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Cambodia is at a crossroads. Neighbouring Vietnam continues to attract investment by promoting itself as wind and solar powerhouse, making renewable energy a priority investment and positioning itself as an ideal manufacturing destination for international investors. Cambodia seems to be taking a different path and risks staying behind the development in the regional markets. Thailand too positions itself as a greening manufacturing hub in the region.
Cambodia has an opportunity to go beyond its renewable energy strategies to benefit from its unique location between the two leading Greater Mekong Subregion (GMS) economies and to position itself as a leader in green business.
Cambodia’s current energy mix sets a commendable rate (by all international standards) of 51.17% of RE. This represents, without any doubt, a source of pride for the RGC and at the same time a challenge on how to maintain such a high yield of RE in the energy mix in the years to come.
The current situation in the fossil fuels commodity market might push Cambodia towards a series of energy security risks, not to mention a difficult financial trade balance. Moreover, energy demand will likely rapidly increase until 2040. Cambodia stands at a crossroads and must choose a path for how to supply and cater reliably to this demand. The Levelized Cost of Electricity benchmarks suggests that renewable
energy provided by solar panels, solar farms, and onshore and offshore wind projects represents the future. Therefore the country could invest more with the help of international institutions as well as private investors. International brands and garment purchase agencies have established their targets for green and sustainable sourcing. They have already expressed many times their needs for a cleaner energy mix. Even local manufacturers have expressed a clear need for more progressive legislation toward rooftop solar panels that will allow the industry to remain competitive and compliant.
The current energy mix is strong and provides Cambodia with a leading position in the region, but its outlook is jeopardized by already approved coal and fossil fuel investments.
The current electricity generation mix sets Renewable Energy (RE) at 51.17%. The proposed Power Development Plan (PDP), recently presented as a base for discussion by the Ministry of Mines and Energy (MME), envisions a drastic reduction in the domestic renewable energy share to 35% in 2030. This will increase only to a meager 43.1% a decade later, by 2040. This effectively reduces the RE generation mix by almost 8.1% in 20 years.
The situation gets even more challenging for the RE mix when accounting for coal power imports from Lao PDR (dedicated plants for Cambodia). In this case, the share of renewable energy drops to approximately one-quarter (25%).
Solar and wind power are the cheapest sources of new electricity supply. Cambodia’s solar auction for the 40MW solar park was announced last month at 2.67 cents/kWh cost for the operator. In 2019 it was 3.9 cents/kWh and, in 2016 it was 9.1 cents/kWh.
Appropriate incentives for RE and more favourable legislation/tariffs for industrial solar photovoltaic (PV) could easily meet the growing demand for electricity in the country. A growth in RE share will significantly reduce power generation costs for the operator of Cambodia (EdC), and reduce the cost burden of consumers (residential and industrial).
Solar farms currently account for less than 5% of total generation sources for Cambodia, imported and domestic. Solar only generates 4-5 effective hours per day compared to 24 hours for coal/gas, so although the domestic installed capacity might look high (above 12%), the actual replacement of fossil fuel generation is very little, only 6.4% of the domestic generation. Under the PDP 2040, this share will be reduced significantly by domestic and imported coal power. The share of solar it seems will only increase to around 9% by 2040, with an additional 2,700MW added. There are no proposed wind projects in the PDP 2040. Given global trends11, and the lower electricity cost benefit, this share is considered quite low.