Green Energy

Green Financing Key to Cambodia’s Energy Transition

A forum to promote sustainable financing in renewable energy and raise awareness about green business practices saw experts gather to discuss the challenges and opportunities of forming an ESCO Association
EuroCham and GGGI forum on "Towards an ESCO Association in Cambodia: Challenges and Opportunities." Kiripost/Siv Channa
EuroCham and GGGI forum on "Towards an ESCO Association in Cambodia: Challenges and Opportunities." Kiripost/Siv Channa

Challenges and opportunities for an ESCO Association have been highlighted by the European Chamber of Commerce (EuroCham) and the Global Green Growth Institute (GGGI), with the goal of promoting sustainable financing of renewable energy in Cambodia.

On September 30, EuroCham and GGGI hosted a forum at Factory Phnom Penh titled "Towards an ESCO Association in Cambodia: Challenges and Opportunities" to raise public awareness about green business practices and promote sustainable financing of renewable energy.

The forum was joined by private and public stakeholders in the energy sector to discuss the viability of establishing an ESCO system in Cambodia. It also included a network of energy service companies that might assist in financing Cambodia's ongoing energy transition.

EuroCham and GGGI forum on "Towards an ESCO Association in Cambodia: Challenges and Opportunities." Kiripost/Siv Channa
EuroCham and GGGI forum on "Towards an ESCO Association in Cambodia: Challenges and Opportunities." Kiripost/Siv Channa

According to Victor Jona, Under Secretary of State for the Ministry of Mines and Energy, Cambodia's electricity supply is dominated by hydropower, coal, and imports. Solar has grown rapidly in recent years, from zero in 2016 to 12.5 percent of installed domestic power generating capacity and 5 percent of electricity provided to the grid in December 2021.

Energy demand in Cambodia is expected to continue to grow at a significant rate, driven by robust economic growth, industrialization, urbanisation, and population growth. However, due to more effective energy usage, Cambodia’s energy intensity will be further reduced until 2040, he said.

He added that Liquefied Power Generation power plants will be the major energy generation source in Cambodia in the coming years due to the huge contribution of hydro, coal and solar.

“Renewable energy is an important resource for energy independence, energy security, and GHG emissions abatement,” he said. “It is necessary to build up the strategy and mechanism to support renewable energy development.”

Rogier Van Mansvelt, Project Lead for GGGI’s EU Switch-Garment Project, said that GGGI has identified a potential investment of about $17 million in renewable energy and energy efficiency.

“We would really like to see energy service providers grow into ESCO associations to support these factories to finance, guarantee, and implement the proposed actions,” he said.

Challenges and Opportunities

According to Daniel Pacheco, co-founder, and CEO of NRG Solutions, the ESCO model is beneficial for customers and companies as it facilitates more projects and investments.

However, as a local solar company, there are some challenges to shifting from the EPC to ESCO model, including financing and regulation making a majority of projects unviable.

“Both of these are improving significantly, but the market still needs better financing terms and conditions, more flexible finance for small and medium projects, as well as improvements to the regulations,” he explained.

Due to Cambodian solar regulations, the savings from solar primarily depend on individual consumption profiles. Saving estimates are averages and might vary widely depending on each client's particular profile and other factors, he added.

He also explained the current Cambodian regulation, which prohibits LV consumers from installing solar, restricts the size of installations possible, imposes a capacity charge, and requires export limiting devices. Also, it doesn’t allow solar users to take advantage of off-peak hours.

“It goes in the right direction but some changes are urgent in order to facilitate more investment as it is currently turning viable projects and investments into unviable projects and unprofitable investments,” he said.