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Coal challenges an opportunity for Cambodia’s solar sector

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A floating solar farm is pictured in Kampot province in 2019. Heng Chivoan

Coal challenges an opportunity for Cambodia’s solar sector

During the global pandemic, Cambodia’s direct neighbours Thailand and Vietnam have made significant progress in the deployment of new solar technologies, utilising floating and rooftop solar to complement existing power supplies.

Their experiences provide Cambodia with a clear pathway to replace coal projects – which are increasingly unfeasible amid clear signals of future price volatility and in light of China’s announcement that funding for new coal projects is off the table – with renewable alternatives.

Cambodia already has an existing baseload of hydropower and coal, and it has readily available alternatives to future coal projects in the form of under-utilised solar power resources. While the government has expanded solar power from 10 megawatts (MW) in 2017 to 305MW in 2021, there are thousands of megawatts of untapped potential.

In August 2021, the first of nine planned large-scale floating solar projects came online at Sirindhorn Dam in Thailand. The floating solar project provides 45MW of renewable capacity, the same as the dam’s hydropower capacity, but covers only one per cent of the reservoir surface and has no additional land-use impacts.

The cost of electricity produced by the floating solar project is estimated at approximately $0.045 per kilowatt-hour (kWh). Like ground-mount solar costs – which in Cambodia have committed to producing electricity for as little as $0.0388/kWh – this is significantly cheaper than the cost per kWh for electricity from a new dam or coal plant. For comparison, the Lower Sesan 2 dam sells electricity for approximately $0.0695/kWh.

Cambodia has significant opportunity to consider floating solar. The Mekong Infrastructure Tracker shows that there are four existing hydropower dams in Cambodia – the Lower Sesan 2, Stung Atay, Stung Tatay, and Kamchay dams – which have sizeable reservoirs of over 10sq km. Each of these could potentially support floating solar plants.

These hydropower projects are already tied into the national grid to provide hydroelectricity, and floating solar on those projects could potentially utilise existing lines and provide dry-season electricity production at times when hydropower production drops due to low water levels.

Another clear opportunity for Cambodia to pursue is consideration of rooftop solar, which has taken off rapidly in Vietnam. Like Cambodia, in 2017 Vietnam had almost no solar generation apart from some small-scale pilot projects. However, Vietnam’s installed solar capacity has since skyrocketed: as of 2021 Vietnam had approximately 16,000MW of solar power, which is nearly a quarter of Vietnam’s total installed capacity. Approximately 60 per cent of Vietnam’s solar capacity is from rooftop solar.

This was the result of a clear strategic choice: facing projections of potential shortages due to delays with fossil fuel projects and rapid demand, the government of Vietnam set out clear policies to allow and regulate individual consumers – industrial, commercial, and households – to install rooftop solar projects and connect them to the grid.

Rooftop solar has many benefits for industrialising countries like Vietnam and Cambodia which face rapidly growing electricity demand: it provides on-site electricity, which can reduce demand on the national utilities from major users like the industrial zones for manufacturing or commercial retail like malls.

Rooftop solar requires local connections to the distribution grid, but unlike large power plants it doesn’t require new transmission lines because it’s located directly on the roof of the primary user. When the electricity produced locally exceeds the needs of the building owner, the government can purchase the excess electricity to help meet needs elsewhere.

By reducing demand on the national grid during mid-day when air conditioning demand and thus electricity demand peaks, the widespread adoption of rooftop solar can help ease crunches in the power supply that have historically led to brownouts. If the cost is below market rate for purchases from the grid, it can also save fuel costs – particularly for energy-intensive manufacturing industries. In 2020 alone more than 100,000 stakeholders in Vietnam installed rooftop solar projects at their own expense, adding 9,500MW of solar to Vietnam’s grid.

Cambodia’s energy market could benefit significantly from adoption of a more supportive rooftop solar policy that provides very modest rewards rather than penalties for connecting rooftop solar to the grid. Industry is a major driver of Cambodia’s long-term energy demand growth projections and therefore a key driver of the expansion of new hydropower and coal projects.

Industrial users are also increasingly sensitive to the source of electricity used in their supply chain, as consumers and shareholders push for brand commitments to carbon neutrality. As Cambodian policymakers review the national power development plan, it is well worth considering a scenario which would expand not only utility-scale solar projects but also to consider whether some of that national electricity demand could be more cost-effectively and sustainably managed through supporting rooftop solar.

While the impacts of Covid-19 have negatively impacted many elements of the economy, the resulting reduction of Cambodia’s electricity demand growth in 2020 and 2021 provides policymakers with the time and flexibility to thoroughly explore alternative options in response to market shifts like a loss of Chinese coal financing or spiking coal prices that reveal problematic volatility.

As the realities of climate change become increasingly visible throughout the region and impact global supply chains, investing in domestically available renewable energy sources now will pay long-term dividends for energy security and help maintain Cambodia’s attractiveness as an investment hub for major international brands.

Courtney Weatherby is deputy director of the Southeast Asia Programme at the Stimson Centre, a think tank based in Washington, DC, in the US which promotes international security, shared prosperity, and justice through applied research, independent analysis, deep engagement, and policy innovation.

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