This "executive summary" consists of the proposed frameworks, devised to investigate the potential for Cambodia to diversify its power supply technology mix, for greater energy security and sustainability benefits, given changing technology cost relativities.
By
Mekong Strategic Partners
This "executive summary" consists of the proposed frameworks, devised to investigate the potential for Cambodia to diversify its power supply technology
mix, for greater energy security and sustainability benefits, given changing
technology cost relativities. To date almost all Cambodian investment in the
power sector has focused on largescale hydropower and coal-fired generation.
The Royal Government of Cambodia (RGC) has indicated investing in sustainable
energy is a priority [1]: recent technology cost developments mean the RGC can
pursue energy security, access, reliability and affordability goals, at least
in part, through increased investment in (non-large hydropower) renewable
energy.
The power sector
in Cambodia, with domestic generation supply of around 3000 gigawatt hours
(GWh) in 2015, is small compared with its ASEAN neighbours Thailand and
Vietnam, but it is growing very rapidly.
Generation
capacity increased from 308MW in 2009 to 1584MW at end-2014, [2] accompanied by
significant construction of a national grid network. This has contributed to
the RGC making steady progress towards its overarching electricity access
targets (100% of villages to be electrified by 2020 and 70% of households by
2030).
Electricity
consumption in Cambodia has also been growing very rapidly – with overall
demand growth averaging nearly 20% per annum since 2010. This has largely been
due to continuing rapid economic growth, notably in the electricity-intensive
garment sector, and the extension of the national grid to more of Cambodia’s
population.
From 2018, the
Ministry of Mines and Energy (MME) expects (Figure 1) power imports to have
been reduced significantly as a proportion of electricity supply and to be able
to meet demand almost entirely through domestic generation. MME demand
projections are, however, based on a lower demand growth rate than has been
evident since 2010.
Part of
achieving lower demand growth will be implementing Cambodia’s draft energy
efficiency strategy [3], involving a range of actions including to introduce
performance standards for the construction sector, industrial equipment and
home appliances. If demand does not fall as rapidly as anticipated there may
still be a need for additional electricity supply (potentially 1000
gigawatthours (GWh)) beyond MME’s expected domestic generation supply in 2020
(around 7600 GWh).
While RGC has
indicated that growing the power sector in an environmentally sustainable way
is a key priority, to date investment in (non-large hydro) RE has yielded
generation capacity in the order of 35 MW, compared with over 1200 MW put in
place under Cambodia’s Power Development Plan (PDP) since 2009. RGC planning
for future investment in generation capacity currently remains focused on large
hydropower and fossil fuel-fired technologies – which have considerable
environmental impacts (and therefore external costs). Cambodia’s PDP forecasts
(to 2030, Fig.1) do not currently factor in any significant contribution from
(non-large hydro) RE generation even though solar and biomass generation can
offset low hydropower output in dry season. Rapidly falling renewable energy
technology costs mean Cambodia can cost-effectively strengthen its energy
security by balancing proposed investment in large-scale hydro and fossil
generation with accelerated investment in solar and biomass technologies.
Global energy
transition: Dynamics and Opportunities
Utilities,
consumers and investors in developed and developing countries are switching to
renewable energy to constrain environmental impacts and reduce the regulatory
risk of emissions limits and carbon pricing but also because it is increasingly
economic in its own right. Increasing scale is a driver of rapid declines in
cost: globally, the installation cost (averaged) of wind and solar fell 28%
from 2011 to 2014. In particular, the following prices for utility scale solar
and wind generation, achieved in Chile and China in 2015, were competitive
against all fossil fuel and large hydro technology bids: Costs are expected to
continue falling in coming years due to increasing economies of scale, more
efficient designs, and advances in materials and manufacturing. Technological
developments such as affordable residential-scale storage devices will also
increase the utility (and therefore competitiveness) of rooftop solar. The
falling cost of consumer solar and storage raises the prospect of consumers
disconnecting from the grid or using the grid for backup. As costs fall and
incomes rise Cambodian households and businesses are also likely to become
power producers within the next decade.
Rapid growth in
renewable energy suggests that transition away from fossil fuels is under way.
In 2014, global solar and wind annual installations set a record of 95 GW,
almost half of all new generation worldwide. Established business models are
now in question, after European utilities, mostly using coal and gas, lost $600
billion in value in the five years to 2014 [5]. Forecasts for power sector
business growth suggest declining revenues and asset values for fossil fuel
technologies (although current low international prices may moderate this trend
somewhat) and growth opportunities for alternative generation.
While these
dynamics clearly point to risk for Cambodia in continuing to invest in
large-scale hydro and fossil fuel generation, there are also significant
opportunities for accessing support for renewable generation uptake. Developed
countries at COP21 reaffirmed their previous commitment to $100 billion per
annum climate finance assistance to developing countries by 2020 as a baseline
for possible increases post-2020. Development partners will likely make available
increased technical assistance, grants and concessional loans to support
diffusion of de-carbonization technologies and practices. Capital will flow if
policy and regulation are clear, simple and stable, putting in place a coherent
framework for planning and investment.
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About Mekong Strategic Partners:
Mekong Strategic Partners is a Phnom Penh based investment, advisory and risk management firm
focused primarily on the countries of the Mekong region. The firm provides
advice on mergers and acquisitions, strategic matters, sustainability
approaches, capital raising and corporate finance, as well as asset management
services to corporations, conservation & development focused institutions,
governments and individuals
References:
1.National
Strategic Development Plan (NSDP 2014-18, p.47), Cambodian Climate Change
Strategic Plan (2013), National Green Growth Policy (2013) and Intended
Nationally Determined Contribution (INDC, prepared for the UN Framework
Convention on Climate Change COP21).
2. Electricite
du Cambodge Annual Report 2014, p.16. Does not include off-grid generation.
3.Cambodia’s draft national energy efficiency
strategy, developed in 2013 but yet to be implemented, proposes a range of
actions to reduce energy consumption, including electricity consumption, by 20%
over the period to 2035.
4.
http://reneweconomy.com.au/2015/solar-energy-costs-continue-to-plunge-across-theworld-17972;
Z. Liu, W. Zhang, C. Zhao and J. Yuan, “The Economics of Wind Power in China
and Policy Implications,” Energies, vol. 8, pp. 1529-1546, 2015; and
http://reneweconomy.com.
au/2015/renewables-clean-up-at-chile-energy-auction-including-24-hour-solar-10549
5. The
Economist, “How to lose half a trillion euros,” The Economist, 12 October 2013.
[Online]. Available:
http://www.economist.com/news/briefing/21587782-europes-electricity-providersface-existential-threat-how-lose-half-trillion-euros.
[Accessed 3 December 2015]
B. Longstreth,
“The Case for Fossil Fuel Divestment,” Huffington Post, 11 July 2014. [Online].
Available:
http://www.huffingtonpost.com/bevis-longstreth/post_8010_b_5577323.html.
[Accessed 3 December 2015].
