By Alissar Chaker, UNDP Resident Representative
Renewable Energy to Enhance Economic Benefits
November 3, 2021
The rapid deployment of renewable energy around the world has been driven by a wide range of socio-economic and environmental imperatives, which include advancing economic development, improving energy security, enhancing energy access, and mitigating climate change. Altogether these drivers might be described as the pursuit of sustainable development, where economic prosperity is advanced while negative impacts on people and the planet are minimized.
The United Nations Intergovernmental Panel on Climate Change (IPCC) Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN) categorized key drivers, opportunities, and benefits of renewable energy into environment (climate change mitigation and reduction of environmental and health impacts), energy access, energy security (diversity of fuel supply; fuel imports; balance of trade), and social and economic development (job creation, livelihoods, and rural development).
Cambodia has been a fast mover in embracing renewables, increasing renewable generation from a 10 megawatts pilot in 2017, to 372 megawatts, by the end of 2021, and it is expected to reach a total of 1,815 megawatts of solar power on its grid by 2030.
The country’s achievement in rural electrification tells a remarkable story on the key drivers, opportunities, and benefits of clean energy, which can serve as a model for much of the world. It is a story that reconfirms the importance of access to electricity in lifting people out of poverty and accelerating socio-economic progress. In 2000, less than 7 percent of the country’s rural areas, where more than 75 percent of the population lives, had access to electricity. By 2020, that number soared to 97 percent with more than 13,700 villages having access to electricity. Only about 370 villages are yet to be electrified, and most of these are deemed “difficult to reach.” Solar power can change the lives of farmers in Cambodia’s most remote villages. Until the grid reaches such “difficult to reach” villages, solar-based mini-grids are offering reliable energy solutions at affordable prices. This speaks to the importance of participation and engagement of the private sector in Cambodia to ensure access to affordable and clean energy.
With economic growth, Cambodia has been on an upward trend in electricity demand, which further increased in 2020 during the pandemic by 6%. This raises a red alert knowing that the country has comparatively high electricity price among ASEAN countries. Moreover, in 2019, large parts of Cambodia had to endure massive daily power outages due to extended dry weather. The country’s demand could not be met causing businesses and communities to suffer. A similar situation was expected in 2020, but because of COVID-19 slowdown and the adoption of solar power, the risk of blackouts was minimized. Heavy dependence on hydro power which is unreliable in a changing climate (namely, recurrent droughts), electricity imports and fixed power purchase agreements, and volatile fossil fuels prices for electricity generation present great threats to energy security. The pandemic exposed the vulnerability of electricity supply due to high fossil fuel prices and consumer affordability putting poor households at a disadvantage.
Alternative solutions are needed, and they do exist. Embracing low-cost solutions such as solar energy will improve energy security and increase access and economic competitiveness. The business community has already noted the signals and is pursuing a strong interest to embrace solar energy in manufacturing processes, as advocated by the RE100 group, to offset higher electricity costs relatively to the rest of the region.
Cambodia achieved a regional record low solar power purchase agreement (PPA) of USD 3.87 cents/kWh via tender, demonstrating that solar PV can yield some of the most cost-competitive prices for new electricity supply in the country. In fact, this has emerged as the least cost option for Cambodia according to recent analyses. The business case for renewable energy was first laid out in a private sector report which estimated in 2017 that business opportunities in renewable expansion in Asia could have an incremental value of US$300 billion in 2030 (Business and Sustainable Development Commission, 2017).
Many grids across the globe are embracing a share of up to 30% renewables in their electricity generation mix. This is achievable in Cambodia through updating the national grid code to allow grid operators to have control for switching between different electricity generation systems. Moreover, the country has the additional advantage of having its national grid interconnected with the national electricity grids of Thailand and Viet Nam. Grid interconnections help to increase load diversity, improve load factor, pool reserves, enhance overall reliability and stability, and allow more grid flexibility for a higher share of renewable energy, mainly solar.
It is imperative that line ministries formulate a joint strategy for optimizing and prioritizing the use of domestic energy resources. The Ministry of Economy and Finance plays a key role in making informed decisions for energy security and redistribution of GDP gains from green economy. An increased role of Rural Electrification Enterprises, not only as distributors, but also as generators of electricity, may also offer sustained pathways for the energy sector in Cambodia.
Beyond the social and economic dimension, Cambodia revised its commitments under the Paris Climate Agreement with more ambitious targets in its Updated Nationally Determined Contribution (NDCs). Recovery from the Pandemic is an opportunity to address these commitments by reaching its target of 25% or more of renewable energy share in the energy mix that contributes to the reduction of domestic greenhouse gas emissions by 2030 against its current baseline. By embracing a high renewable energy share in its energy mix, Cambodia has the potential to demonstrate yet another remarkable story – this time of the long-term economic benefits and comparative advantage of a renewable energy transition that will lay the foundations for a low-carbon economy and foster progress for people and the planet.
 RE100 is a global initiative of world’s most influential businesses committed to 100% renewable energy in their production by 2050, with interim steps of at least 60% by 2030; and 90% by 2040. Those companies are H&M, Adidas, Puma, Gap, Nike, etc. They are advocating with the Royal Government of Cambodia to have more renewable energy in the energy mix.
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