Authors: Madu Selvakumar
This case study, prepared by the Climate Investment Funds (CIF), takes a deep dive into Cambodia’s multidimensional energy sector transition, a joint effort by the government of Cambodia and the Asian Development Bank (ABD) to reformulate how the nation approaches power generation: moving from thermal and large hydro to scalable, low-cost renewables; from bilaterally negotiated power purchase agreements to competitive international tendering; and from binary public or private operating and ownership structures to complex blended risk-sharing modalities. With burgeoning economic growth, power demand in Cambodia has also surged, rising from 742 GWh in 2004 to 6,229 GWh in 2016, a combined annual growth rate of 20 percent. With traditional thermal generation vulnerable to shifting global coal prices, and hydro proving unreliable in the face of climate volatility, solar has offered the brightest light: an abundantly available, vastly untapped and increasingly price-competitive option to bridge demand and supply, Cambodia’s year-round irradiation presents a mammoth potential of 30,090 GWh per year.
With an aim to incentivize an entry into solar, the CIF's Scaling Up Renewable Energy Program in Low Income Countries (SREP) drafted an Investment Plan for Cambodia in June 2016, introducing concessional and grant financing facilities that could trigger pilot projects in a sector with, at the time, no installed capacity. The development objective: improve supply and utilization of renewable energy sources to all categories of consumers including the rural poor in remote areas. In 2017, in consort with the Asian Development Bank (ADB), the CIF revised its Investment Plan, adding provisions for a National Solar Park Program that would kick-start large scale solar generation in Cambodia. With 3 years of concerted and foundational work, the country’s first National Solar Park of 100MW has now been established, with the first competitively auctioned 60MW plant securing a record low tariff in the South-East Asian region—US$0.039/kWh, nearly a third of what the nation was previously paying. The project has also had above-par knock-on effects, triggering other regional counterparts to also approach the ADB for similar competitive international solar auctions, a brave new frontier for renewable energy transitions in the ASEAN.
The project’s impact in Cambodia has been markedly catalytic: the country is proceeding to Phase II of the project, auctioning the remainder of the Park’s solar capacity; is deliberating the deployment of the same solar park model, even without the support of concessional finance; is deploying competitive infrastructure tendering in sectors even outside of solar; and has a new Power Development Plan, approved in early 2020, that for calls for up to 1.8 GW of solar in Cambodia by 2030. Where previously cautious about integrating solar, the Cambodian government has maximised the project’s potential as a market-sounding and technical-testing exercise, and is now exploring yet more frontier integration technologies, including new-to-the-market energy storage options. Early this year, the state utility Electricite du Cambodge agreed to host a pilot battery energy storage system within the National Solar Park substation, also partly financed by an SREP grant and executed by the ADB. The project team hopes that this will pave the way for a larger, nation-wide battery energy storage systems program in 2022–2023. In sum, the project has demonstrated the immense potential of concessional climate finance, and of efforts of dedicated climate champions, to realise emerging economies’ and regions’ ambitions for greener and more sustainable low-carbon development trajectories.