Cambodia’s steeplechase towards renewable energy
cambodia’s steeplechase towards renewable energy

Cambodia’s steeplechase towards renewable energy

The southeast Asian country is currently applying a monthly capacity fee on rooftop PV systems and the government may halve it in an effort to spur more solar installs. Several more hurdles, however, should be removed to ensure further growth.

Installation of rooftop PV is heavily penalized in Cambodia with solar arrays currently charged a monthly capacity fee – around US$0.07/kWh for larger systems and $0.84/kWh for smaller systems, according to the report “Position paper on renewable energy in Cambodia” by the European Chamber of Commerce in Cambodia (EuroChamb). It is advocating for the cancelation of the charges for both the manufacturing and industrial sectors.

According to the regulations introduced by the Electricity Authority of Cambodia (EAC) in 2018, rooftop PV system owners cannot access cheaper off-peak energy at nighttime nor may they export excess solar electricity to the grid. Furthermore, solar is capped at 50% of the contracted load, and systems built prior to the regulations cannot operate.

“It is evident that this tariff and regulation policy is not only discouraging investments in private solar panels but effectively blocking any possibility for the industry to reduce the cost of electricity and achieve sustainability goals,” Massimiliano Tropeano, sustainability and garment expert at EuroChamb Cambodia told pv magazine. Cambodia currently has one of the highest electricity prices in Asia, with industrial, agricultural, and commercial consumers paying between $0.1370 to $0.1723/kWh.

New policies

The Cambodian government has rolled out policies to lower the price of electricity and attract foreign investment. It is reportedly considering halving the capacity charge for rooftop PV systems. “We know the government might reduce the capacity charge levied on the solar PV systems, also thanks to the various messages coming from the industry and us. Nevertheless, even a slash of 50% – rumors are saying so – will not be sufficient to open a substantial solar market that could be advantageous for everyone,” Tropeano said.

Other policies comprise the approval last year of a law that includes tax and custom duties exemptions for renewable energy. Solar panels are currently exempt from import tax, but there is a 5% duty on PV inverters purchased from China, and 7% from elsewhere.

Cambodia’s economy is still mostly driven by the garment manufacturing sector. The current regulations frustrate rooftop PV’s potential to offer lower electricity bills, making it unattractive for most factories. “All the factories have an investment perspective of maximum five years. The solar systems proposed to them at this point have an unattractive return on investment (ROI) of eight to 10 years,” said Tropeano. “Even if the capacity charge is slashed by 50%, the ROI will be oscillating between six to eight years – still unappealing and not enough for a garment factory.”

PPAs

Another regulation currently preventing the expansion of the Cambodian PV market is the unavailability of bilateral power purchase agreements (PPAs). The state-owned utility Electricite du Cambodge (EDC) is the only authorized entity to sign PPAs for solar power, thus prohibiting renewable energy licensees and special economic zones from installing solar power. According to EDC, the Cambodian grid cannot sustain variable solar power output, thereby limiting the amount of solar on the grid to 15% of the electricity generation mix.

Overall, solar accounted for 6.36% of Cambodia’s energy mix in 2021, according to data from the EDC. The country’s total installed capacity totaled 376.8 MW in 2021. In 2020, there were 296.80 MW of solar installed, representing 3.38% of the energy mix.

Solar is the only renewable energy source predicted to grow in the country in 2022, to 436.80 MW of installed capacity, corresponding to 6.77% of the energy mix. Hydro is the largest source of renewable energy in the country, with 1,331.70 MW of installed capacity in 2021, or 44,17% of the energy mix.

Cambodia imported 26.55% of its energy mix in 2021, with 56.91% coming from Laos, 33.95% from Vietnam, and 9.14% from Thailand. Figures are expected to increase in 2022, with the country importing 31.79% of its energy mix. Imports from Laos and Thailand will grow, totaling 62.45% and 10.47% of imported energy, respectively, with imports from Vietnam decreasing to 27.08%.

According to a recent report by the United Nations Development Programme (UNDP), there is an estimated $903 million investment opportunity in solar PV in Cambodia.

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