Cambodia Sustainable Energy for All

Rapid Assessment and Gap Analysis

July 2013

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Table of Contents List of abbreviations ...... 5 Executive Summary ...... 7 1 Objective and methodology ...... 8 1.1 Objective of the rapid assessment and gap analysis ...... 8 1.2 Methodology ...... 8 2 Introduction ...... 9 2.1 Country overview ...... 9 2.2 Energy situation ...... 11 2.2.1 Energy use ...... 11 2.2.2 Energy demand growth ...... 13 2.2.3 Energy and Economic Development ...... 14 3 Current situation with regard to SE4All goals ...... 15 3.1 Energy Strategy and Relevant Targets ...... 15 3.2 Energy access ...... 16 3.2.1 Overview and assessment ...... 16 3.2.2 Modern energy for thermal applications ...... 17 3.2.3 Access to Electricity ...... 20 3.2.4 Modern energy for productive uses ...... 25 3.2.5 Summary of challenges to meeting energy access goals ...... 27 3.3 Energy efficiency ...... 27 3.3.1 Overview and assessment ...... 27 3.3.2 Energy savings potential in households ...... 28 3.3.3 Energy savings potential in industry ...... 28 3.3.4 Summary of challenges to meeting energy efficiency goals ...... 28 3.4 Renewable energy ...... 29 3.4.1 Overview and Assessment ...... 29 3.4.2 Renewable Energy Potential and Status of Development ...... 29 3.4.3 Renewable Energy Strategy and relevant targets ...... 33 3.4.4 Summary of challenges to meeting renewable energy goals ...... 33 4 Institutional framework for Achieving SE4ALL Goals ...... 33 4.1 Institutional and policy framework for the power sector ...... 33 4.2 Institutional and policy framework for non-power subsector ...... 35 4.3 Program and financing ...... 36

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4.3.1 Financing thermal energy ...... 36 4.3.2 Financing the power sector ...... 37 4.3.3 Private financing of domestic energy ...... 40 4.4 Private investment and enabling business environment ...... 41 4.4.1 Private investments in the power sector ...... 41 4.4.2 Financial flows to the energy sector...... 41 4.5 Petroleum and gas ...... 44 5 Summary of gap and barriers to achieving SE4ALL Goals ...... 45 5.1.1 Thermal energy for households ...... 45 5.1.2 Power sector ...... 45 5.1.3 Renewable energy ...... 46 5.1.4 Productive uses, businesses, and private investments ...... 46 5.1.5 Energy efficiency ...... 46 6 Conclusions and next steps ...... 46 7 Appendices ...... 53 Appendix 1: List of Interviewees and their institutions ...... 53 Appendix 2: List of attendees of the Gap analysis and investment readiness consultation workshop ...... 53 Appendix 3: Indicative electricity tariffs for different customer categories in different provinces ...... 56

Table of Figures

Figure 1: Cambodia’s energy mix ...... 11 Figure 2: Energy consumption by sector in 2009 ...... 12 Figure 3: Power development plan, 2008-2020 ...... 13 Figure 4: Electricity demand growth projections ...... 13 Figure 5: Changing demand for various energy sources ...... 14 Figure 6: Subsidies for South East Asian Countries in 2008 ...... 15 Figure 7: Trends in access to electricity in households in Cambodia ...... 17 Figure 8: Indicative prices of LPG per kg in five South East Asian countries ...... 20 Figure 9: Power quality 2008 to 2011 ...... 21 Figure 10: Duration of power supply problems ...... 21 Figure 11: Carbon performance of selected South East Asian economies ...... 24 Figure 12: Institutional power sector map ...... 34 Figure 13: Electricity and gas distribution GFCF∞ ...... 36 Figure 14: How Cambodia and other South East Asian economies rank on the ease of doing business ...... 42 Figure 15: ODA and FDI flows to Cambodia 2000 to 2010 ...... 43 Figure 16: Fixed assets of approval investments ...... 43

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List of Tables

Table 1: Cambodia socio-economic characteristics ...... 10 Table 2: Capital costs subsidies provided by the Rural Electrification Fund ...... 17 Table 3: Cooking fuels in households in Cambodia ...... 18 Table 4: EAP Region: Yearly Premature Deaths Attributed to Air Pollution from Cooking with Solid Fuels, 2007 ...... 18 Table 5: Indicative electricity tariffs for different customer categories in different locations ...... 22 Table 6: Frequency of black outs experienced by manufacturing firms ...... 25 Table 7: Duration of power outages experienced in selected firms ...... 26 Table 8: Licenses in 2011 ...... 34 Table 9: List of on-going power generation projects ...... 37 Table 10: Power projects and lead investors by country...... 38 Table 11: List of on-going power transmission projects ...... 39 Table 12: Investment costs in rural electrification in million US$ (constant price) ...... 39 Table 13: Examples of financial services providers and the diversity of financing provided ...... 40

List of Boxes

Box 1: Protests against high costs of electricity in Cambodia ...... 22 Box 2: Low levels of skills among artisans affect biomass gasifier quality ...... 27 Box 3: The potential impacts of increased biofuels production ...... 31 Box 3: Using the appropriate legal and regulatory framework to stimulate cogeneration in Mauritius ...... 32 Box 4: Good governance of oil resources turns a traditional curse into a modern blessing ...... 44

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List of abbreviations

ADB Asian Development Bank AFTA ASEAN Free Trade Area ASEAN Association of Southeast Asian Nations CCCSP Cambodian Climate Change Strategic Plan CDM Clean Development Mechanism CDRI Cambodia Development Research Institute CHDR Cambodia Human Development Report CHP Combined heat and power CO2 Carbon dioxide CNPA Cambodia National Petroleum Authority CSP Concentrated Solar Power DSM Demand side management EE&C-SSN Energy Efficiency and Conservation Sub-Sector Network EdC Électricité du Cambodge FDI Forgien Domestic Investment GDP Gross Domestic Product GERES Groupe Energies Renouvelables Environnement et Solidarités GFCF Gross Fixed Capital Formation GHG Greenhouse gas GNI Gross National Input Gwh Giga-watt hour HDI Human Development Index IEA International Energy Agency ICS Improved Cook Stoves IED Innovation Energie Développement IFC International Financial Cooperation IPPs Independent Power Producers JICA Japan International Cooperation Agency Kw Kilowatt Kwh Kilowatt-hour LPG Liquefied Petroleum Gas MAFF Ministry of Agriculture, Forestry and Fisheries MCA Management Compass Associates MEF Ministry of Economy and Finance MIME Ministry of Industry, Mines and Energy MoE Ministry of Environment MoH Ministry of Health MoWRAM Ministry of Water Resources and Meteorology MTOE Million Tons of Oil equivalent MW Megawatts NBDP National Biogas Digester Program NSDP National Strategic Development Plan ODA Overseas development Assistance OECD Organisation for Economic Co-operation and Development REE Rural Electricity Enterprises RGC Royal Government of Cambodia SE4All Sustainable Energy for All SMMEs Small micro and medium enterprises

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SNV Netherlands Development Organisation (Stichting Nederlandse Vrijwilligers) TOE Tons of Oil Equivalent UNDP United Nations Development Programme UNEP United Nations Environment Programme UNFCCC UN Framework Convention on Climate Change VAT Value Added Tax WB World Bank WEO World Economic Outlook WHO World Health Organization

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Executive Summary

The Royal Kingdom of Cambodia lies on the lower Mekong basin, and is dominated by the Krâvanh (Cardamom) and Dâmrei (Elephant Ranges) mountains to the South-west, by lake Tonlé Sap to the North-west and the lower part of the Mekong river which runs from the North-east to South-east. It is 181,035 km2 in size and has a population of 15 million.

Cambodia has overcome decades of war to become one of the fastest growing economies in the world. Since 2009, its GDP growth has averaged 7% per annum, down from 10% per annum before an economic downturn caused the global economic crisis in 2008 (IMF, 2012). In 2012, GDP per capita stood at US$946 (World Bank database, 2012). However, the years of war left Cambodia with a huge burden of socio-economic inequalities and underdeveloped infrastructure. As a result, 30% of Cambodians continue to live below the national poverty line. Infrastructure, including electricity grid remains problematic and there is no consolidated national electricity grid. Access to modern energy services is low and only about 35% of the population has access to electricity. One effect of rapid economic growth has been the rapid increase in demand for electricity. Demand for electricity will grow by more than 10% every year until 2020.

The national utility, Electricité du Cambodge mainly supplies the capital city; Phnom Penh, while many rural areas are supplied by rural electricity enterprises. The bulk of the electricity generated in Cambodia is from fossil fuels, particularly heavy fuel oil, resulting in high electricity prices. The country imports about 45% of its electricity supply from Thailand, Vietnam and Laos despite having good potential for renewable energy especially hydropower, solar and modern biomass. There is also potential for generating wind power particularly in coastal areas. Cambodia has recently discovered gas and oil deposits on the Gulf of Thailand to its west, resources that could in the medium to long term, add to the country’s energy security. The high cost of electricity means that even if Cambodia attains universal electricity access in 2030, it is unlikely that households will afford to use electricity for cooking the majority of the time, as experience in other countries such as Vietnam where household electrification levels are at 98% (OECD/IEA, 2010) but 80% of households use traditional biomass for cooking and heating (FSIV, 2009) has shown.

The main policies guiding the Cambodia energy sector include National Sustainable Development Plan NSDP 2009-2013 (RGC, 2010), Rural Electrification Master Plan (JICA, 2006), the Power Development Plan (2006) the Renewable Energy Action Plan (Hundley, 2003) and in the near- future, the Cambodia Climate Change Strategic Plan (CCCSP). However, these policies and strategies skewed towards electricity access and power sector development in their focus, while the user and demand aspects are less well articulated. These policy frameworks also inadequately address thermal energy in households and enterprises, and do not have specific targets and policies on energy for productive uses, lack targeted policies to support small, micro and medium enterprises (SMMEs) growth through sustainable energy, energy efficiency and lack a diversified renewable energy strategy. The energy sector framework also lacks clarity in how Cambodia’s fragmented supply sector will be consolidated and integrated within the framework of a national grid, which the country is progressing towards. Another key challenge that affects energy access,

7 | P a g e energy efficiency and renewable energy progress is limited human capacity to effectively implement policies.

The gaps and barriers to Sustainable Energy for All (SE4All) identified in this report will negatively impact targets on energy efficiency the most, followed by targets on renewable energy. Results on targets on energy access will be mixed as the country is likely to meet or be within the range of electricity access, but thermal energy for households and sustainable energy for small scale enterprises are likely to lag behind. It is therefore critical to develop priority actions that address the identified gaps and improve the likelihood of meeting all SE4All goals.

1 Objective and methodology

1.1 Objective of the rapid assessment and gap analysis

Recognising the critical role of access to sustainable, affordable and environmentally sound energy services to sustainable development, the United Nations General Assembly declared 2012 the International Year of Sustainable Energy for All, and the UN Secretary-General Ban Ki-moon is leading the global initiative; the Sustainable Energy for All (SE4All). SE4All is aimed at mobilising action from governments, donors, the private sector, and civil society to meet three sustainable energy objectives by 2030 as follows:  Ensuring universal access to modern energy services  Doubling the rate of improvement in energy efficiency  Doubling the share of renewable energy in the global energy mix

In response to this call, UNDP Cambodia is supporting the analysis of key issues, goals and gaps to achieve the three objectives in Cambodia through a rapid assessment and gap analysis, as well as a range of other activities. This rapid assessment and gap analysis document aim to provide: i. A brief assessment of the energy situation in the country within the context of its economic and social development, and poverty eradication ii. A review of where the country is in terms of the three SE4All goals and whether it is likely to meet the goals of sustainable energy for all. iii. An outline of the main challenges and opportunities vis-à-vis the three goals of SE4All where the major investments, policies and enabling environments will be required iv. A sound basis and background for a Readiness Plan that may follow as part of the SE4All activities in Cambodia

1.2 Methodology

The methodology for developing this rapid assessment and gap analysis included a desk review of relevant national documents on energy as well as general development, investment and on social and environmental issues. Key national documents reviewed included the Rectangular Strategy II, the NSDP as well as documents and presentations produced by the staff of the Ministry of Industry, Mining and Energy (MIME). International documents and those by NGOs and knowledge institutions were also reviewed. Data was further gathered through interviews with persons in key government institutions addressing energy including MIME and the rural Electrification Fund, donor partners such as the Asian Development Bank, the EU delegation, the Agence Française de Développement as well as with local NGOs and private sector. A schedule

8 | P a g e of persons interviewed and their institutions is provided in Appendix 1. A first draft of the rapid assessment and a stakeholders’ summary of its key points were then circulated to key stakeholders who were also invited to a consultation workshop where the document and an investment readiness plan were presented for comments. A list of attendees, their institution and the broad sectors to which they belong are presented in Appendix 2. The documents were also reviewed and commented on by staff of UNDP Regional office in Thailand. The ensuing comments were addressed and new data was incorporated in the final version were possible.

2 Introduction

2.1 Country overview

Cambodia is located in South East Asia, bordered by Thailand, Laos, Vietnam and the gulf of Thailand (Map 1) between latitudes 10°57'N to 16°08'N and longitudes 101°4.7'E and 106°10'E. The country covers 181,035 km2, at a height ranging from 305m to 848m above sea level. Cambodia has an estimated population of 15 million, of which about 51.5% is female, and 48.5% is male. About 19.5%% of the population live in urban areas and 79.5% live in rural areas, living in over 14,000 villages. Almost 27% of Cambodian households are female headed.

Map 1: Cambodia Map

Source: Rushdy, 2009

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Cambodia has overcome three decades of war and strife to become a resilient economy that has grown at an appreciable rate. Between 1999 and 2008 the country’s economy grew by an average of 10% per annum (IMF, 2012; World Bank Database, 2012). The country experienced a downturn in economic growth in 2009 due to the global crisis but returned to strong growth from 2010 to 2012, averaging 7% per annum and World Bank estimates that the country’s economy will grow at the rate of 6.7% in 2013 (World Bank database, 2012; IMF, 2012). Despite this growth, the legacy of a dysfunctional political and economic history persists and an estimated 30% of Cambodians live below the national poverty line, although this has decreased from 47% in 1994 (World Bank database; 2012; UNCDF, 2010). Based on a range of socio-economic indicators, Cambodia is classified by the World Bank as low income country and mostly ranks lower than the average for East Asia and Pacific countries (Table 1).

Table 1: Cambodia socio-economic characteristics* Socio-economic characteristics Cambodia East Asia & Pacific Population, mid-year (millions) 14.3 1,962 GNI per capita (Atlas method, US$) 820 3,696 GNI (Atlas method, US$ billions) 1,167 7,249 Poverty (% of population below national poverty line) 30 25.3 Urban population in 2012 (% of total population) 20 46 Life expectancy at birth in 2012 (years) 63.6 72 Infant mortality (per 1,000 live births) 43 20 Child malnutrition–weight for age in 2010 (% of children under 5) 7.5 6 Access to an improved water source in 2010 (% of population) 64 90 Literacy in 2009 (% of population age 15+) 74 94 Gross primary enrolment (% of school-age population) 126 111 Male 130 111 Female 122 112 Source: World Bank database, 2012 *2011 unless specified

The Cambodian economy is dominated by the service sector which, in 2011, contributed up to 40% of the national gross domestic product (GDP) while the agriculture sector contributed about 37% and industrial activities contributed 24% (World Bank database, 2012)1. Main economic sectors include textiles and garments, beverages, food processing (including fish, rice) and wood processing. The country’s main exports are garments and textiles, wood, furniture and rubber. The tourism, garment industry and rice milling have grown strongly in the last few years, as a result of a rich cultural heritage, and improving investment and agricultural policies. Cambodia has also benefited from being part of a range of regional cooperation agreements in the Association of South East Asian Nations (ASEAN) region.

In terms of energy, limited access to modern energy such as electricity and Liquefied Petroleum gas (LPG) means that over 80% of energy used for cooking in households is derived from

1 This makes a total of 101% which is likely as a result of automatic rounding of numbers by the World Bank database.

10 | P a g e traditional firewood and charcoal (UNDP, 2012). For lighting, households are dependent on kerosene and batteries, with the exception of those that have access to electricity who then use it for lighting.

2.2 Energy situation

2.2.1 Energy use

Cambodia uses a net of 5.18 MTOE of energy, of which 3.67MTOE are domestically sourced and imports constitute 1.5MTOE (IEA, 2011). Total per capita energy use stands at 0.35TOE and energy intensity is at 0.69TOE/2000 GDP (IEA, 2011). Electricity consumption in 2009 was estimated at 127kWh per capita and in 2012, this had increased to about 190kWh per capita (World Bank Database, 2012; Bunthoeun, 2012).

At household level, firewood dominates energy consumption. Over 80% of households depend on firewood and charcoal for cooking (UNDP, 2012). Charcoal use is dominant in urban households while firewood use is dominant in rural households. Although urban households are estimated to use less biomass – 1.5kg per household per day compared to rural households which are estimated to use 5kg per household per day (San, 2011), taking into account lifecycles of these fuels, the use of equivalent wood stock from cooking with charcoal is higher than using firewood2. This implies that without changes in charcoal production and use efficiencies, increases in percentage of households using charcoal will lead to higher wood stock extraction, and possibly higher deforestation rates than the current situation where the majority use firewood.

Because households are a major user of energy in Cambodia, the dominance of biomass in the household sector is also reflected in the national energy mix (Figure 1).

Figure 1: Cambodia’s energy mix

Source: National Biogas Digester Program (2009) in Hanko and Voller (2010)

2 About 6kg of wood produces 1kg of charcoal thus theoretically; urban charcoal use of 1.5kg translates to 9kg of wood use compared to 5kg of wood use per day in rural areas.

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The residential sector accounts for 49% of all energy consumed in Cambodia, while the commercial sector accounts for 26% (Figure 2). Industry and administrative functions consume 15% and 10% of the total energy respectively.

Figure 2: Energy consumption by sector in 2009

Source: MIME, 2010

In 2011, Cambodia had an installed capacity of about 635 MW (Bunthoeun, 2012) while electricity use was 2,488GWh. The power development plan envisions installed capacity to increase to about 3.6GW by 2020, with about 58% of electricity in Cambodia being from hydropower resources by 2020 (Figure 3). Already as of 2012, 1000MW was under construction, while Memoranda of Understanding (MOU) have been signed for 2200MW (Piseth, 2009). Up to 14 hydropower plants are planned to be built by 2020 (baseline year of 2012).

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Figure 3: Power development plan, 2008-2020

Source: Jona, 2011

2.2.2 Energy demand growth Demand for energy is expected to grow rapidly in the next decade as a result of strong economic growth, electrification expansion and increasing industrialisation. Year-on-year demand growth for electricity is estimated at between 12% and 16% until 2020 (Figure 4).

Figure 4: Electricity demand growth projections

Source: Adapted from Phan, 2009

Other than electricity, other sources of energy will also change over the years with traditional fuels such as animal dung and firewood decreasing, as will demand for kerosene and candle for

13 | P a g e lighting. This decrease is projected in part due to increasing use of electricity and LPG. Increasing urbanisation and incomes will also mean an increase in demand for charcoal.

Figure 5: Changing demand for various energy sources

Source: MIME 2007

2.2.3 Energy and Economic Development

Modern energy and related services can contribute to economic development (UN, 2005) but the way in which energy is sourced and exploited can also have significant negative consequences for a country’s economy. High levels of importation can be detrimental to the economy since it means a country’s financial resources or revenues are transferred abroad. This outflow of financial resources is especially undesirable where alternative resources are available locally. In Cambodia, oil products are imported and represented about 24.2% of imports and 14.4% of GDP in 2009 (IEA, 2012). The country spent an estimated US$1.4 billion on petroleum imports in 2011, and while petroleum imports in the first three-quarters of 2012 were at an estimated US$1billion (Xinhuanet, 2012). In addition, over 45% of electricity consumed in Cambodia is imported and US$59 million was spent on electricity imports in 2009 (Xinhuanet, 2010). Reducing the country’s burden of energy imports on national revenues through development of national resources and more efficient use of energy can save revenue which can then be invested in addressing other socio-economic needs.

In terms of socio-economic impacts of pricing structures and subsidies in particular, subsidisation of modern energy services favours the richest households since few of the poor households have access to it. However, because of the large proliferation of Independent Power Producers (IPPs) and Rural Electricity Enterprises (REEs) in Cambodia compared to other South East Asian countries, fuel subsidies in Cambodia are among the lowest in the region (Figure 6).

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Figure 6: Subsidies for South East Asian Countries in 2008

Source: Sovacool, 2010

Quality of supply of energy may also impact economic development, as lack of or intermittent supply of modern energy can disrupt economic activities such as manufacturing and trade. Power outages and rationing are frequent in parts of Cambodia, particularly those supplied by REEs, causing economic losses. The overall impact of poor quality of electricity supply on the GDP is negative. However, the extent of the impact – in GDP losses for example - is not yet clear due to lack of studies on this topic, but the IFC estimates a GDP loss of 4% as a result of power outages (IFC, 2009).

3 Current situation with regard to SE4All goals

3.1 Energy Strategy and Relevant Targets The Royal Government of Cambodia (RGC) has put in place a set of strategies and targets to support goals of energy access and energy efficiency within the context of its broader national development goals. While many of these pre-date the SE4All initiative, there are synergies between these national targets and global SE4All targets. Strategies that set out relevant targets on sustainable energy include;

Energy access The NSDP commits to energy access targets as follows;  All villages in the Kingdom of Cambodia have access to electricity of any type by the year 2020 (i.e. 50% of households in each village have some form of electricity access including from battery with access to battery charging)  At least 70% of all households in the Kingdom of Cambodia have access to grid-quality electricity by the year 2030 (at acceptable tariff with minimum subsidy from government)

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There are no detailed socio-economic specifications such as gender-sensitive targets in the energy access goals.

Energy efficiency The government has declared the goal of 10% decrease in final energy consumption (ASEAN Centre for Energy, 2011) but an energy efficiency policy strategy and action plan is being developed by the RGC with support from EUEI. This energy efficiency policy draft suggests a 20% reduction in energy demand by 2030, compared to the Business-As-Usual scenarios.

Renewable energy There is no specific target of how much energy should be derived from renewable energy sources by a particular deadline, although previously a Renewable Energy Action Plan (2003) detailed the development of renewable energy. This plan was from 2002 to 2012 and hence had expired at the time of this study. However, the power development plan shows that over 50% of electricity generated will be derived from hydropower by 2020, and the Rural Electrification Master Plan (JICA, 2006) intends to increase access to electricity in rural areas through renewable energy, among other options.

The next section will discuss the situation with regards to the various SE4All goals in Cambodia, including status vis-à-vis achieving SE4All, and the barriers and gaps to meeting these goals.

3.2 Energy access

3.2.1 Overview and assessment

While sustainable energy is broader than electricity, due to limitations of data on non-electric energy sources such as LPG, electricity is used in this discussion as a proxy indicator for sustainable energy in Cambodia. Current access to electricity stands at 35% nationally. The country’s target is to reach 70% of households with grid-quality electricity by 2020 and serve 100% of villages with electricity by 20203. With about than 15% electricity access, rural areas are a particular focus of energy access strategies. Data on energy access is not gender desegregated and so it is unclear how different women’s and men’s access to sustainable energy is. However, given the gender development index in Cambodia is 0.500 (UNDP, 2010)4, it is likely that women’s access to electricity and other modern forms of energy is lower than that of men.

The energy access targets for Cambodia are ambitious and in line with the transformation agenda of the SE4All initiative of achieving universal energy access by 2030. The electrification trend over the last 10 years (Figure 7) suggests a high level commitment which provides the basis for prioritising SE4ALL in Cambodia.

3 It must be noted here that 100% electrification of villages does not mean 100% electrification of households 4 This is the Human Development Index adjusted for gender disparities. A high GDI implies higher gender disparities in in terms of income, decision making power at all levels, access to education and information, and reproductive health outcomes. However, a country’s ranking may also be improved by its high HDI, meaning that despite high gender disparities in a specific country, it may rank as having a good gender development index because of a very high HDI. As such any comparison with other countries should be made with this caveat in mind.

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Figure 7: Trends in access to electricity in households in Cambodia

100

80

60

40

20

0 1992 1999 2005 2007 2009 2010 2012

Source: NIS, 1998; RGC, 1999; ADB, 2005; IEA, 2010; MIME, 2012

However, as electrification expands to areas with lower population densities and areas away from major infrastructure, its costs are likely to increase, possibly constraining the progress of electrification.

In 2004 a Rural Electrification Fund was established with support from the World Bank to accelerate rural electricity access and to encourage private participation in electrification services in rural areas. The fund also provides capital costs subsidies for rural electricity access (Table 2)

Table 2: Capital costs subsidies provided by the Rural Electrification Fund

Connection type Costs per connection (US$) New Connection 45 SHS of at least 40Wp 100 Mini or micro hydro 400/kW Biomass. 300/kW Source: Keosela, 2013

Other key challenges to reaching these targets are;  Ensuring high quality of electricity supply especially by REEs  Mobilising necessary investments  Putting in place a robust and functional legal and regulatory reforms  Affordability of electricity for both providers who often have to provide capital costs subsidies, and users who are unable to afford electricity use  Energy for thermal needs  Access to energy for productive uses  Ensuring gender balance in access to sustainable energy, and reduced gendered effects of energy access

3.2.2 Modern energy for thermal applications Over 80% of Cambodian households use traditional biomass including firewood, charcoal, post- harvest and agro-waste for cooking and other thermal applications. The use of kerosene as a cooking fuel is declining while the use of LPG is increasing (Table 3).

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Table 3: Cooking fuels in households in Cambodia

Energy source Percentage of household using energy source 1998 2008 Firewood 90.0 83.6 Charcoal 5.3 7.4 Kerosene 1.8 0.3 LPG 1.7 7.9 Electricity N/A 0.5 None N/A 0.2 Other 1.2 0.1 Source, NIS, 1998, 2008

The increased use of LPG is likely to be a result of increase in incomes and improved supply chains. However, this is mostly an urban area rather than national phenomena with most use occurring in Phnom Penh and Siem Reap, including high usage among the expatriate community and in some tourism establishments. It is not an indication that the poor who are not served by electricity or those that have unreliable electricity are using LPG as an alternative. Nevertheless, LPG and its distribution infrastructure are available and can be expanded – with necessary support for affordability and use – to improve sustainable energy access across the country.

One effect of using traditional biomass indoors is that users are exposed to pollutants including particulates, carbon monoxide and dioxide, hydrocarbons, and other compounds which negatively affect their health (WHO, 2009). Effects of these exposures include respiratory infections, eye irritations, headaches and others. According to World Health Organisation (WHO) data 5,500 deaths among children under the age of 5 and 1,100 adult deaths can be attributed effects of air pollution from cooking (Table 4). In Cambodia, as elsewhere, these effects and deaths largely affect women who are chiefly responsible for cooking, and children, who are often with the women as they cook.

Table 4: EAP Region: Yearly Premature Deaths Attributed to Air Pollution from Cooking with Solid Fuels, 2007

Pneumonia Chronic Cancer Total Total (Children LT Obstructive (Adults GT 30) Premature Premature 5) Lung Disease Deaths Deaths/1,000 (Adults GT 30) Population Cambodia 5,500 1,100 NA 6,600 0.47 China 9,100 505,900 33,900 548,900 0.42 Lao PDR 1,200 1,300 NA 2,500 0.38 Myanmar 8,300 9,800 NA 18,100 0.38 Vietnam 2,000 21,100 700 23,800 0.28 Papua New 1,000 600 NA 1,600 0.28 Guinea Indonesia 8,700 36,600 NA 45,300 0.19 Thailand 1,000 9,500 NA 10,500 0.16 Mongolia 200 100 NA 300 0.10

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Pneumonia Chronic Cancer Total Total (Children LT Obstructive (Adults GT 30) Premature Premature 5) Lung Disease Deaths Deaths/1,000 (Adults GT 30) Population Philippines 3,800 3,300 100 7,200 0.08 Total in EAP 40,800 589,300 34,700 664,800 0.35 Region Source: World Bank, 2011a

Other implications of traditional biomass use include extensive time used to collect firewood rather than engaging in productive social and economic activities such as educational activities and capacity building, income generation, community enhancement activities or respite. A 2007 study found that Cambodians in rural areas of Kampong Speu and Svay Rieng can spend one to three hours per day respectively, collecting firewood, with men and children being the main responsible persons for collecting firewood (MIME, 2007), although the report does not specify the frequency of collection. Given that this data shows that in some parts of Cambodia, the poor and poor men in particular are more likely to collect firewood than other socio-economic groups, while in others firewood collection is women’s responsibility (MIME, 2007), the use of biomass can contribute to economic, gender and other social disparities. As such any energy strategies and action plans must take into consideration gender aspects of energy acquisition and use.

Technologies for thermal applications that are currently available and in use in Cambodia include improved cookstoves such as the Neang Kongrey stove and the New Lao promoted by agencies such as Groupe Energies Renouvelables Environnement et Solidarités (GERES), domestic biogas digesters promoted by agencies such as SNV, and LPG stoves. Improved stoves and domestic biogas digesters are experiencing rapid growth while the growth of LPG is hampered by the high costs of the cylinder, the gas itself, associated appliances and poorly developed distribution outside of major cities. Neang Kongrey and New Lao stoves cost between US$1.25 and US$4 (World Bank, 2009) and are therefore affordable for most households compared to LPG or electricity. For domestic uses, common LPG cylinder sizes are the 6kg, 15kg and 48kg. The cost of a 15kg cylinder is estimated at US$19 while that of a 48kg cylinder is estimated at US$60 (Cambodia Investment Bureau, 2012), well beyond the means of the majority of the Cambodian population.

As of December 2012, Cambodia had some of the most expensive LPG in the region (Figure 8). However, prices in other countries are kept low through subsidies some of which – e.g. Thailand – are set to diminish.

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Figure 8: Indicative prices of LPG per kg in five South East Asian countries

Source: Adapted from Bangkok Post, 2013

It is unlikely that in the short to medium term, LPG will become a major thermal energy source in households in Cambodia without specific efforts to facilitate distribution and demand, and to improve affordability. Biogas, which burns cleanly can replace or complement LPG for households that can produce their own or purchase some locally.

Solar water heaters also have a role to play in household energy applications but their application and use in Cambodia remains low.

3.2.3 Access to Electricity Physical access to electricity is estimated at 35% in Cambodia. A consolidated grid has just started to develop and there are on-going activities to expand the reach of the grid to rural and other areas not yet reached by it. However, electricity use varies depending on availability and reliability, household income, cultural and other factors.

Availability and reliability of electricity are dependent on service providers and given the large number of REEs, it is difficult to quantify accurately without comprehensive national wide surveys. Approximations however show that some areas have power supply for only 4 to 12 hours per day and that planned and unplanned power outages are common, as are other quality issues such as voltage fluctuations and brown-outs (Figure 9).

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Figure 9: Power quality 2008 to 2011

Source: Hirata, 20115

Other than power outages and voltage fluctuations, quality of electricity for households is affected by how long the outages last. According to Hirata (2011), the duration of power outages is decreasing (Figure10)

Figure 10: Duration of power supply problems

Source: Hirata, 2011

5 Note that the graph gives the impression that poor quality is rising in 2011. This is not necessarily the case since the data for 2011 is six months data covering the summer period where demand is high in part due to cooling demand and supply low due to droughts and poor hydrology. It is likely that12 month data would have a more even data. Another reason could be the increasing demand on a system due to increases in connections and demand as incomes increase while generation capacity has not increased at a similar or higher rate over the last few years. Changes between 2010 and 2011 should therefore not be interpreted as an emerging trend.

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In terms of affordability, Cambodia has one of the most expensive electricity in the world and the most expensive in the ASEAN region. The configuration of the electricity sector disadvantages the poor in that tariffs are between 9-25USc/kWh for customers supplied by EdC which largely supplies urban and non-poor households, compared to 40-120USc/kWh in rural areas where the majority of suppliers are REEs. Thus high costs of electricity is not only caused by householders’ low incomes or relative costs of electricity to income but is bi-directional and further driven by the fact that in absolute terms, electricity is more costly per unit for the poor compared to the non- poor (Table 5). Detailed electricity tariffs for other provinces are provided in Appendix 3.

Table 5: Indicative electricity tariffs for different customer categories in different locations

Area Tariff (US$/kWh) Phnom Penh 0.18 for households 0.19 for businesses Other grid-connected towns and urban areas 0.25 - 0.40 Rural areas (mostly diesel generators) 0.50 - 1 Battery (car batteries) charging stations (diesel Up - 4 - to be found in 35% of rural villages) Source: Energypedia, 2012

The high cost of electricity has also shown itself through protests (Box 1). It is also due to these high costs of electricity and the lack of alternatives for thermal applications that households with access to electricity continue to use firewood as the main fuel for cooking.

Box 1: Protests against high costs of electricity in Cambodia

In recent years, Cambodia has seen a number of protests and petitions over high costs of electricity. In February 2010, more than 200 villagers from two communes in Kandal Stung district protested against the high cost of electricity and in May 2010 more than 1,000 households in Kampong Thom province signed a petition against high electricity prices. In June 2012, about 300 people from three villages in Kampong Cham’s Batheay district also protested against electricity price increases, and in July 2012 more than 200 villagers in Preah Vihear town signed a joint complaint requesting intervention over electricity price increases. Source: Heng, 2010

The RGC subsidises all oil products and electricity supply for EdC (i.e. state utility) consumers. It spent about US$170 million oil subsidies in 2007 and US$250 million in 2008 (Naron, 2012). Oil subsidies represent an estimated 2% of GDP. For electricity, the government spent about US$30 million in subsidies in 2008 (Naron, 2012). Given that the wealthiest 10% of Cambodians have almost 30% of income compared to the poorest 10% who have 3.5% of income (World Bank database, 2012), and given that the poorest have least access to modern energy services, subsidisation of modern energy services favours the richest groups. Currently, the government is working to reduce subsidies in electricity sector. In July 2012, government announced that, in Kandal, Kampong Speu, Sihanoukville and Phnom Penh, households consuming more than

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200kWh will no longer be eligible for subsidies (Kunmakara, 2012). This begins to balance some of the inequalities inherent in the subsidy structure.

Economic sustainability of rural electricity enterprises can be rated as medium to low. On one hand, REEs tend to charge tariffs that are based on cost of service provision and hence recover their costs. On the other hand, the high costs and their focus on rural areas mean that their customer base is limited and rural electrification expansion is slow. Further, high price and volatility of petroleum products – the main energy source for power generation in Cambodia - mean costs of electricity are volatile and dependent on the international market. The threat of rising costs of imported oil will be further worsened by pressure to reduce tariffs to affordable levels in the absence of compensatory mechanisms or alternative supply models. The overall sustainability of REEs is also threatened by an unclear policy framework, particularly on how they may be integrated into a national grid system that is planned by government and what their role will be when national grid access reaches the areas that they serve. This could lead to reluctance to invest in quality improvements to REE’s electricity supply, among other things. Other threats to sustainability of rural electrification include lack of technical and managerial capacity, limited access to capacity building and support services, and limited access to affordable financial instruments. For EdC, economic sustainability is threatened by poor economic performance, in part due to subsidies that EdC spends to reduce costs of electricity among its consumers while its electricity prices do not meet the cost of service. Between January and May 2012, EdC reported losses of US$3 million – a factor that has contributed to a reduction of electricity subsidies (Kunmakara, 2012).

In terms of environmental sustainability, the Cambodian economy is a low carbon economy – with CO2 emissions estimated at 4.6TCO2 on 2009 (IEA, 2011) - reflecting its low income status rather than high use of renewable energy. In comparison, Thailand emitted 227.8 TCO2, Vietnam emitted 114.07 TCO2, and Myanmar emitted 10.14 TCO2 (IEA, 2011). As this and as Figure 11 shows, Cambodia’s economy is performing better, carbon-wise, than its neighbours.

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Figure 11: Carbon performance of selected South East Asian economies

Source: IEA, 2011

In spite of the carbon-friendly economy of Cambodia, the current power development plan is focused on large hydropower developments on the Mekong River and its tributaries i.e. over 50% of generation planned is on Mekong and its tributaries. This can threaten the environmental sustainability since big hydropower dams as planned in the development plan often require flooding large areas which negatively affects biodiversity. In addition heavy dependence on hydropower makes the electricity sector vulnerable to climate variability such as flooding and droughts. This is especially true when the hydropower developments are on the same river meaning they are susceptible to the same hydrology. For the case of Cambodia, the development of hydropower on the Mekong is also being undertaken by other countries upstream and downstream of Cambodia’s development which may further impacts the performance of the planned hydropower plants.

Social sustainability of electricity in this report is defined as the provision of electricity across social strata, and specifically including vulnerable groups, the poor and particular genders. It also means developing supply capacity without disadvantaging vulnerable groups. Given Cambodia’s situation where electricity supplied to wealthier households is cheaper and better quality than that to poorer households, electricity access patterns reflects, maintains and worsens socio-economic and gender disparities.

Development of large infrastructure such as hydropower dams can negatively affect surrounding communities whose livelihoods are sustained by the ecosystems surrounding the dam sites because flooding and relocations. At the same time, surrounding communities can benefit through access to electricity, jobs, and social services brought about by dam construction and electricity company operations in the area. The social impacts of dam development in Cambodia must therefore be weighed against economic and social benefits through research, and mitigation

24 | P a g e measures must be identified and incorporated from planning to execution. Specific efforts should be made to ensure that such communities directly benefit from any dam developments.

3.2.4 Modern energy for productive uses

Productive use of energy means energy access that contributes to productive purposes such as agriculture, milling, manufacturing and tailoring among, and in turn allows households and communities to increase their incomes. Key opportunities for energy for productive uses in SMMEs in Cambodia include;

 Mechanical power for motors e.g. in rice mills  Biogas and thermal generators for food, leather and other product processing tasks  Electricity whether from grid, off-grid or self-generated in agro-processing plants  Solar water heaters in hospitality industry and food processing  Process heat in food and agro-processing  Cost reductions and revenue increases for SMEs through cogeneration activities including excess power sales

SMMEs in Cambodia employ the majority of Cambodians – over 80% of those employed - and hence contribute to the economy in a vital way. However, access to modern energy for productive uses follows the patterns of household energy access, with better access in urban areas and lower and poorer quality access in rural areas. In addition, rural SMMEs are chiefly supplied with expensive power from REEs. In addition, the World Bank identifies electricity access as a key issue in doing business in Cambodia where it takes an estimated 183 days for businesses to access electricity, and it costs 2802.0% of income per capita in 2013, down from 3,062.5% in 2012 (World Bank, 2013).

Electricity is identified as one of the factors that increase production costs in industry and a deterrent to doing business in Cambodia, due to both costs and unreliable supply. In an assessment of 11 firms, Hem (2009) found that electricity and other forms of energy (excluding transportation) account for about 12% of costs of production. Electricity black outs are frequent and were also identified as a barrier to effective and competitive business by businesses (Table 6).

Table 6: Frequency of black outs experienced by manufacturing firms

Frequency of black out Number of firms reporting Percentage of firms reporting Several times a day 1 6 Once or few times in a week N/A N/A Once or few times in a 14 82 month Once or few times in six 1 6 months

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Frequency of black out Number of firms reporting Percentage of firms reporting Have not experienced in a Na Na year Owned generation 1 6 Total observation 17 100% Source: Hem, 2009

For about 65% out of 17 firms, power outages can last for over 30 minutes (Table 7) which can disrupt production and lead to product or productive time losses.

Table 7: Duration of power outages experienced in selected firms

Length of period Frequency Percentage reporting 1-5 minutes 3 18 5-30 minutes 3 18 Longer than 30 minutes 11 65 Total observations 17 100 Source: Hem, 2009

To mitigate against disruptions and production losses caused by poor electricity supply, several businesses install their own generators for backup, increasing their production costs and decreasing their competitiveness. As of 2009, an estimated 36% of firms in Cambodia used generators and firms reported that about 4% of their sales are lost due to power outages (IFC, 2009). Such losses would likely affect micro-enterprises the most because they rarely have insurance or substantial profit margins to cope with the losses.

Although there was no data, observations indicated that there are also disparities between energy access between micro-enterprises operated by women and those operated by men. In Phnom Penh, a common micro-enterprise observed by the author was street food vending. Women street food vendors were observed chiefly using charcoal stoves while men – in part because they use mobile food vending – were observed to use 6kg gas cylinders more often than women. More data is thus required on gendered access to modern energy in SMEs, and why any disparities exist (whether it is choice, income or mode of vending i.e. stationary vs. mobile vending).

In terms of a transition to sustainable energy use, a growing number of businesses in the tourism sector have access to modern renewable energy, often combining diesel electricity generation with solar water heaters. Increasingly, rice mills are also switching to self-generated electricity using rice husks but the number remains low compared to the total number of rice mills with this potential. Quality of gasifiers is also becoming an issue that could affect future adoption trends (Box 2)

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Box 2: Low levels of skills among artisans affect biomass gasifier quality

Programs promoting use of rice husks for generating electricity are increasing the demand of rice- husk gasification. However, there are only two companies that make gasifiers in the formal sector in Cambodia while other gasifiers are imported, mainly from India and China. Gasifiers remain costly and this has led to an emergence of local gasifier manufacturers. Interviews by the consultant with an expert in the gasification sectors showed that these emerging gasifier manufacturers make low-quality gasifiers that combust the rice husk incompletely. This results in air and water pollution where low-quality gasifiers have replaced diesel in rice milling, undermining the environmental benefits of switching to gasification. However, because low quality gasifiers tend to be cheaper than high quality gasifiers, business owners are ignoring, and are sometimes unaware of, the risks of such gasifiers. During the gap analysis stakeholder consultations, the same issue was raised by two participants from the private sector. Source: Consultant’s interviews and stakeholder consultations

3.2.5 Summary of challenges to meeting energy access goals

While it is likely that Cambodia may reach the universal access to electricity goal by 2030 based on recent performance where access has increased from around 10% in 1992 to about 35% today (see Figure 7, page 17,), there are some challenges to reaching the SE4All goals in Cambodia;

 High costs of electricity  Lack of a clear framework to consolidate a fragmented supply industry  Lack of a thermal energy strategy i.e. strategy on how energy for cooking and heating will be met in households, communities and for productive uses  Lack of strategic plan for energy access for productive uses  Poor quality of electricity supply  Stability of hydropower supply might be endangered due to changing climate conditions as hydropower projects in Cambodia will all come from a single river (the Mekong river)  Lack of a comprehensive strategy that addresses efficient use and affordability of electricity

3.3 Energy efficiency

3.3.1 Overview and assessment The Royal Government of Cambodia has committed to regional ASEAN and national energy efficiency targets. As a member of ASEAN, it is committed to reducing energy intensity by 8% by 2015, from 2005 levels (Kimura, 2012). It has also declared its intentions to reducing final energy consumption by 10% in all sectors (Kimura, 2012; ASEAN Centre for Energy, 2011), to encourage efficient use of energy resources and minimise detrimental effects of energy supply and consumption on the environment (Bunthoeun, 2012). In 2008, the RGC through Prime Minister Hun Sen issued a circular requiring the implementation of electricity saving measures in all ministries and public institutions (RGC, 2008). The circular detailed a range of actions to be adopted by government and public sector employees to save electricity in the workplace and

27 | P a g e hence, reduce government expenditures. Demand-side management (DSM) and energy efficiency programs currently underway in Cambodia span almost all aspects of the energy efficiency spectrum, from awareness programs, audits, technology provision to market creation activities but are mostly in infancy.

Currently, the government with support from the EUEI is developing an energy efficiency policy strategy that aims to address minimum energy performance standards, actions, strategies and others (RGC, 2013). This will maximise the vast opportunities for energy efficiency and create a clear and coordinated operational framework for energy efficiency interventions.

On the supply side, within the electricity sector, EdC’s distribution losses are about 10.5% of total generation (World Bank, 2011a). For IPPs and REEs, their efficiency levels are difficult to ascertain as there are no comprehensive studies of their technical performance. However, one study suggests that REEs lose about 25% of electricity generated (Pagnarith and Limmeechokchai, 2009). Given these losses, Cambodia is not on course to meet the ASEAN energy intensity targets. The planning for energy intensity targets is further complicated by a lack of baseline information of current status, at macro and sub-levels.

3.3.2 Energy savings potential in households According to Williamson et. al., (2004) the potential for residential energy savings in Cambodia is 6,562GWh/year. Efficiency opportunities include efficient lighting, appliances, standards and labelling, building codes and behaviour changes interventions. However, there is low level of awareness of energy efficient appliances and behaviours, although an awareness campaign on television and other media is currently aiming at changing that.

The proliferation of low quality, inefficient appliances that are cheaper than high quality energy efficient appliances inhibits the transition towards more energy efficient households. There is also limited awareness of the returns on investments in energy efficient appliances. In addition, for poor households, long term benefits are often sacrificed because of low availability of cash in the short term.

3.3.3 Energy savings potential in industry Williamson et. al., (2004) estimated that savings from energy efficiency measures in the industrial sector can save 547GWh.year. Various projects, implemented by a range of development institutions including UNIDO, are underway to improve energy efficiency measures in industry and raise awareness of the role of energy efficiency in corporate performance. However, there are no compulsory standards or regulations to steer industry towards energy efficiency. This, combined with cheap labour and the ease of passing on costs to customer, does not incentivise energy efficiency in industry. An energy efficiency policy that is currently being developed will provide a strong basis for which to incentivise and drive energy efficiency in all subsectors.

3.3.4 Summary of challenges to meeting energy efficiency goals Challenges to meeting SE4All goals relating to energy efficiency in Cambodia include:

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 Lack of an operational energy efficiency policy and national energy efficiency standards and labels including building codes  Lack of awareness of energy efficiency technologies  Poor market conditions for energy efficient technologies leads to low availability  Limited human capacity to undertake energy management and audit exercises  Lack of baseline data to form the basis of targets and performance measurements

3.4 Renewable energy

3.4.1 Overview and Assessment The share of renewable energy in electricity is small, at less than 5% of total electricity sent out, although there is a high potential for renewable energy. Currently, it is estimated that renewable energy can meet more than the current and projected future (up to 2024) energy needs of the country. Given Cambodia’s high costs of electricity, of which 95% are fuel related (Poch and Tuy, 2012), use of renewable energy to provide various energy services including electricity, is an attractive economic proposition for the national economy, service providers and users. The following section details the potential for renewable energy and the status of development for selected renewable energy technologies.

3.4.2 Renewable Energy Potential and Status of Development Cambodia has a variety of viable renewable energy options that include hydropower, wind, solar and modern biomass. It also has co-generation potential, most of which would be from renewable resources. However, these resources are currently under-exploited although there is emerging focus on hydropower and modern biomass. The resource potential and status of development are as follows:

Hydropower: The potential for hydropower generation in Cambodia is estimated at between 8,000MW and 10,000MW (Williamson et. al., 2004; Hundley, 2003). The bulk of this is on the Mekong river and its tributaries. While current focus is on large scale hydro development, there is also potential for micro and pico-hydro installations which would be especially important for small isolated communities.

Wind: Wind speed in Cambodia range from 2m/s to about 5m/s. Good wind speed for power generation (i.e. 5m/s or more) exist around the coastal regions of Sihanoukville, Kampot, Kep, Koh Kong and around Tonle Sap. From a technical perspective, wind can provide up to 3,665Gwh/yr of electricity in Cambodia (Williamson et. al, 2004). Other than generating power, wind energy – especially at the lower speeds common in Cambodia - can be used for activities such as water pumping for improving household and community water access or for supplying water to small and agro-enterprises. Prey Veng province has had some experience with water pumping from wind power with up to 700kw installed (Energypedia, 2012).

Geothermal: The potential for geothermal energy in Cambodia is yet unknown.

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Solar: Solar radiation in Cambodia averages 5kWh/m2/day. There is therefore potential for solar home systems, solar PV and solar thermal applications for public facilities such as schools and health facilities, and for enterprises. A World Bank program from 2011-2012 aimed to install 12,000 SHS throughout Cambodia through the rural electrification fund, complementing REF’s own efforts (Keosela, 2013). In the first quarter of 2011, REF disbursed financing for 49,023 solar home systems connections in 8 provinces (REF, 2011). Private sector and social enterprises such as Kamworks, PicoSol and others are among those involved in improving access to SHS.

A challenge for current and future efforts to increase the use of solar technology at household and community level is the proliferation of low quality products that spoil the market. Another challenge is the on-going financial need to subsidise connections (capital costs), whether grid or SHS to poor homes, as pointed out earlier (Table 2, page 17).

To date, there are no plans to develop Concentrated Solar power (CSP) technology for solar power generation although some private and semi-private entities such as Kamworks have shown interest.

There is no major programmes addressing solar thermal energy including solar water heaters but the private sector including companies such as Khmer Solar are involved in selling solar water heaters.

Modern biomass including biogas:

Electricity from solid postharvest waste - Cambodia’s agro-processing and silviculture results into 1 million tons of rice husks annually, over 25,000 tons of old rubber trees and other biomass annually respectively (TERI, 2009; Asiabiomass, undated). These and other biomass sources including waste from piggeries, present opportunities for generating as much as 18GWh of electricity per year from biomass resources. However, some of these biomass resources such as rice husks face competing use from other industries and domestic applications where they are used as feed for pigs, animal bedding or litter, building material, pest control, and floor spillage soak-up materials in industry among others.

Cambodia is currently a participant of the EU SWITCH-Asia project aimed at switching from fossil fuels to bio-organic waste for energy generation. In Cambodia, the waste-to-energy program under the EU SWITCH-Asia project aims to improve the competitiveness of the rice milling sector by facilitating a switch from fossil fuels to use of waste such as rice husks. There are other companies harnessing solid biomass, particularly rice husks with over 50 gasification plants around Cambodia. However, the potential for gasification is higher and an estimated 2,670 gasifier systems can be installed in Cambodia (TERI, 2009).

Other upcoming and major projects include a General Electric and SOMA group (GE-SOMA) supported rice husk gasification plant in Kamphong Cham (Hak Se Mill) which aims to generate 1.5MW of electricity for the mill, with the excess sold to the grid (EPC Engineer, 2012). With the

30 | P a g e opening of a sugar milling factory in 2012, bagasse also provides an opportunity for power generation.

Liquid biofuels - While liquid biofuels are also possible from various sources, their potential and resulting impacts are yet to be comprehensively assessed. Feedstock could include cassava, Jatropha, palm oil, sugar cane etc. A Japanese energy company, Idemitsu Kosan, has signed a MOU for ethanol and aims to produce 200,000 litres of bioethanol per year for the national and regional market (Sapp, 2012; Idemitsu, 2012). There are around 10 companies also involved in producing biofuels.

Municipal waste: Municipal solid waste and sewerage are also potential sources of bioenergy, but face the barrier of lack of dysfunctional sorting, collection and waste disposal system.

For both solid (gasification) and liquid biomass for energy generation, an enforceable and enforced regulatory framework needs to be in place to ensure that the biomass used meets a sustainability criteria, throughout its value chain from sourcing to disposal. As news articles have shown, biofuel production and land rights are on-going areas of concern in Cambodia (Box 3).

Box 3: The potential impacts of increased biofuels production

Land ownership and rights in Cambodia have a unique configuration as a result of decades of war and systematic dispossession in the late 1970s. In recent years, the distribution and acquisition of land has come under scrutiny and disputes are common. While only a small portion of land disputes relate to biofuels production, the impact that biofuel production can have on an already contentious issue can be highly negative in part due to the differences in power between potential fuel producers and (potential) rural land owners. Between September 2012 and March 2013, newspapers in Cambodia reported a number of arrests related to land acquisition for biofuels production in Banteay Meanchey province, showcasing the possible conflict between land and energy production. Organisations such as Oxfam, and Actionaid are warning national governments, bilateral and multilateral partners to be prudent in their support of biofuels production in developing countries. Sources: Dahlbeck, 2012; Oxfam, 2012; Naren and Lewis, 2013; Lewis 2013

Biogas production: At household, community or enterprise levels there is a substantial potential for biogas production. A National Biogas Digester Program (NBDP) is implemented jointly by the Ministry of Agriculture, Forestry and Fisheries (MAFF) and SNV. In three years between 2006 and 2009, SNV in Cambodia had supported the installation of 6,402 (Ghimire, 2013) and by 2013, SNV estimates that it has installed 15,000 domestic biogas units. It plans an additional 22,000 domestic biogas units by 2016. There is no independent data on how many of these are functioning and being used by the owners.

Firewood and charcoal: As biomass is likely to remain a key energy source by 2030, particularly for household thermal applications, it will have to be accorded a priority status in any sustainable

31 | P a g e energy strategy efforts in Cambodia. In 2012, efforts were started to develop a biomass energy strategy but this will have to be well-thought through and well-coordinated as the biomass sector (in any developing country) is highly fragmented and complex due to many applications and linkages, and is traded on a range of markets including formal and informal markets.

The World Bank’s Clean Cooking Initiative program implemented by a range of partners including GERES aims to improve access to cleaner cooking in Cambodian households. GERES, one of Cambodia’s key promoters of improved cookstoves has already disseminated over 1 million improved cook stoves in the country. In addition, private companies such as Sustainable Green Fuel Enterprise are beginning to produce sustainable charcoal, making charcoal briquettes mostly from coconut husks.

Cogeneration: Industry including the garment, agro-processing and wood processing can generate electricity using cogeneration technology. While there is as yet no government mandate ensuring use of by-products such as rice husks or bagasse for process heat or Combined Heat and Power (CHP), a range of programs including one implemented with support from UNIDO are promoting cogeneration as a way for improving energy efficiency in industries including the garments industry, rice milling sector, the brick kiln sector and others. One barrier to increasing cogeneration is that as rice mills become more efficient and generate their own electricity, the rules for selling that electricity to the grid are unclear. This creates a disincentive for potential cogenerators. An example from Mauritius highlights how appropriate legal and regulatory framework can create incentives for cogeneration and save the national utility the need to (prematurely) invest in new generation, creating the opportunity to use the avoided expenditure for improving grid access as well as improving grid integrity (Box 4).

Box 4: Using the appropriate legal and regulatory framework to stimulate cogeneration in Mauritius

Mauritius is one of the major sugar producers in Africa. Over the years, the country has created a range of performance linked incentives and deterrents to encourage the use of sugar production waste – bagasse – for electricity production to complement coal usage during the sugar harvesting season. The policy tools include performance-linked rebates on export duty paid by efficient sugar millers with preference for those producing firm power, exempting sugar millers that produce power from paying taxes on revenue generated from power sells, providing allowances on capital spent on power investments by sugar millers, centralising cane milling activities where possible, and providing a reasonable prices for bagasse used for energy production in order to make it more attractive compared to its competing uses. In addition, the legal framework clarified and simplified how such power can be sold to the grid. These measures prompted sugar millers to see opportunities in generating power from bagasse, and improve the efficiency with which they generate such power. The utility benefitted by buying power from sugar millers instead of investing heaving on new generation. Funds were redirected to other utility objectives including electrification. Source: Deepchand, 2001

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3.4.3 Renewable Energy Strategy and relevant targets The Renewable Energy Action Plan (2003) and the Rural Electrification Master Plan (JICA, 2006) are the key strategies in Cambodia’s energy sector. The latter document singles out renewable energy as the key mode for reaching rural populations with modern energy services, and aims to add 10MW to 17 MW of renewable energy to the countries capacity. It set the target of renewable energy electricity at 5% of electricity by 2012 (JICA, 2006). Under the power sector development plan, the role of renewable energy and particularly of hydropower in the future energy mix of Cambodia is prominent. According to the power sector development plan, about 58% of all power developments between 2011 and 2010 will be hydropower.

3.4.4 Summary of challenges to meeting renewable energy goals Challenges to meeting SE4All goals relating to renewable energy in Cambodia include;  Need to diversify renewable energy resource exploitation  Lack of incentives for renewable energy for low income households  Limited technical know-how for exploiting renewable energy  Incompatible financing both program development and consumers

4 Institutional framework for Achieving SE4ALL Goals

4.1 Institutional and policy framework for the power sector

The institutional framework for power sector is dominated by the Ministry of Industry, Mines and Energy (MIME), the Electricity Authority of Cambodia (EAC) and Electricite du Cambodge (EdC). MIME is responsible for setting out policy, strategies, plans and any restructuring (e.g. private participation, export and imports, subsidies etc.) of the energy sector as a whole.

The EAC, set up in 2002, is an independent regulator responsible for issuing regulations governing the electricity sector and enforcing them. It is responsible for issuing electricity supply, generation, distribution or consolidated licenses, enforcing sector rules through penalties and dispute resolution, undertaking cost and price-adjustment reviews and charges and tariff setting. There are currently no plans to privatize EdC but private power producers are encouraged to enter the electricity sector.

EdC is the state-owned utility that is vertically integrated; generating, transmitting and distributing power in Cambodia. It is co-owned by MIME and Ministry of Economics and Finance (MEF). It mainly supplies Phnom Penh, Sinahoukville and other urban centres (Figure 12).

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Figure 12: Institutional power sector map

Source: MIME, 2012

There are different electricity service providers including provincial electricity providers owned the MIME, and privately owned REEs and IPPs who are licensed to generate and/or distribute power. Rural electricity enterprises (REEs) supply an estimated 5% of electricity consumers in Cambodia. There were 297 licenses for generation, transmission and/or distribution as well as special licenses in 2011 (Table 8). These represent legal actors in the electricity supply sector while there are also unlicensed operators.

Table 8: Licenses in 2011 Licenses Valid licenses at the end of 2010 Valid licenses at the end of 2011 Consolidated License consisting of 1 1 Generation, Distribution and National Transmission Licenses Generation license 19 17 Special Purpose Transmission 3 6 License Consolidated License consisting of 6 6 Special Purpose Transmission and Distribution Licenses Distribution license 27 40 Retail license 1 1 Consolidated License consisting of 221 227 Generation and Distribution Licenses

Total 278 297 Source: Adapted from EAC, 2011

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Other key ministerial players in the power sector include the Ministry of Environment which governs power developments of water bodies and regulates environmental assessments, and the Ministry of Finance which governs planning and financing of power developments. The Cambodia National Petroleum Authority (CNPA) is responsible for regulation of the oil (the main fuel for electricity generation in Cambodia) and gas sectors. International (state) players directly involved in power provision include utilities in Vietnam, Thailand and Laos which export electricity to Cambodia, providing about 45% of the country’s electric power.

4.2 Institutional and policy framework for non-power subsector

The non-electric energy market consists of players that provide energy services and technologies other than electric power. It includes those involved in small, micro and pico lighting technologies, improved and cleaner cooking solutions such as stoves and biofuels. This subsector is dominated by international NGOs or NGOs that are in partnerships with international and local entities and/or government and social enterprises. The major non-governmental participants can be grouped into those providing lighting solutions, those providing cooking solutions and those involved in energy services for productive use as discussed below.

Lighting: The lighting sector is dominated by small off-grid lighting products, mostly imported by small scale business. These lighting solutions target households as well as community facilities such as clinics and schools that are not electrified. Key players include Kamworks, Pico Sol, Khmer solar, Solar energy Cambodia and Yejj solar. However, low income households are often unable to afford solar systems, with price per Wp estimated at US$7-9. This implies that the most popular solar home systems, which are the 40Wp and the 80Wp systems, cost about US$280 and US$720, unaffordable to most households. There is also lack of a systematic effort to control and improve quality of products into the Cambodian market, leading to market spoilage. Not all technology providers provide their customers with maintenance and other support services. However, a reduction in import levied on solar products and an increase in market actors should reduce costs over time. This will have to be tracked over time to assess the extent to which the costs reductions resulting from tax incentives are passed on to consumers.

The rural electrification fund also supports the dissemination of solar home systems, using subsidies and there are over 50,000 solar home systems throughout the country.

Cooking energy sector Two major programs addressing cooking needs at household level are the National Biogas Digester program implemented jointly by the Ministry of Agriculture, Forestry and Fisheries (MAFF) and SNV, and the World Bank’s Clean Cookstove Initiative (World Bank, undated) that promotes improved cook stoves. A biomass energy strategy, which will include clean cooking, is still under development. It is still unclear how it will affect participation, financing and other challenges in this sub-sector. Key challenges in the cooking energy sub-sector include;  Lack of standards for clean cooking energy solutions (technologies and fuels)  Lack of conducive policy framework to support the growth of a clean cooking market

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 Lack of awareness among users of impacts of traditional biomass cooking and benefits of improved cookstoves  Abundance of “improved” cook stoves of power quality or low performance  Cultural preferences for particular ways of cooking  Limited facilities for testing the performance of improved cook stoves to support design and technology promotion  Low value placed on the benefits of improved cookstoves which in turn limits their adoption  Lack of a National Strategy for Cooking Energy with specific targets and strategies

There is no specific program promoting the use of LPG in for thermal applications in households in Cambodia.

4.3 Program and financing Financing for energy programs include government, donor, private sector and consumer financing. Overall, there has been a steady increase in financing for energy projects (Figure 13).

Figure 13: Electricity and gas distribution GFCF∞

Source: Bazilian et al (2011) ∞ Gross fixed capital formation is measured by the total value of a producer’s acquisitions, less disposals, of fixed assets during the accounting period plus certain specified expenditure on services that adds to the value of non- produced assets

However, current financing falls short of the required US$100 million per annum to achieve universal access to energy. However, finance inflows are likely to improve as a result of investments planned for hydropower development and transmission expansion.

4.3.1 Financing thermal energy In spite of programs addressing thermal energy such as the National Biogas Digester program (NBDP), the National Clean Cooking Initiative and independent programmes by NGOs to promote cookstoves, there are major gaps that limit the scale of dissemination and the level of adoption. In terms of thermal energy such as water heating demand, awareness and initial costs

36 | P a g e remain the biggest barriers. Support for illustrating the business case for solar water heating particularly in the tourism sector is required to promote use of solar water heaters in the sector.

4.3.2 Financing the power sector

Given Cambodia’s plans to extensively invest in the power sector, the RGC, the private sector and donor partners have embarked on a range of power projects across all electricity subsectors; electricity generation (Table 9), transmission (Table 11) and distribution projects.

Table 9: List of on-going power generation projects

Source: EAC, 2011

The list of power generation projects shows that hydropower and coal will be the main energy sources that will be exploited for power generation over the next decade. More importantly for SE4All goals achieving these investments means that by 2020, about 58% of Cambodia’s capacity will be hydro-based. The RGC is depending on and encouraging private investments to undertake these planned power plants and in 2010, private sector companies from Malaysia and China invested over US$1.6 billion in the construction of power plants with over 1000MW capacity in Cambodia (World Bank, 2011b). In 2013, the government signed 13 guarantees for hydropower and coal power plants including a payment guarantee of US$781 million for electricity produced

37 | P a g e from the lower Sesan 2 hydropower dam in Stung Treng (Trandem, 2013; Irrawaddy, 2013). Of the 6,429.1 MW of power generation constructions planned between 2011 and 2020, at least half – 3575mw – have identified investors with memoranda of understanding (Table 10).

Table 10: Power projects and lead investors by country

No Project Country of Type Power Year of Supplier (MW) Operation 1 Kamchay Hydro Power Plant China Hydro 193 2011 2 Kirirom III Hydro Power Plant China Hydro 18 2012 3 200MW Coal Power Plant in Malaysia+ Coal 100 2013 Sihanoukville (I) (Phase 1) Cambodia 4 Stung Atay Hydro Power Plant China Hydro 120 2013 5 Stung Tatay Hydro Power Plant China Hydro 246 2013-2014 6 Lower Stung Russey Chhrum Hydro China Hydro 338 2013 Power Plant 7 700MW Coal Power Plant in - Coal 100 2014 Sihanoukville(II) (Phase 1) 8 700MW Coal Power Plant in - Coal 100 2015 Sihanoukville(II) (Phase 2) 9 700MW Coal Power Plant in - Coal 100 2016 Sihanoukville(II) (Phase 3) 10 200MW Coal Power Plant in Malaysia+ Coal 135 2017 Sihanoukville(I) (Phase 2) Cambodia 11 Lower Se San II & Lower Sre Pok II Vietnam Hydro 400 2017 12 700MW Coal Power Plant in - Coal 100 2017 Sihanoukville(II) (Phase 4) 13 Stung Chhay Areng Hydro Power Plant China Hydro 108 2017 14 700MW Coal Power Plant in - Coal 100 2018 Sihanoukville(II) (Phase 5) 15 Lower Sre Pok III + IV Hydro Power - Hydro 368 2018 Plant 16 Add 700MW Coal Power Plant at - Coal 200 2019 Offshore 17 Sambor Hydro Power Plant China Hydro 450/2600 2019 18 Coal Power Plant (III) or Gas Power - Coal/ 400 2020 Pant Natural gas Total 3,576 Source: Cambodia Investment Bureau, 2012

In addition to construction of generation plants, transmission investments are also increasing and over 2000km of transmission lines are expected to be constructed by 2020 and have identified investors (Jona, 2011). In 2013, Agence Française de Développement embarked on talks to provide a US$65million loan for the extension of transmission lines in Cambodia (Thust, 2013) but this support is likely to be limited to 200-kilometres high-tension and a 200-kilometres medium-tension transmission lines. Meanwhile, according to the MIME (2009), just to reach 4,400 villages required to meet 2015 electricity access targets would require 7,000km of medium voltage transmission lines, at a cost of about US$143 million.

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Table 11: List of on-going power transmission projects

Source: Jona, 2011

For rural electrification targets alone, Cambodia would have to mobilise about US$1 billion (Table 12). In addition to these capital costs, there are costs related to capacity building, awareness and affordability that will have to be factored in, for a meaningful SE4All strategy.

Table 12: Investment costs in rural electrification in million US$ (constant price)

2011‐2015 2016‐2020 2021‐2030

Sub‐transmission 143.4 118.2 83.3 network (MV lines) Distribution 184.0 158.7 203.5 (transformers, LV, meters) Subtotal grid 327.4 276.9 286.8 extension Hydro mini‐grid 31.5 0.9 0.2 Biomass mini‐grid 16.4 0.6 0.2 New diesel mini‐grid 23.9 2.4 0.4 Subtotal mini‐grid 71.8 3.8 0.8

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2011‐2015 2016‐2020 2021‐2030 projects Solar home systems 6.7 8.3 0.0 Community PV 2.2 2.2 0.0 Solar battery 10.4 10.6 0.0 charging stations Subtotal stand‐alone 19.3 21.0 0.0 systems Total investments 418.4 301.8 287.6 Total households 34 52 67 reached Total villages 78 100 100 reached Source: MIME, 2009

Given the scale of investments required, the country will have to mobilise finances from a wide range of sources including private sector, development partners, civil society and government allocations. Mobilising such resources will be a key challenge in three critical ways;

a) Mobilising financing itself given the large scope of investments required b) Ensuring sustainable or balanced financing so that the government does not bear excessive liability/risk in the investments c) Assessing future risks of the investments to ensure long term sustainability

4.3.3 Private financing of domestic energy

Private financing is growing as an option for consumers and developers of energy solutions. An assessment of actors providing financing to energy projects and technologies (both project developers and consumers) showed that there are over 20 organisations that provide financing to the energy sector (Andreas, et. al., 2011). Over the years, these financial services providers have spread over the different niches and provide financing from as low as less than US$100 to over US$250,000. These financial services providers include local organisations and banks such as ACLEDA Bank, to international partnerships such as Blue Orchard (Table 13). Despite the increasing availability of private financing and public-private financing, a range of barriers exist including cultural-religious reluctance to owe money; and the fact that repayment periods (which financial services providers have extended to decrease payment pressures) often fall outside warranty periods of energy systems or their components. As an example, stakeholders sighted the fact that batteries of solar installations often have life times of one to two years under best-use conditions, and sometimes as short as 6 months under real-life use. In contrast, payment periods can stretch between two to three years.

Table 13: Examples of financial services providers and the diversity of financing provided

Financial Category Range of finance Energy specific Collateral service provider products financing requirements Oiko Credit International Microfinance Considering No social investor ACLEDA Local Medium, Small Yes Mixed

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Financial Category Range of finance Energy specific Collateral service provider products financing requirements commercial and large Blue Orchard International Debt financing to Open to it impact investor MFIs AMK Services Local MFI Micro and No – initial medium attempts failed financing Source: Author

While many financial services providers have addressed the issue of collateral by requiring no collateral for micro loans and accepting land titles, corruption in soft land titles was said to be a problem in administering loans that require these. Other service providers pointed out to restrictive conditions of certain donor funded energy projects that limited where, whether and what kind of loans beneficiaries and project developers could access to finance energy installations. Quality of products was another barrier to access to loans since poor quality products are considered too risky to get a loan for.

4.4 Private investment and enabling business environment

4.4.1 Private investments in the power sector Private sector investments in the energy sector will play a major role in meeting the financing needs for the Cambodian energy sector. There are currently over 154 IPPs but their investments and experiences in the sector are difficult to consolidate and ascertain due to lack of systematic data. The following section therefore discusses the general investment climate for private sector in Cambodia. The discussion starts with an assessment of the general business environment in Cambodia and ends with an analysis of the energy sector investments specifically.

4.4.2 Financial flows to the energy sector

As evidenced by its improving position on the World Bank doing business ranking, the general investment climate and the private sector environment in Cambodia is improving. While Cambodia ranks below the regional average for ease of doing business6 (Figure 14), its ranking for doing business has improved from 141 to 133 out of 185 countries (World Bank, 2013).

6 The ‘Doing Business’ ranking is based on factors including the ease of starting a business, construction permits, other permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency, and getting electricity.

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Figure 14: How Cambodia and other South East Asian economies rank on the ease of doing business

Source: World Bank/IFC, 2013

In terms of law and regulations, there are no restrictions on foreign currency flows (with usual caveats), no restrictions on repatriation of profits, and there is a free foreign exchange flow system, limited only in case of foreign exchange crisis. The tax regime includes import duties with an ad-valorem rate, special tax for certain goods, and value added tax (VAT). All imports are subject to a 10% flat VAT, with special dispensation for goods from the ASEAN Free Trade Area (AFTA).

Foreign Direct Investment (FDI) and Official Development Assistance (ODA) are major sources of investments in the power sector. For Cambodia, the last 10 years saw a rapid increase in the total amounts of FDI and ODA (Figure 15), which slowed down around 2008 as a result of the global economic crisis. Although most of the investment flows have been to the garment and agriculture sectors, they illustrate that the government is being successful in improving the business and ODA environment, thereby gaining the confidence of investors and donors. Such confidence may also translate to the energy sector but conditions in this sector and wider political conditions must also be right to attract investors.

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Figure 15: ODA and FDI flows to Cambodia 2000 to 2010

Source: UNCTAD, 2011; Hem, 2012

In terms of investment flows to the energy sector, fixed assets investments offer a picture of investment patterns and trends show an increase in the energy sector, with the exception of 2007 when there was a reduction in investments (Figure 16). However, the investment growth must also be viewed in the context that Cambodia was starting from a very low baseline as a result of infrastructure destruction during the war.

Figure 16: Fixed assets of approval investments

Source: British embassy, 2011; EIC, 2011 **For 9 months only

IPPs and REEs provide about 90% of electricity supplied in Cambodia (EAC, 2011) and illustrate the country’s high level of private sector participation in the electricity sector. While this situation

43 | P a g e has been out of necessity rather than as a result of a deliberate policy framework, it illustrates that despite challenges that the private sector faces, they have a critical role to play in provision of energy services. It further illustrates that under the right conditions, private sector can, and do provide energy services to the poor.

To encourage private participation in the energy sector, the government reduced the import duties on renewable energy technologies such as solar panels and battery chargers from 35% to 7% in 2009, and removed them altogether for wind and hydropower turbines. Similar efforts have been done for import duties on oil and petroleum products, including gasoline (35% to 15%) diesel (15% to 0%) and kerosene (7% to 0%). This, combined with other activities such as awareness creation, should stimulate some investments in the energy sector in the near future. Further, Cambodia is likely to become a medium income country between 2016 and 2024 (RGC, 2011; CDRI, 2012; Xinhua, 2013), which will improve the buying power of many of its citizens and is likely to translate into a more attractive market for private investors.

While the investment framework is creating an increasingly attractive environment for the private sector, a major shortcoming is lack of human capacity. There is also a comparatively low rate of local investments, making private sector investments in Cambodia highly susceptible to elements outside the country.

4.5 Petroleum and gas

Cambodia is exploring offshore oil and gas fields and so far 28 exploratory wells have been drilled (RGC, 2010). The Cambodian National Petroleum Authority (CNPA) is the authority responsible for contracting oil and gas.

For Cambodian households to benefit from any exploitation of this oil and gas potential, a strong governance framework will have to be put in place well before exploitation starts. In addition, clear policies must be developed, implemented and reinforced, that ensure that some of these resources, particularly gas, addresses household and SME energy needs.

A realistic approach should also be adopted, with the knowledge that developing the necessary infrastructure, raising awareness and overcoming common fears about domestic gas use will delay local market creation and the extent which households and SMMEs can benefit from these resources. Instruments such as levies, royalties, taxes on these findings can be used to facilitate market creation activities.

Box 5: Good governance of oil resources turns a traditional curse into a modern blessing

Although gas and oil are some of the highest value commodities, their discovery has not always been beneficial for countries that discover them, leading to the monikers such as resource curse in reference to wars, endemic corruption and continuing poverty in countries with oil resources despite US$ billions in annual revenues. Although the majority of oil producers have experienced this resource curse, countries such as Norway and to some extent, Malaysia have shown that if well managed, oil resources can have long term benefits and can be crucial to ensuring development and equality.

Norway pumps about 1.9 million barrels of oil daily. The Norwegian model, which is widely

44 | P a g e considered the ideal model for managing oil revenues has been enabled by a range of factors including a realisation early on of the finite nature of the oil resources, creation of legislation on how to manage the revenues including investing them in a government pension fund which invests in a range of ethical investments – largely outside Norway (and hence protecting it from domestic risks). Investing in a pension fund also ensures that the oil revenues are used for benefiting future generations. Limits on withdrawals – to 4% per annum – on invested revenues ensures that the invested revenue is not overdrawn. Revenues are highly taxed which increases government’s interest in good governance of the revenues but also increases the range of beneficiaries from the revenues by putting proceeds into state reserves. Although the state has a major stake in the oil sector, Norway is also increasingly balancing state control with global competitiveness made possible by private participation to maximise its oil revenues. These technical aspects of oil governance are anchored by overall good governance including high political competition and high institutional capacity. Source: Thurber, et. al., 2011; Persily, 2011; Hsieh, 2013

5 Summary of gap and barriers to achieving SE4ALL Goals Based on the analysis above and on the consultation meeting on the rapid assessment and gap analysis held in Phnom Penh in April 2013, the following are identified as the key gaps and barriers to meeting SE4All goals in Cambodia.

5.1.1 Thermal energy for households - High costs of electricity for users will inhibit use of sustainable energy even if 100% electrification is achieved since thermal uses are high-consumption activities - Lack of policy and institutional framework to facilitate other modern thermal energy sources such as LPG and clean biomass - Currently there are no targets for clean and sustainable thermal energy for households - Lack of standards for cleaner cooking energy solutions - Low awareness of technologies such as solar water heaters - High dependence on donor financing making the sector susceptible to aid flow changes - Low levels of gender mainstreaming in energy projects

5.1.2 Power sector The following barriers impede grid expansion, off-grid rollout and small hydropower development:  Inefficient and poor quality power supply system  Economic limits of grid expansion i.e. cost per household as grid expands  Lack of an off-grid institutional and financial framework  Need for diversification of renewable energy exploitation to reduce vulnerability of hydropower due to hydrological disruptions due to either climate variability or competing demands for water use or environmental services  Need for climate mainstreaming for power projects  Lack of clarity on integration of REEs in national grid system  A need for inclusive power development strategies i.e. including small scale energy systems, pro-poor solutions and strategies to ensure that communities around hydropower development are key beneficiaries

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5.1.3 Renewable energy  Lack of national strategy on renewable energy development  Lack of assessment and data on renewable energy resources  Lack of long term financial instruments to reduce risk for investors and improve affordability for users  Limited awareness of banks of renewable energy projects and financing leading to excessive risk aversion  Lack of quantity, price or quality guarantees to encourage renewable energy investments  Lack of a tiered green-facility to finance different sized renewable energy and energy efficiency projects  Investment gaps in that few renewable energy facilities support low income households  High availability of poor quality renewable energy technologies leading to low trust in renewable energy technologies and market spoilage  Low awareness of available renewable energy solutions for various applications  Lack of a legal and regulatory framework for increasing share of renewable energy in energy generation and consumption

5.1.4 Productive uses, businesses, and private investments  Lack of policy framework to support energy access and use for productive uses  High costs of energy and back-up systems  Lack of information for consumers and investors on alternatives to expensive generation solutions – primarily diesel  Low human capacity for undertaking energy retrofitting  Limited access to energy for productive uses at the household and community levels

5.1.5 Energy efficiency  Low availability of affordable energy efficient equipment  Lack of mandatory standards to steer sectors towards energy efficiency  Lack of awareness of available technology and behavioural options

6 Conclusions and next steps This rapid assessment and gap analysis represents Cambodia’s response to the Secretary General’s Sustainable energy for all initiative. The analysis has shown that the Country has made substantial progress in energy access but the challenge remains high with about two-thirds of the population still without access to electricity and over 80% dependent on traditional biomass. Practice of energy efficiency remains low, in part due to a historical lack of a legal and regulatory framework including codes of practice and standards. However, an energy efficiency strategy is currently under development. Deployment of renewable energy also remains low despite high potential for solar, hydropower, and modern biomass. Although hydropower planned between 2013 and 2020 will improve the contribution of renewable energy in the sector, there remains a lack of diversification of renewable energy sources such as concentrated solar photovoltaic while off-grid solar remains expensive for average consumers. The challenges facing the sector while

46 | P a g e surmountable require a number of changes to the sector environment in order to make it investment-ready, both in terms of private and public investments that go beyond finances.

This rapid assessment and gap analysis recommends that the Royal Government of Cambodia must focus on developing legal and regulatory frameworks that address the needs of partners including the creating an attractive investment climate, ensuring good governance and supporting energy affordability initiatives. The role of the private sector is illustrated by the high numbers of REEs already in the energy sector. Private sector must further diversify from energy services provision to providing good quality services and providing the services efficiently, as well as moving into providing energy services in rural areas. In addition, the private sector, together with other partners must come up with innovative solutions – financial and otherwise – that will ensure that the poor can access sustainable energy products and services. For its part, donors have a critical role to play in supporting capacity building and technical assistance, and also in financing facilitative actions such as demonstration and promotion of the feasibility of lesser known but viable technology and services options. As an effort that requires broad-based partnerships, development partners can also play a crucial role in supporting consultations, policy dialogue, brokering partnerships and networking and coordination. The civil society on its part can play a role in ensuring mass awareness of sustainable energy options and in ensuring high quality energy products are supported to enter the market by taking on advocacy roles. This rapid assessment and gap analysis further recommends the development of a readiness plan that aims to outline the process of getting Cambodia to be ready for finance and resource mobilisation to implement its sustainable energy for all goals.

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Appendices

Appendix 1: List of Interviewees and their institutions Interviewee Organisation/Sector Sector type/Designation Iwan Baskoro GERES NGO, project manager Benjamin Independent consultant, Independent, Consultant Gasification Jim Greenberg Kamworks Private sector, Managing director Nida Ouk ADB International Development Bank Carlos Telamanca EUEI/SGFE Private sector and consultant Sorya Chan AFD Development Partner Johnson Nkem UNDP/MoE UNDP and climate change expert Sok Narin UNIDO UNIDO, Energy efficiency program staff Leuong keosela REF Parastatal, Director Koen Everaert EU Delegation Energy expert

Appendix 2: List of attendees of the Gap analysis and investment readiness consultation workshop on 10 April 2013

No Name Gender Organization Phone # E-mail

1 Somony Mam M MAFF 012905525 [email protected]

2 Kim sour M CDRI 0888001969 [email protected]

British 3 Poch Kongchheng M 017333650 [email protected] Embassy

4 Victor Jona M MIME 012918401 [email protected]

5 Lam Saoleng F NBP 017961056 [email protected]

6 Heng Da M RECOFTC 012659425 [email protected]

7 Ny Sokea M AMK (MFI) 017958596 [email protected]

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No Name Gender Organization Phone # E-mail

ACLEDA 8 Char Sopheap M 015900112 [email protected] Bank

9 Loeung Keosela M EDC 012940379 [email protected]

10 Op Pich M GDA/MAFF 012817152 [email protected]

11 Sok Khorn M MEF 016868817 [email protected]

Maximilien Comin [email protected] 12 M 0975891625 Aguttes Khmer [email protected]

Carlo Figà 13 M EUEIPDF 0978159256 [email protected] Talamanca

14 Francesco Carocci M SGFE 0973619408 [email protected]

15 War Samnang M SNV 012900221 [email protected]

16 Chea Somdoul F SNVIO 012691133

17 Nhem Sovanna M UNDP/SFM 012959429 [email protected]

18 Veasna Bun M WB 012330360

19 Miranda Phua F Blue Orchard 095930089 [email protected]

20 Taing Theary M OIKO Credit 012651955 [email protected]

21 Hum Sophon M UNDP 099890898 [email protected]

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No Name Gender Organization Phone # E-mail

22 Theng Sopheak F UNDP 092888770 [email protected]

23 Phearanich Hing F UNDP [email protected] 012 800 107

24 Nida Ouk M ADB [email protected]

25 Hing Kunthap M Khmer Solar 098676828 [email protected]

TV 26 Hok Sokrin M 077927127 [email protected] HangMeas

27 Ouch Kemly F UNDP 016888900 [email protected]

28 Mam Kosal M [email protected]

29 Ly Piseth M MoWA 0966999003 [email protected]

30 Peou Vorleaks F MIME 012377869 [email protected]

31 Leang Sophal M CCD, MOE 012246192 [email protected]

32 Say Sophea F MoWA 016646825

34 Khem Chanthorn M MOH 012623739 [email protected]

081870377 35 Magi Matinga F UNDP +27715621992 [email protected]

36 Heng Pheakdey M UNDP 016929899 [email protected]

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Appendix 3: Indicative electricity tariffs for different customer categories in different provinces

Category Electricity Tariff Phnom Penh, Kandal, Kampong Speu Residence of Phnom Penh and Monthly used≦50kWh 610 Riel/kWh Takmao (Kandal) Monthly used >50kWh 720 Riel/kWh Residence of Chamon (Kampong For all customers 720 Riel/kWh Speu) Customers paid by government For all customers 820 Riel/kWh budget, Embassy, Foreign Residence Residence of administration, Small customers *MA + 0.036 USD/kWh Commercial and industrial sectors Medium customers MA + 0.028 USD/kWh Large customers MA + 0.024 USD/kWh **MV customers MA + 0.020 USD/kWh Preah Sihanouk Local Residence For all customers 720 Riel/kWh Customer paid by government For all customers 820 Riel/kWh budget Embassy, Foreign Residence, Small customers MA + 0.046 USD/kWh Commercial and industrial sectors Medium customers MA + 0.038 USD/kWh Large customers MA + 0.034 USD/kWh MV customers ( 275-500 KVA) MA + 0.025 USD/kWh MV customers (501-1000 KVA) MA + 0.022 USD/kWh MV customers (1001-3000 KVA) MA + 0.018 USD/kWh MV customers ( > 3000 KVA) MA+ 0.015 USD/kWh Kampong Cham Local residence For all customers 940 Rile/kWh Customers paid by government For all customers 940 Rile/kWh budget Embassy, Foreign Residence, Small customers MA + 0.046USD/kWh Commercial and industrial sectors Medium customers MA + 0.038USD/kWh Large customers MA + 0.034USD/kWh MV customers ( 275-500 KVA) MA + 0.025USD/kWh MV customers (501-1000 KVA) MA + 0.022USD/kWh MV customers (1001-3000 KVA) MA + 0.018USD/kWh MV customers ( > 3000 KVA) MA + 0.015USD/kWh Siem Reap Small customers 820 Rile/kWh Medium customers 800 Riel/kWh Large customer 750 Riel/kWh MV customers 700 Riel/kWh Shu Jing Electronics company 600 Riel/kWh Licensees and hole sale customers 600 Riel/kWh Banteay Meanchey Small customers 1,000 Rile/kWh Medium customers 900 Rile/kWh Large customer 850 Riel/kWh MV customers 750 Riel/kWh Licensee and hole sale Customer 600 Rile/kWh Battambang Small customers 1,000 Rile/kWh Medium customers 900 Riel/kWh Large customers 850 Riel/kWh MV customers 750 Riel/kWh Licensees and hole sale customers 600 Rile/kWh Takeo Small customers 920 Riel/kWh

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Medium customers 0.1825 USD/kWh Large customers 0.1730 USD/kWh MV customers 0.1655 USD/kWh Svay Rieng (Bavet) For all customers 650 Riel/kWh MV customer 0.1150 USD/kWh Kampot For all customers 1,100Riel/kWh (Kampong Trach) MV customers 0.1150USD/kWh Prey Veng For all customers 1,220 Riel/kWh Stung Treng For all customers 980 Rile/kWh Rattanak Kiri For all customers 670 Riel/kWh

Note: * MA: IPP’s monthly average price in the month before last. **MV: Medium Voltage customers Source: MIME as of November 2011

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