Cambodia Investment Review

Switching to solar will provide an economic spark for Cambodia’s manufacturing industry: EuroCham

Switching to solar will provide an economic spark for Cambodia’s manufacturing industry: EuroCham

Harrison White 

The European Chamber of Commerce is continuing to call for Cambodia’s energy regulator to remove burdensome capacity charges on solar and fully embrace renewable energy, in particular for the manufacturing sector as coal prices rise to over $400 a ton.

The worldwide rise in commodity prices such as coal and oil prices is projected to result in a $100 million loss for EDC according to Prime Minister Hun Sen due to the reluctance to increase power prices for consumers.

In its recently released Position Paper on Renewable Energy in Cambodia, the chamber outlines how a switch to solar from the state-run electricity utility Electricite du Cambodge (EDC) could provide an economic spark.

Brian Badzmierowski EuroCham’s Senior Communication and Membership Engagement Officer welcomes media at the position paper launch.

“A full endorsement and support of rooftop solar by the Royal Government would be a huge step towards modernizing Cambodia’s manufacturing base, to green the image of the country and to become more competitive while better integrating itself into regional economies,” EuroCham Chairman Tassilo Brinzer said.

“It would boost Cambodia as an investment destination, as an investment in renewable energy [RE] can be supported as a Qualified Investment Project within the new investment law and thus attract manufacturers who have clean energy targets to fulfill,” he added.

High energy costs

According to the paper, Cambodia’s energy costs rank as one of the highest in Asia, with the paper arguing for the full implementation of solar infrastructure in industrial compounds and factories and increased investments in the sector to help Cambodia compete with Vietnam and Thailand.

One of the key benefits, in addition to reducing carbon emissions, is the potential creation of a new future-proof industrial sector in sustainable energy, spearheaded by solar tech development. The government could also save on operational and capital expenditures related to power costs by enabling a more open rooftop solar market.

To read more about Cambodia’s changing garment industry click here.

Cambodia’s current energy mix stands at 51% renewable. However, this renewable energy share is expected to fall to 35% by 2030, before climbing back to 43% by 2040. Overall, this represents an 8.1% decrease in renewable energy use over the next two decades.

According to a report published by the German development fund, GIZ limited on-or off-grid solar capacity to date, with regulators, stating concerns around the proliferation of rooftop solar without adequate controls, grid codes and installation standards.

Rogier van Mansvelt, vice-chairman of EuroCham’s Green Business Committee.

The capacity charge, or ‘Power Price Rate’, is charged per month based on the contract demand that is agreed with the regulator for customers connecting at higher voltages. In Cambodia, solar is the only technology subject to a capacity charge, with all other technologies charged a simple, one-part, per kWh tariff, the report stated.

The penalty for solar electricity is about $0.07/kWh for larger solar systems and $0.84/kWh for smaller systems. This cannot be the intent of the solar regulation and makes the investment economically unattractive and unviable

Rogier van Mansvelt, the vice-chairman of EuroCham’s Green Business Committee, said: “Most garment factories are pressured by buyers to install solar. However, the current tariffs take about 50% of the solar benefit away, increasing the payback time from about four to eight years.”

“Also, the 50% capacity installation is hindering the percentage of solar replacement. If Cambodia wants to stay attractive for garment investors, it should create supportive solar rooftop regulations and tariffs,” he added.

Ongoing challenges

The position paper also states that international brands and garment purchase agencies have established their targets for green and sustainable sourcing as well as expressing 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, it added.

It’s estimated that energy demand will more than triple by 2040 in Cambodia and several factors favor a switch to solar energy. China, South Korea, and Japan have refused to finance future coal projects, while at the same time, international investors are trending towards renewable energy in response to the global demand for sustainability.

Massimiliano Tropeano, EuroCham’s sustainability expert.

Massimiliano Tropeano, EuroCham’s sustainability expert stated: “Cambodia is currently facing a series of challenges and choices that could seriously cut its percentage of renewable energy. A more progressive and open policy towards solar energy and private photovoltaic could help in addressing issues such as the ever-growing electricity demand, cheaper electricity generation, and dependency on the foreign import of energy.”

“The Royal Government of Cambodia has engaged in relevant and important talks around this issue, and we are hopeful that they will grab the opportunities given by renewable energy defined in this paper. International buyers and industry need more renewable energy,” he added.

To read more about the government’s response click here.

Secretary of State at the Ministry of Mines and Energy His Excellency Sok Khavan has previously responded to these ongoing concerns telling Cambodia Investment Review that a balance must be struck between moving towards sustainable energy in the future and ensuring supply to meet energy demand growth, and providing affordable and reliable energy.

“Concerning grid connection capacity charges for rooftop solar, the relevant regulation has already been established so we will have to implement it. I acknowledged the clear message from the factories’ owners on the importance of solar rooftops to their sustainable business plan and ultimately their continued growth in Cambodia,” Sok Khavan said.

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