacts on these ecosystems threatening the survival of species that have evolved to depend on these flooding cycles.[31] The lower Mekong River is a freshwater biodiversity hotspot so it’s not surprising that, in total, experts have predicted that these dams put up to 100 species at risk, including already endangered species like the Irrawaddy Dolphin and Giant Mekong Catfish. [32], [33], [34] Furthermore, coal power plants come with their own set of detrimental impacts including mercury, SO2, NO2, and greenhouse gas emissions.

It seems clear that given all these challenges to reliability, cost, and the environment, that the MME should look into other viable solutions like renewable energy and energy efficiency to meet growing demands from electrification at an acceptably low tariff. Mini-grids and solar home systems are expected to help Cambodia meet its electrification targets for 2030. Cambodia is calculated to have 8,074 MW of technical solar potential near rivaling the country’s hydro potential at 10,000 MW, and solar is cost-competitive with other energy sources in rural areas with poor grid infrastructure.[35] Similarly, energy efficiency measures could serve to temper the rapidly growing demand, and address high costs for customers. Several researchers have recommended lowering industry costs through energy efficiency and self-generation. They estimate that a typical Cambodian garment factory could save up to 1-1.5 US cents/kWh through such low cost efficiency measures.[36] Even the World Bank rates Cambodia highly in terms of policies promoting energy access but poorly in promoting energy efficiency (EE) and renewable energy (RE). [37] With such a heavy focus on accessibility Cambodia has clearly missed opportunities in RE and EE that could help meet growing power demands at acceptable rates.

While Cambodia has made some progress on this front, there are plenty of policy opportunities that remain. The Rural Electrification Fund (REF) is a government subsidy program to encourage rural electrification including a solar home system project (SHS). [38],[39] SHS is an ambitious project to install 10,500 systems at 50W and 2,000 at 5W, totaling 12,500 SHS in 2016.[40] Ultimately, however, Cambodia’s development in RE and EE remains weak due to few proactive policies, limited funding and technical capacity.[41], [42] More intentional state-level planning for EE, minimum appliance standards, energy labeling, building energy codes, and utility mandates are all potential policy options for Cambodia to more formally include EE in its energy planning mix. To encourage expansion of RE capacity Cambodia should integrate it in its power development plans, and increase available financial and regulatory incentives.[43] The state owned utility enterprise could also expand opportunities for industries to sell back power in net-metering-type contracts and initiate more purchase power agreements with RE independent power producers thereby lowering investment risks for these companies.[44] Ultimately while Cambodia has made ambitious strides towards electrification and increased access to modern energy, too little attention has been paid to opportunities for RE and EE in its energy mix thereby compromising environmental health, potential cost savings, and grid reliability.

[1] Asian Development Bank. Renewable Energy Developments and Potential in the Greater Mekong Subregion. 2015. (12) http://www.eepmekong.org/index.php/resources/country-reports/190-renewable-energy-developments-and-potential-in-the-greater-mekong-subregion/file Accessed Oct 1, 2017.

[2] Larson, Aaron. “Cambodia’s Largest Hydropower Plant Begins Operation.” PowerMag.com. March 1, 2015. http://www.powermag.com/cambodias-largest-hydropower-plant-begins-operation/ Accessed Oct 1, 2017.

[3] Banerjee, Sudeshna Ghosh, Moreno, Alejandro, Sinton, Jonathan, Primiani, Tanya, & Seong, Joonkyung. Regulatory Indicators for Sustainable Energy – Scorecard for Policy Makers. The World Bank. 2017. (iv) http://www.eepmekong.org/index.php/resources/country-reports/276-rise-2016-report/file Accessed Oct 1, 2017.

[4]Open Development Cambodia. “Electricity Production.” Open Development. February 27, 2017. https://opendevelopmentcambodia.net/topics/electricity-production/ Accessed Oct 1, 2017.

[5] General Department of Energy and General Department of Petroleum, Ministry of Mines and Energy of Cambodia. Cambodia National Energy Statistics 2016. (11) http://www.eria.org/RPR_FY2015_08.pdf Accessed Oct 1, 2017.

[6] Electricite du Cambodge Department of Rural Electrification Fund. Report on Transferring the Benefits Resulting from the Development of Electricity to the Population in Rural Area for the Year 2016. 2017. (6) http://ref.gov.kh/page/admin/public/asset/article-asset/REF%20report%202016_Eg%20final.pdf Accessed Oct 1, 2017.

[7] Central Intelligence Agency. “Cambodia” World Factbook. 2017. https://www.cia.gov/library/publications/the-world-factbook/geos/cb.html Accessed Oct 1, 2017.

[8] Ibid.

[9] Open Development Cambodia. “Electricity Production.” Open Development. February 27, 2017. https://opendevelopmentcambodia.net/topics/electricity-production/ Accessed Oct 1, 2017.

[10] Larson, Aaron. “Cambodia’s Largest Hydropower Plant Begins Operation.” PowerMag.com. March 1, 2015. http://www.powermag.com/cambodias-largest-hydropower-plant-begins-operation/ Accessed Oct 1, 2017.

[11] Derbyshire, William, Hong, Setha. Cambodia – In Depth Study on Electricity Cost and Supplies March 2015. 2015 (6)

http://www.seac-cambodia.org/wp-content/uploads/2016/06/Cambodia-in-depth-study-on-electricity-cost-and-supplies-Final-Report.pdf Accessed Oct 1, 2017.

[12] General Department of Energy and General Department of Petroleum, Ministry of Mines and Energy of Cambodia. Cambodia National Energy Statistics 2016. (48) http://www.eria.org/RPR_FY2015_08.pdf Accessed Oct 1, 2017.

[13] Electricite du Cambodge Department of Rural Electrification Fund. Report on Transferring the Benefits Resulting from the Development of Electricity to the Population in Rural Area for the Year 2016. 2017. (6) http://ref.gov.kh/page/admin/public/asset/article-asset/REF%20report%202016_Eg%20final.pdf Accessed Oct 1, 2017.

[14]Electricity Authority of Cambodia.  Report on Power Sector of the Kingdom of Cambodia. 2016.  (6) http://eac.gov.kh/wp-content/uploads/2016/10/Annual-Report-2015-English.pdf  Accessed Oct 1, 2017.

[15] Council for Development of Cambodia. “Electricity” Investor Information. No Date. http://www.cambodiainvestment.gov.kh/investors-information/infrastructure/electricity.html Accessed Oct 1, 2017.

[16] Larson, Aaron. “Cambodia’s Largest Hydropower Plant Begins Operation.” PowerMag.com. March 1, 2015. http://www.powermag.com/cambodias-largest-hydropower-plant-begins-operation/ Accessed Oct 1, 2017.

[17] Electricite du Cambodge Department of Rural Electrification Fund. Report on Transferring the Benefits Resulting from the Development of Electricity to the Population in Rural Area for the Year 2016. 2017. (6) http://ref.gov.kh/page/admin/public/asset/article-asset/REF%20report%202016_Eg%20final.pdf Accessed Oct 1, 2017.

[18] Council for Development of Cambodia. “Electricity” Investor Information. No Date. http://www.cambodiainvestment.gov.kh/investors-information/infrastructure/electricity.html Accessed Oct 1, 2017.

[19] Larson, Aaron. “Cambodia’s Largest Hydropower Plant Begins Operation.” PowerMag.com. March 1, 2015. http://www.powermag.com/cambodias-largest-hydropower-plant-begins-operation/ Accessed Oct 1, 2017.

[20] Council for Development of Cambodia. “Electricity” Investor Information. No Date. http://www.cambodiainvestment.gov.kh/investors-information/infrastructure/electricity.html Accessed Oct 1, 2017.

[21] Electricity Authority of Cambodia.  Report on Power Sector of the Kingdom of Cambodia. 2016.  (24-25) http://eac.gov.kh/wp-content/uploads/2016/10/Annual-Report-2015-English.pdf  Accessed Oct 1, 2017.

[22] Larson, Aaron. “Cambodia’s Largest Hydropower Plant Begins Operation.” PowerMag.com. March 1, 2015. http://www.powermag.com/cambodias-largest-hydropower-plant-begins-operation/ Accessed Oct 1, 2017.

[23] General Department of Energy and General Department of Petroleum, Ministry of Mines and Energy of Cambodia. Cambodia National Energy Statistics 2016. (45) http://www.eria.org/RPR_FY2015_08.pdf Accessed Oct 1, 2017.

[24] Open Development Cambodia. “Hydropower.” Open Development. February 6, 2015. https://opendevelopmentmekong.net/topics/hydropower/Accessed Oct 1, 2017.

[25] Open Development Cambodia. “StoryMap: The Lower Mekong River’s Major Dam Projects” Open Development. No Date. https://opendevelopmentmekong.net/a-hydroelectric-tour-of-the-mekongs-mainstream/ Accessed Oct 1, 2017.

[26] Beilfuss, Richard & Triet, Tran. A Scoping Study on Climate Change and Hydropower in the Mekong River Basin: A Synthesis of Research.  September 2014. https://www.giz.de/en/downloads/giz2014-en-study-climate-change-hydropower-mekong.pdf Accessed Oct 1, 2017.

[27] Central Intelligence Agency. “Cambodia” World Factbook. 2017. https://www.cia.gov/library/publications/the-world-factbook/geos/cb.html Accessed Oct 1, 2017.

[28] Beilfuss, Richard & Triet, Tran. A Scoping Study on Climate Change and Hydropower in the Mekong River Basin: A Synthesis of Research.  September 2014. (41) https://www.giz.de/en/downloads/giz2014-en-study-climate-change-hydropower-mekong.pdf Accessed Oct 1, 2017.

[29] General Department of Energy and General Department of Petroleum, Ministry of Mines and Energy of Cambodia. Cambodia National Energy Statistics 2016. (34) http://www.eria.org/RPR_FY2015_08.pdf Accessed Oct 1, 2017.

[30]Beilfuss, Richard & Triet, Tran. A Scoping Study on Climate Change and Hydropower in the Mekong River Basin: A Synthesis of Research.  September 2014. (41) https://www.giz.de/en/downloads/giz2014-en-study-climate-change-hydropower-mekong.pdf Accessed Oct 1, 2017.

[31] Ibid. (7)

[32] Open Development Cambodia. “Hydropower.” Open Development. February 6, 2015. https://opendevelopmentmekong.net/topics/hydropower/Accessed Oct 1, 2017.

[33] Beilfuss, Richard & Triet, Tran. A Scoping Study on Climate Change and Hydropower in the Mekong River Basin: A Synthesis of Research.  September 2014. (55) https://www.giz.de/en/downloads/giz2014-en-study-climate-change-hydropower-mekong.pdf Accessed Oct 1, 2017.

[34] Open Development Cambodia. “StoryMap: The Lower Mekong River’s Major Dam Projects” Open Development. No Date. https://opendevelopmentmekong.net/a-hydroelectric-tour-of-the-mekongs-mainstream/ Accessed Oct 1, 2017.

[35] Asian Development Bank. Renewable Energy Developments and Potential in the Greater Mekong Subregion. 2015. (viii , xiv, 2, 7)  http://www.eepmekong.org/index.php/resources/country-reports/190-renewable-energy-developments-and-potential-in-the-greater-mekong-subregion/file Accessed Oct 1, 2017.

[36] Derbyshire, William, Hong, Setha. Cambodia – In Depth Study on Electricity Cost and Supplies March 2015. 2015 (10)

http://www.seac-cambodia.org/wp-content/uploads/2016/06/Cambodia-in-depth-study-on-electricity-cost-and-supplies-Final-Report.pdf Accessed Oct 1, 2017.

[37] Banerjee, Sudeshna Ghosh, Moreno, Alejandro, Sinton, Jonathan, Primiani, Tanya, & Seong, Joonkyung. Regulatory Indicators for Sustainable Energy – Scorecard for Policy Makers.The World Bank. 2017. (xvii, 67) http://www.eepmekong.org/index.php/resources/country-reports/276-rise-2016-report/file Accessed Oct 1, 2017.

[38] Asian Development Bank. Renewable Energy Developments and Potential in the Greater Mekong Subregion. 2015. (14-15) http://www.eepmekong.org/index.php/resources/country-reports/190-renewable-energy-developments-and-potential-in-the-greater-mekong-subregion/file Accessed Oct 1, 2017.

[39] Electricite du Cambodge Department of Rural Electrification Fund. Report on Transferring the Benefits Resulting from the Development of Electricity to the Population in Rural Area for the Year 2016. 2017. (8) http://ref.gov.kh/page/admin/public/asset/article-asset/REF%20report%202016_Eg%20final.pdf Accessed Oct 1, 2017.

[40] Ibid. (21)

[41] Asian Development Bank. Renewable Energy Developments and Potential in the Greater Mekong Subregion. 2015. (xiv) http://www.eepmekong.org/index.php/resources/country-reports/190-renewable-energy-developments-and-potential-in-the-greater-mekong-subregion/file Accessed Oct 1, 2017.

[42] Energy and Environment Partnership Mekong. “Projects Portfolio” http://www.eepmekong.org/index.php/projects/projects-portfolio-map-1 Accessed Oct 1, 2017.

[43] Banerjee, Sudeshna Ghosh, Moreno, Alejandro, Sinton, Jonathan, Primiani, Tanya, & Seong, Joonkyung. Regulatory Indicators for Sustainable Energy – Scorecard for Policy Makers.The World Bank. 2017. (204, 208) http://www.eepmekong.org/index.php/resources/country-reports/276-rise-2016-report/file Accessed Oct 1, 2017.

[44] Derbyshire, William, Hong, Setha. Cambodia – In Depth Study on Electricity Cost and Supplies March 2015. 2015 (11)

http://www.seac-cambodia.org/wp-content/uploads/2016/06/Cambodia-in-depth-study-on-electricity-cost-and-supplies-Final-Report.pdf Accessed Oct 1, 2017.

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