Feasibility Study of Renewable Energy Options for Rural Electrification in Cambodia (REOREC) Publication Reference: EuropeAid/119920/C/SV Budget line BGUE-B2004-19.100200-C8-AIDCO Project Number: 103-2004 Task 3 MARKETS, POLICIES AND INSTITUTIONS February 2006 Phnom Penh, Cambodia This document has been produced with the financial assistance of the European Union. The contents of this document are the sole responsibility of the Cambodian Research Centre for Development (CRCD) and can under no circumstances be regarded as reflecting the position of the European Union. Table of Contents 1 INTRODUCTION 1 2 RENEWABLE RURAL ELECTRICITY MARKET 2 2.1 Rural Electrification Development in Cambodia 2 2.1.1 Electrification Level 2 2.1.2 Rural Electrification Development Targets 4 2.2 Rural Electricity Supply Market 5 2.2.1 Electricity Demand 5 2.2.2 Electricity Supply 9 2.2.3 Renewable Energy Supply Options for Rural Electrification 12 2.3 Renewable Energy Technologies 19 2.3.1 Small Hydropower 19 2.3.2 Wind Energy 21 2.3.3 Solar PV 24 2.3.4 Biomass Energy 27 3 RENEWABLE RURAL ELECTRIFICATION POLICY 38 3.1 Opportunities and Barriers to Renewable Energies for Rural Electrification 38 3.1.1 Rural electricity supply issues 38 3.1.2 Market barriers to renewable energy for rural electrification 41 3.2 Renewable Rural Electrification Policies and Instruments 43 3.2.1 Rural electrification and renewable energy policies 43 3.2.2 Rural renewable electrification strategies 44 3.2.3 Policy instruments 47 3.3 Renewable Energy for Rural Electrification Policy Options for Cambodia 49 3.3.1 European Renewable Energy Policies and Strategies 50 3.3.2 Renewable Energy Policies of EU Member States 53 4 RENEWABLE RURAL ELECTRIFICATION INSTITUTIONAL FRAMEWORK 60 4.1 Electricity Sector Institutional Frameworks 60 4.1.1 Electricity Sector Legal Framework 60 4.1.2 Electricity Supply Industry Structure and Governance 61 4.1.3 Electricity Supply Industry Regulatory Frameworks 63 Feasibility Study of Renewable Energy Options for Rural Electrification in Cambodia (REOREC) 4.1.4 Investment Laws 68 4.1.5 Clean Development Mechanism 69 4.2 Stakeholders’ Activities 71 4.2.1 Power Licenses 71 4.2.2 Procedures for Obtaining Power Licenses 72 4.2.3 Power Purchase Agreements 72 4.2.4 Environmental Permits 73 4.2.5 Accessing the Rural Electrification Fund 74 4.2.6 Accessing Investment Incentives 76 4.2.7 Clean Development Mechanism Approval Procedures 77 4.3 Financing Renewable Energy Projects 78 4.3.1 Background 78 4.3.2 The project cycle of RE projects and their financing 81 4.3.3 Financing Mechanisms and Options for Renewable Energy Projects 82 4.3.4 Examples of successfully financed projects in ASEAN 87 4.3.5 Sources of financing in Cambodia 90 5 POLICY ANALYSIS AND RECOMMENDATIONS 92 6 REFERENCES 95 7 ANNEXES 98 Cambodian Research Centre for Development (CRCD) - Cambodia ii Centre Wallon de Recherches Agronomiques (CRA) - Belgium Risoe National Laboratory (RNL) - Denmark Emerging Power Partners LTD (EPP) - Finland Feasibility Study of Renewable Energy Options for Rural Electrification in Cambodia (REOREC) List of Tables Table 2-1: Rural Electrification Level ..............................................................................3 Table 2-2: Number of Customers, Electricité du Cambodge, 2004.................................5 Table 2-3: Electricity Consumption (MWh), Electricité du Cambodge, 2004 ..................6 Table 2-4:Unit Annual Electricity Consumption (kWh per customer), Electricité du Cambodge, 2004 .....................................................................................................7 Table 2-5: Baseline Household Electricity Consumption Assumptions...........................8 Table 2-6: Household Projections (thousands) ...............................................................8 Table 2-7: Residential Sector Electricity Demand Projections (GWh) ............................8 Table 2-8: Installed Capacity, 2004.................................................................................9 Table 2-9: EDC’s Transmission and Distribution Facilities (circuit-kilometers) ...............9 Table 2-10: National Transmission System Development Plan ....................................10 Table 2-11: Power Generation Development Plan........................................................11 Table 2-12: Hydropower Resources Technical Potential Estimates and Classification..........................................................................................................12 Table 2-13: Hydropower Projects (existing and under implementation) .......................12 Table 2-14: Biomass Energy Resource Potential .........................................................14 Table 2-15: Biomass Energy Projects...........................................................................14 Table 2-16: Wind Energy Resource Potential of Cambodia (65 m above ground level) .....................................................................................16 Table 2-17: Electricity Demand of Selected Cluster of Villages....................................18 Table 2-18: Capital Costs of Small Hydropower Plant ..................................................21 Table 2-19: Wind Power Investment Costs...................................................................22 Table 2-20: Advantages and Disadvantages of Steam Turbines..................................31 Table 2-21: Utilisation of Solid Biofuels, Liquefied Biofuels and Biogas .......................35 Table 3-1: Summary of Barriers to Renewable Energy Investments in Cambodia .......42 Table 3-2: Rural Electrification Policy Objectives..........................................................43 Table 3-3: Rural Renewable Energy Policy ..................................................................44 Table 3-4: Rural Electrification Strategy and Program Criteria .....................................45 Table 3-5: Rural Renewable Energy Strategy...............................................................46 Table 3-6: Renewable Energy Action Plan’s Mission, Guiding Principles and Objectives ..............................................................................................................47 Table 3-7: Rural and Renewable Energy Fund (REF) Subsidy ....................................48 Table 3-8: Foreign Investment Incentives.....................................................................49 Table 3-9: Taxes Applicable to Private Investments.....................................................49 Table 4-1: Electricity Law Objectives ............................................................................60 Table 4-2: Key Functions of the Ministry of Industry, Mines and Energy (MIME) .........62 Table 4-3: Key Functions of the Electricity Authority of Cambodia ...............................63 Table 4-4: Types of Licenses Issued by EAC ...............................................................64 Table 4-5: License Fees................................................................................................64 Table 4-6: Types and Number of Licenses Issued (end of 31 December 2004)...........65 Table 4-7: EDC’s Electricity Tariff in Phnom Penh and Kandal Province .....................66 Table 4-8: Actions to Improve Electric Power Services ................................................66 Table 4-9: Actions to Improve Electric Power Services ................................................67 Table 4-10: Environmental Laws...................................................................................67 Table 4-11: Types of Licenses Required From Electricity Supply Providers ................71 Cambodian Research Centre for Development (CRCD) - Cambodia iii Centre Wallon de Recherches Agronomiques (CRA) - Belgium Risoe National Laboratory (RNL) - Denmark Emerging Power Partners LTD (EPP) - Finland Feasibility Study of Renewable Energy Options for Rural Electrification in Cambodia (REOREC) Table 4-12: Ranges of Projects and Possible Financing Mechanisms .........................87 Table 5-1: Summary of Policies and Instruments .........................................................92 Table 5-2: Subsidy Options for Renewable Energies ...................................................93 Table 5-3: Summary of Legal and Regulatory Procedures...........................................94 Table 7-1: EU Manufacturers for Small Hydro Power ...................................................98 Table 7-2: EU Manufacturers and Developers for Wind Power ....................................99 Table 7-3: EU Manufacturers for Solar PV..................................................................100 Table 7-4: EU manufacturers of Large-Scale-Fuel Handling Equipment ....................103 Table 7-5: EU Manufacturers of Boilers and Auxillary Equipment ..............................103 Table 7-6: EU Manufacturers for Steam Turbine Cycle Technologies........................105 Table 7-7: EU Manufacturers of Biomass Fired ORC Equipments .............................106 Table 7-8: EU Manufacturers of Steam Piston Engines..............................................107 Table 7-9: EU Manufacturers and Service Providers for Biomethanation and Biogas Utilization (engines, gas boilers, biomethanation plants).........................107 Cambodian Research Centre for Development (CRCD) - Cambodia iv Centre Wallon de Recherches Agronomiques (CRA) - Belgium Risoe National Laboratory (RNL) - Denmark Emerging Power Partners LTD (EPP) - Finland Feasibility Study of Renewable Energy