Discussion Papers

Renewable Energy Policies and the Solar Home System in Cambodia

By Han Phoumin

ERIA Discussion Paper 2015-64

Posted: September 2015

Abstract

Only about one-third of households in Cambodia have access to commercial energy. Full rural electrification remains far from being achieved, and energy services are mainly delivered through fuel-based engines or generators to produce electricity that can then be stored in batteries, while biomass rather than electricity is used to power many small industrial processes. The current electricity cost in Cambodia is very high, ranging from US$0.15/kWh in Phnom Penh to US$1.00/kWh in rural areas. This high cost of electricity in rural areas provides an opportunity for the Solar Home System (SHS) to be competitive, although the installed system price of SHS remains high despite a decline in global SHS prices. This study aims to (i) review the current Renewable Energies (RE) policies in Cambodia, and (ii) analyse the cost structure through the levelised cost of electricity (LCOE) of HSH compared with current electricity costs in rural areas. The results indicate that the LCOE of SHS (without any government subsidy) is about 50 percent cheaper than the current electricity price in rural areas. When factoring in a government subsidy of US$100 per SHS unit, the LCOE of SHS drops to about one third of the current electricity price in rural areas. These results imply that promoting SHS would enable rural households to cut spending on electricity, thus increasing deposable incomes and social wellbeing of rural communities. Policy support for SHS is needed from the Royal Government of Cambodia (RGC) to ensure that the upfront costs remain comparable to other countries. It is therefore important for the state-owned electricity utility, Electricité du Cambodge, and the Rural Electricity Department to look into the whole value chain of SHS from procurement through to installation. In order to achieve savings it may be necessary to make large purchases directly from manufacturers, and increase transparency in the bidding and procurement process, together with the removal of import taxes on Renewable Energy equipment, including SHS. Furthermore, providing training to local technicians and small business entrepreneurs will be necessary to promote the solar energy business in rural Cambodia. This will help to drive down the unit costs of SHS, and promote the widespread use and application of SHS in rural Cambodia.

ERIA-DP-2015-64

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