Energy Efficiency and Cleaner Power for
a Greener Economy
Written by Butch Guade and Vuthy Va
Royal Government of Cambodia (RGC) will approve the National Energy Efficiency Policy (NEEP) 2021-2030 in 2021. The Policy targets at least 19% of total energy consumption (thermal and electrical) reduction by the year 2030. Soon after the approval of this policy, the next immediate question will be on the financing to meet these targets from now until 2030.

Residential, commercial and public buildings are expected to contribute towards a major share of this emissions reduction target. The construction industry has experienced strong growth. At the end of first half of 2020, Phnom Penh office buildings increased to 558,710 m2, equating to an increase of 13.8% compared to end of 2019. The supply is expected to be more than double over next two years, despite COVID-19. Since the year 2000 to 2020, Cambodia's Ministry of Land Management, Urban Planning and Construction (MLMUPC) has approved 52,185 projects with a total construction area of around 150 million m2, with total investment around USD 59 billion, spreading beyond the major urban centres such as Phnom Penh, Kandal and Siem Reap towards the coastal provinces of Sihanoukville and Koh Kong. In this development, unfortunately inclusion of low-carbon affordable housing is completely undermined.
As the buildings floor area is increasing, there is an increased final energy demand. In December 2020, the RGC submitted its updated Nationally Determined Contribution (NDC) in December 2020 that contains 11 mitigation actions (out of 24) related to energy efficiency. The energy sector that includes electricity, transport, and buildings has with 38 million tonnes of CO2 equivalent, the second highest total GHG mitigation potential in 2030. It means that roughly 30% of GHG emission reductions can be achieved by investing in energy efficiency and renewable energy.

In order to achieve these targets, there is a need for mandatory implementation of energy efficiency code for buildings. From an inclusivity perspective, policy framework must be in place for low-carbon affordable housing. The draft NEEP rightly identified the capacity building needs of relevant government agencies at national and local level including the necessity of training program with certification for energy auditors and managers; and empanelment of Energy Service Companies (ESCOs) that create more jobs.
Greener Power
A green recovery also provides a least cost option for Cambodia as the power demand is projected to increase four-fold by 2040. Increasing the share of renewable energy particularly solar PV offers an economic growth that has far fewer negative social, health and environmental impacts than other energy sources, i.e., hydro power, coal and gas powerplant. Increase share of renewable energy in the national electricity grid enhances the economic competitiveness of industries based in Cambodia, including several global brands that have commitment to go 100% renewable in their productions. Specifically, industrial sector has been looking for a favorable policy for rooftop solar. It is necessary to updated existing regulation on solar PV with more details, such as procedure to be followed by low-voltage consumers for connecting their rooftop solar systems and a fair tariff structure including capacity charge, and allowance for time of use tariff (TOU) that is a win-win for utility and rooftop solar developers. Promoting the rooftop solar will generate local high skill employments for design and install the rooftop solar. This does not count the potential of employment in the manufacturing of solar PV and relevant components in the country.

Cambodia achieved a regional record low solar power purchase agreement of 3.87 US$ cents/kWh through Auction Mechanism. Although it is one of the mechanisms to attract investments in renewable energy, but there is a need for dedicated financing towards the promotion of green technologies and resource efficiency. Historically, Rural Electrification Fund (REF) helped to improve energy access to most villages and household's and transformed the landscape of electrification in Cambodia. Now, it is the time for upgrading this as Integrated Electrification Program (IEP) by amending its ongoing six programmes towards mobilizing new finance for electrification as affordability is still an issue, further mapping villages, household data consolidation is needed for tracking of progress towards Cambodia Sustainable Development Goal 7 (SDG 7).
There are several financing instruments available to foster investment in energy efficiency, which are generally based on the market maturity and size. While grants, soft loans, dedicated energy efficiency credits lines, and revolving funds fit best in small energy efficiency markets of early maturity, more sophisticated and performance-based financing can be found in matured markets. Energy Efficiency Revolving Fund (EERF) may provide attractive financing for the promotion of green technologies and resource efficiency as local banks perceive financing these investments is too risky. The scope of revolving fund could be expended later to finance clean energy projects.

It is the time for testing blended financing and integrated approaches for the promotion of clean energy in Cambodia as policies are taking a shape for energy efficiency promotion.