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Chapter 7
Cambodia’s Electricity Sector in the
Context of Regional Electricity Market
Integration
Kongchheng Poch
Economic Institute of Cambodia, Caombodia
Savong Tuy
JICA-PILAC2, Cambodia
August 2012
This chapter should be cited as
Poch, K. and S. Tuy (2012), ‘Cambodia’s Electricity Sector in the Context of
Regional Electricity Market Integration’ in Wu, Y., X. Shi, and F. Kimura (eds.),
Energy Market Integration in East Asia: Theories, Electricity Sector and Subsidies,
ERIA Research Project Report 2011-17, Jakarta: ERIA, pp.141-172.
141
CHAPTER 7
Cambodia’s Electricity Sector in the Context of Regional
Electricity Market Integration
KONGCHHENG POCH
Economic Institute of Cambodia
SAVONG TUY
JICA-PILAC 2, Cambodia Office
Cambodia’s integration into the regional electricity market is a policy priority. With a
constrained supply-side, the increasing demand posts a critical challenge for electricity
sector development. Against this backdrop, this paper provides an overview of the current
situation of Cambodia’s electricity sector and explores other critical issues in the sector.
Diesel and heavy fuel oil is the major source of power generation as hydropower will be
the successor source in the future. Tariffs range from US¢9-25/kWh for EDC grid and
US¢40-80/kWh for rural areas. Electrification rate through grid expansion is about 24.72
per cent in 2009. Cambodia’s electricity tariff remains one of the highest in the region and
the world. With a consolidate license, EDC, the state-owned utility, is the dominant key
player in the electricity market. Two main institutions playing important roles in governing
the electricity sector include MIME and EAC. The electricity sector remains underinvested.
Only large scale investment projects are preferred in the market. High-voltage
transmission connections, large-scale hydropower dams, and coal-fired plants have been
the focused priority for power development thus far. Barriers to investments include huge
capital requirement for large-scale projects, insufficient legal and institutional framework,
and high administrative costs. Therefore, it is essential that national grid development is
accelerated and more investment is encouraged in order to reduce current high tariffs.
Investment climate must be enhanced to be conducive to foreign and local investment.
142
1. Introduction
Energy cooperation is one of the focused priorities in the East Asia Summit (EAS)
region. To advance this cooperation, energy market integration is, among other things,
laid out by the member countries to address barriers of trade and investments in the
energy sector across the region. Being a member of the sixteen-countries-EAS region,
Cambodia, one of the poorest countries in the region, needs to take steps to accelerate
this envisaged integration and to fulfill its increasing demand for electricity for
continued economic development.
Cambodia has achieved strikingly high rates of economic growth over the past ten
years; the real gross domestic product (GDP) grew on average 8.0 % per annum. This
robust growth has stimulated substantially-increasing demands for electricity. With a
constrained supply-side, Cambodia faces critical challenges in satisfying this greater
demand. In this regard, regional electricity market integration serves as a useful tool for
Cambodia to optimize benefits enhancing the domestic electricity sector and to further
regional energy cooperation.
Despite remarkable improvement in the energy sector, the electrification rate in
Cambodia remains low. The majority of the population is not connected to electric
power networks. Moreover, electricity cost remains one of the highest in the region and
the world. Investment in the electricity sector represents a small proportion of the total
investment needed for electricity sector development.
Although electricity imports from neighboring countries have been on the rise, the
supply of electricity still suffers shortage and reliability. Electricity market players are
diverse, ranging from small Rural Electricity Enterprises (REEs) and Independent
Power Producers (IPPs) to the state-owned utilities while a national power grid has not
yet materialized. In terms of regional cooperation, the government’s current policies
and strategies have significant effects and implications for electricity supply and
coverage in Cambodia.
Against this background Cambodia’s electricity sector has steadily developed in the
past decade, although its development has not been at parity with the pace of economic
development. Therefore, to better understand the current situation of the Cambodia’s
143
electricity sector, this paper considers the overall situation and progress of the sector in
the context of regional integration. It is crucially important to shed light on furthering
development of the electricity sector in Cambodia and integrating Cambodia’s
electricity market into the region.
With the main purpose of providing a general background of the electricity sector in
Cambodia, the study has five objectives as follows:
1) To lay out an overview of Cambodia’s electricity sector covering issues such
as supply, demand, transmission, tariffs, investment, access, electrification,
and government strategies and policies;
2) To summarize present strategies and policies of the Cambodian government in
regards to the ASEAN Power Grid (APG);
3) To understand the current situation of investment in the electricity sector
covering issues such as key market players, main investment barriers, and the
attraction of foreign investment in the sector;
4) To illustrate a case study of Cambodian electricity imports from Vietnam; and
5) To explore other issues which are significant and relevant to electricity sector.
2. Overview of the Cambodian Economy
Cambodia, officially known as the Kingdom of Cambodia, is a member of the
Association of the Southeast Asian Nations (ASEAN) and Greater Mekong Subregion
(GMS). Situated at the heart of the GMS, Cambodia is a land of rice and forest covered
by the Mekong River and Tonle Sap Lake (ESMAP, 2005). It is bordered with
Thailand and the gulf of Thailand in the West and South respectively, Vietnam in the
East, and Lao PDR in the North. With a total area of 181,035 Km2, Cambodia has a
total population of about 15 million, of which approximately 80 % live in rural areas.
Cambodia had gone through several civil wars over three decades since the military
coup d’état in 1970. In particular, the Cambodian economy had been gravely destroyed
during the genocidal Democratic Kampuchea regime during 1975-1979. As a result, the
economy plunged into almost zero levels of growth because either physical or non-
144
physical infrastructure had been demolished. The economy began to develop from this
level as a socialist economy before it embarked upon free-market economy in 1989
(MoE, 2002). The country had its first national election in 1993, and the economy
developed gradually and steadily to be a post-conflict economy in 1999 when
reconciliation among all political tendencies was successfully accomplished.
In the last decade, Cambodia enjoyed exceptionally high rates of economic growth.
The economy grew 8.0% per annum on average during 2001-2010.1 The economy
experienced the highest growth rate at 13.3 percent in 2005. Later, it declined from
6.7% in 2008 to 0.1% in 2009 due to global economic downturn in 2008/2009 because
Cambodia’s major economic sectors such as garment, tourism, and construction
dramatically contracted. Real GDP growth started to edge up again to around 6.0% in
2010 and was estimated to realize a rate of 7.8% in 2011 (Khin, et al. 2012). In the
meantime, Cambodia needs to achieve at least an average growth rate of 6-7% per
annum to achieve sustainable poverty alleviation in accordance with government policy
ambitions. In this regard, development of the electric power sector needs to be hastened
to support sustainable growth and economic development.
Figure 1: Cambodia's Real GDP Growth Rate over 2001-2011
Source: Data compiled from NIS and EIC estimate (2011).
1 Data compiled from the National Institute of Statistics (NIS).
7.4% 6.6%
8.5%
10.3%
13.3%
10.8% 10.2%
6.7%
0.1%
6.0%
7.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
145
3. Electricity in the Energy Sector
3.1. Overall Situation
The power sector in Cambodia is supplied by different sources such as heavy fuel
oil (HFO), diesel, gasoline, gas, wood, coal, hydropower, wind and solar energy,
biomass, and biogas (World Bank, 2006). The major source of power generation is
diesel and HFO. Cambodia actively seeks other alternative sources which have high
possibility for power generation. Noticeably, hydropower, which holds considerable
potentials for power production in Cambodia, will become the major source in the long
term (World Bank, 2006).
Electric power supplied throughout the country is sourced from three different types
of licensees including the state-owned Electricite du Cambodge (EDC), IPPs, and
consolidated licensees including REEs. However, REEs supply electricity typically in
the rural areas. As shown in the following Figure 2, the capacity of electricity sent out
by IPPs accounts for approximately 90.95% of electricity supply in Phnom Penh,
followed by 4.82% by EDC and 4.22% by consolidated licensees.
Figure 2: Proportion of Energy Sent Out by Licensee in 2010 in Phnom Penh (%)
Source: EAC Annual Report 2010.
90.95
4.22 4.82
0
10
20
30
40
50
60
70
80
90
100
Independent Power Producers Consolidated Licensees Electricite Du Cambodge
146
Although the Electricity Authority of Cambodia (EAC) reports the usage of
different sources of power, the main source of power in which licensees across the
country are utilizing is diesel which is imported from abroad making the electricity tariff
very volatile. In 2010, diesel accounted for almost 93% of the total power sources used
to generate electricity (Figure 3).
This indicates that the price of electricity is rather unstable because it is attached to
the cost of diesel. Given the fact that Cambodia is an oil-importing country, the cost of
diesel is quite sensitive to global market movements; thus, the price of electricity moves
generally along with the fluctuation of the cost of diesel. It is worthwhile noting that
the volatility of the electricity price significantly affects the ability of consumers to pay
electricity bills and impacts investors’ sentiments.
Figure 3: Proportion of Energy Sent Out by Sources in 2010 (%)
Source: EAC Annual Report 2010.
According to the EAC, consumers’ demand for electricity increases every year;
hence, the demand for electricity-producing capacity installed must also be increased. In
2002, the number of consumers was only 182,930 (Table 1). Consumer numbers
increased about 268% to reach 672,709 in 2010. In the meantime, installed capacity
edged up around 310% from 614.03 million kilowatt-hour (kWh) in 2002 to 2,515.67
million kWh in 2010. Within the next 15 years, the demand of power in the country is
3.28
92.81
0.60 3.31
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
Hydropower Diesel/HFO Wood, other
biomass Coal
147
expected to increase by as much 500% reaching about 3,000 Megawatts (MW) in 2025
(Phnom Penh Post (PPP), 2012).
Table 1: Number of Energy Consumers by Year
Items 2002 2003 2004 2005 2006 2007 2008 2009 2010
Number of consumers 182,930 231,964 272,668 306,176 358,270 415,141 487,426 552,521 672,709
% increase over previous
year 26.80 17.55 12.29 17.01 15.87 17.41 13.35 21.75
Energy available in million
kWh 614.03 692.66 814.13 977.26 1,203.20 1,516.73 1,858.36 2,076.99 2,515.67
%increase over previous year 12.81 17.54 20.04 23.12 26.06 22.52 11.76 21.12
Energy sold in million kWh 525.69 599.04 702.31 858.36 1,057.16 1,349.12 1,664.40 1,853.50 2,254.04
%increase over previous year 13.95 17.24 22.22 23.16 27.62 23.37 11.36 21.61
Source: EAC Annual Report 2010.
With current supply capacity, reliability remains a concern for consumers.
Blackouts have been routinely reported, especially in Phnom Penh municipality as the
supply capacity reaching peak level, particularly in the dry season, is still below the
demand. Phnom Penh is currently requires electricity up to 400 MW per day, but the
current supply available is only 290 MW of which half is imported from Vietnam (PPP,
2012). Therefore, there is a huge need for investment in electricity to fulfill demand
which is steadily increasing over time. An overview of electricity supply is shown in the
following Table 2.
Table 2: Electricity Sector in Cambodia at a Glance
Description Unit 2009 2010 % Change
Electricity generated million kWh 1,234.59 968.36 (21.56)
Electricity imported from Thailand million kWh 324.25 385.28 18.82
Electricity imported from Vietnam million kWh 518.15 1,162.03 124.27
Total electricity import million kWh 842.40 1,547.31 83.68
Total electricity available million kWh 2,076.99 2,515.67 21.12
Generation Capacity kW 372,129 360,078 (3.24)
Number of consumers # 552,521 672,709 21.75
Electricity sold to consumers million kWh 1,853.50 2,254.04 21.61
Overall loss % 10.76 10.40
Source: EAC Annual Report 2010.
148
According to the Asian Development Bank (ADB), the number of households
supplied with electricity from the main electricity grid was 633,123 in 2008 (ADB,
2011). As set out in the development plan, this number is expected to increase to
1,131,190 by 2013. Electrification rate through grid expansion in Cambodia is about
24.72% in 2009, but it is expected to move up to 35.17% by 2013 (ADB, 2011).
Cambodia is on track to achieve a target of increasing the length of high-voltage
transmission network by 100 Km from 2005 to 2010 and increasing per capita use of
electricity from 54 kWh in 2005 to 89 kWh in 2010 in terms of improving access to a
reliable and affordable power supply (ADB, 2007a). Nonetheless, challenges remain in
meeting the rising demand of the growing economy, improving access to electricity, and
reducing its costs in rural areas.
3.2. Electricity Tariffs
Electricity service providers (ESPs) set prices for their electric power services
supplied to consumers; however, the set prices require approval from the EAC. As
stipulated in the electricity law, the approval is required to ensure that prices are
reasonably affordable by consumers and businesses of ESPs are carried out efficiently,
qualitatively, sustainably and transparently (EAC, 2008). The EAC determines and
reviews the tariff rates, charges, and service terms and conditions for the electricity
service provided by licensees (ESPs). Within ninety days from the receiving date of any
application by licensees requesting the EAC to determine or revise their tariff, the EAC
either approves, revises, or disapproves requests (Royal Government of Cambodia
(RGC), 2001).
Cost of electricity generation is the single largest component of the price of
electricity supplied by licensees to consumers. In this regard, unlike other commodities
in the market, the electricity price is not determined by demand and supply interaction.
It is very much dependent on input factors of the supply side. Specifically, it hinges on
the cost of producing electricity per kilowatt-hour. Moreover, electricity is a natural
monopoly service in Cambodia; ESPs have significant power in setting the electricity
tariff and manipulating the electricity market.
On the one hand, electricity tariff rates in Cambodia vary considerably depending
on the source of electric power generation. Almost 95% of the cost of electricity supply
is related to the cost of fuel. Licensees generating electricity from diesel or HFO or
149
purchasing electricity from IPPs, with costs of electricity purchase linked to the cost of
fuel, the price of electricity supply is extremely high. Moreover, it varies critically
according to the fuel cost.
The cost of electricity supplied by hydropower plant or purchase from neighboring
countries fluctuates little. As a result, the tariff of electricity provided to consumers by
licensees getting electric power from such sources does not change frequently.
On the other hand, different types of tariffs have been applied by different types of
ESPs to different categories of customers. IPPs importing electric power supply from
neighboring countries apparently have the tariff rates lower than IPPs that generate
electric power using diesel or HFO (EAC, 2007).
Given the fact that tariffs are set by each ESP based on full-cost recovery principle,
the tariff levels, vary from area to area; and, there is a huge discrepancy between urban
and rural customers. Rural customers generally pay higher tariffs than their urban
counterparts (CRCD, 2006b). As Phnom Penh residents pay the electricity bill at a
tariff rate of around 18.00 US¢ /kWh, some rural residents pay the tariffs rate as high as
USD 1.00/kWh. This large gap is due to various factors such as differences in supply
capacity of ESPs, economy of scale, load factor, fuel transportation cost, cost of capital
and financing, power supply losses, and risk premium for rural customer’s low capacity
to pay the bill. The following Table 3 and 4 present the fundamental tariffs charged by
EDC by categories of consumers and distribution areas, respectively.
Table 3: Tariff of EDC in 2010 in Phnom Penh, Kandal and Kampong Speu
Province
Categories of Consumers Tariffs (US¢ /kWh) Condition
Domestic in Phnom Penh and
Takhmao Town of Kandal
Province
15.25 All kWh if monthly consumption
does not exceed 50 kWh
18.00 All kWh if monthly consumption
exceeds 50 kWh
Domestic in Kampong Speu
province 18.00 All domestic consumers
Embassy, NGO and foreign
residents and institutions 20.5
Customers paid by government
budget,
Commercial and industrial
customers
Tariff rate= average cost of total electricity
purchased in previous month + 3.6 US ¢ /kWh For small commercial and Industrial
customers
Tariff rate= average cost of total electricity
purchased in previous month + 2.8 US ¢ /kWh For medium commercial and
Industrial customers
Tariff rate= average cost of total electricity
purchased in previous month + 2.4 US ¢ /kWh For big commercial and Industrial
customers
Tariff rate= average cost of total electricity
purchased in previous month+2.0 US Cents/kWh
For commercial and Industrial
customers who are connected directly
to MV
Source: EAC Annual Report 2010.
150
Table 4: Electricity Tariff of EDC at Other Provinces in 2010
Distribution Areas of EDC Tariffs
(US Cents/ kWh) Condition
Provincial Town of StuengTreng 30.5 All consumers
Provincial Town of Ratanakiri 16.75 All consumers
Provincial Town of Kampot 27.5 All consumers
Provincial Town of Prey Veng 30.5 All consumers
Memot 12.5 Bun Rany Hun Sen Primary and High School
16.25 Small consumers
12.5 Medium consumers
11.5 Medium Voltage
Ponhea Kraek and Bavet
16.25 Small consumers
12.5 Medium Voltage
11.5 Medium Voltage
Kampong Trach 16.25 Small and medium
11.5 Big consumers
Svay Rieng, Kampong Row, SvayTeap 16.25 All consumers
Source: EAC Annual Report 2010.
Cambodia’s electricity tariff is one of the most expensive in the Southeast Asian
region. Tariff rates range from US¢9-25 per kWh for EDC grid and US¢40-80/kWh for
rural areas (Lieng, 2010). As shown in Table 5 below, the average electricity prices for
industrial consumers range from US¢11.71 to US¢14.63 which is the highest among the
ASEAN economies.
Table 5: Electricity Tariff in ASEAN Nations (US¢ /kWh)
Country Residential Commercial Industrial
Brunei 3.82-19.11 3.82-15.29 3.82
Cambodia 8.54-15.85 11.71-15.85 11.71-14.63
Indonesia 4.60-14.74 5.93-12.19 5.38-10.14
Lao PDR 3.34-9.59 8.80-10.36 6.23-7.34
Malaysia 7.26-11.46 9.67-11.10 7.83-10.88
Myanmar 3.09 6.17 6.17
Philippines 6.65-10.52 -- --
Singapore 19.76 10.95-18.05 10.95-18.05
Thailand 5.98-9.90 5.55-5.75 8.67-9.43
Vietnam 2.91-9.17 4.38-15.49 2.30-8.32
Source: ASEAN Center for Energy (2011).
151
Table 6 demonstrates monthly electricity prices of EDC by consumer categories in
Phnom Penh, Kandal province and Kampong Speu provincial town in 2010. The prices
on average are quite high across consumer categories. They are in the range of US¢18-
23 per kWh.
Table 6: Monthly Electricity Tariffs of EDC for Phnom Penh, Kandal Province and
Kampong Speu Provincial Town in 2010 (US Cents/kWh)
Categories of
Consumers Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Small 22.99 20.26 20.05 19.9 20.21 19.92 19.57 19.21 19.32 19.25 19.5 19.68
Medium 22.19 19.46 19.25 19.1 19.41 19.12 18.77 18.41 18.52 18.45 18.7 18.88
Big 21.79 19.06 18.85 18.7 19.01 18.72 18.37 18.01 18.12 18.05 18.3 18.48
Medium Voltage 21.39 18.66 18.45 18.3 18.61 18.32 17.97 17.61 17.72 17.65 17.9 18.08
Source: EAC Annual Report 2010.
There are three important reasons behind the skyrocketing prices in the country.
First, although Cambodia is endowed with an abundance of hydropower resources, it
depends heavily on costly fuel-based engines or generators to produce electricity.
Furthermore, accessibility to sources of electric power is quite limited. While coal
power plants have been constructed to provide more electric power to consumers, only
several hydropower plants are being operated to extract electricity.
Second, with isolated electricity generation systems across the country, the
electricity infrastructure stays vastly fragmented although considerable progress has
been made. According to Breeze (2010), Cambodia’s electricity infrastructure was
almost completely destroyed by war as were facilities of electricity supply (EAC, 2008).
Presently, the national grid is being constructed to bring electricity supply to provinces
throughout the country (EAC, 2011).
Third, high tariff is caused by significant electric power loss. Inefficient electric
power facilities, small fragmented diesel-based generation systems, and lack of
interconnection within the system can explain this electric power loss very well (EAC,
152
2008). Overall power loss for the country is on average 11.05 %; however, the power
loss for rural areas stays around an extremely high rate of 25.34 % (EAC, 2008).
The following Table 7 presents the energy situation in Cambodia with power loss in
2010 which is supplied by EDC only.
Table 7: Energy Situation Supplied by EDC in 2010
Area of Supply Installed
Capacity
(kW)
Energy
Purchased
(kWh)
Energy
Sent Out
by
Generation
(kWh)
Energy
Transferred
from/to
other
Branches
(kWh)
Energy
Sold to
Other
Licensees
(kWh)
Number of
Consumers
Energy
Sold to
Consumers
(kWh)
Loss
in
%
Phnom Penh Grid System 45,560 1,676,055,488 31,702,495 60,412,598 246,973 1,488,183,010 9.32
Banteay Meanchey Grid System 15,580 272,123,600 1,287,558 6,899,043 66,300 231,476,332 12.81
Kampot 3,080 3,951,740 665,179 15,841,180 546,046 7,168 14,559,593 26.16
Sihanoukville 5,600 51,522,280 8,655,407 721,770 10,632 57,086,359 3.94
Kampong Cham 34,951,440 12,499,998 10,474 18,683,236 10.78
Prov.Town of Prey Veng 1,640 4,032,974 631,732 418,520 4,445 3,695,679 11.80
Prov. Town of Steung Treng 1,640 5,748,768 50,784 2,634 4,768,664 17.78
Pro. Town of Ratanakiri 960 6,359,699 1,766,000 2,904 7,448,230 8.34
Prov. Town of Svay Rieng 1,000 18,039,900 108,640 173,730 10,789 16,280,618 9.34
Khum Bavit 60,861,000 2,494 57,564,164 5.42
Memot District 10,403,000 4,015 9,759,063 6.19
Ponhea Krek District 25,977,000 14,099,259 2,385 10,550,045 5.11
Kampong Trach District 28,585,992 (15,841,180) 4,060,892 2,513 8,188,704 1.73
Mondulkiri 670 1,821,545 1,328 1,571,300 13.74
Keoseyma District 764,700 861 589,694 22.89
Total 75,730 2,199,377,581 46,689,340 99,831,856 375,915 1,930,404,691 9.61
Source: EAC Annual Report 2010.
153
4. Governance of the Electricity Sector
4.1. Policy and Regulatory Framework
According to the Royal Government of Cambodia (RGC), there are four main
objectives of energy sector development policy detailed out as follows:
1) Providing an adequate supply of electricity throughout the country at
reasonable and affordable price;
2) Ensuring reliable and secure electricity supply which facilitate investment in
Cambodia and development of the national economy;
3) Encouraging exploration of environmentally and socially acceptable energy
resources needed to supply all sectors of the Cambodian economy; and
4) Encouraging efficient use of energy to minimize environmental effects
resulting from energy supply and use.
To prepare a governing framework for the electric power supply and services
throughout the country, the “Law on Electricity” was adopted by the National
Assembly on November 6, 2000 and then promulgated by the Royal Degree on
February 2, 2001. This law covers all activities related to the supply, provision of
services and use of electricity, and other associated activities of power sector. It helps
reform the current electricity sector, and is endorsed to boost private investors in the
power sector in a fair, just, and efficient manner for the benefit of the Cambodian
society.
Overall, this law has key components including:
1) Establishing the principles for operation of the sectors;
2) Establishing favorable conditions for competition, private investment, private
ownership and commercial operation of the electric power industry; and
3) Establishing and defining the functions of the EAC and the Ministry of
Industry, Mine and Energy (MIME).
In this regard, there are three main players who have considerable power in the
electricity sector in Cambodia: the MIME, EAC and EDC. The EDC is the most
influential of the three in the electricity market. Other players in the market include
154
IPPs, REEs, and other licensees that import electricity from neighboring countries or
own stand-alone diesel generators.
In addition to the Law on Electricity, RGC also specifies the development of the
energy sector in the National Strategic Development Plan (NSDP) with the prioritized
aims of increasing electricity supply capacity and reducing tariff rates to an appropriate
level while strengthening institutional mechanism and management capacity. To
achieve the desired goals, the development of the electricity sector is set out in the
Rectangular Strategy Phase II of the fourth-mandate RGC.
To ensure sustainable development of the electric power sector, an electrification
master plan was worked out for: (1) electricity generation development including
hydropower resources development and development of coal or gas power plant, (2)
electricity import to coordinate the development of the border zones of the kingdom and
(3) the development of transmission grid throughout the country in order to establish the
electricity transmission system of Cambodia (EAC, 2009). Furthermore, RGC will
encourage the construction of low cost electricity generating plants by using local
energy sources such as hydro-power, natural gas, and coal.
As the electricity sector in Cambodia is fundamentally governed by the Law on
Electricity, sub-degrees and other regulations have subsequently been issued by the
EAC. Table 8 presents a list of noticed electricity legal documents.
Table 8: Important Legal Documents in Electricity Sector
No. Name of Standard Documents Promulgated by Date Promulgated
1 Electricity Law of the Kingdom of Cambodia The King February 2, 2001
2 Sub-Degree on the Rate of the Maximum License Fees
applicable to Electric Power Service Providers in the
Kingdom of Cambodia RGC December 27, 2001
3
Procedures for Issuing, Revising, Suspending,
Revoking, or Denying Licenses EAC
September 14, 2001
Revision 1 December 12, 2002
Revision 2
4 Regulations on General Conditions of supply of
Electricity in the Kingdom of Cambodia EAC January 17, 2003
Revision 1 December 17, 2004
5 Regulatory Treatment of Extension of Transmission and
Distribution Grid in the Kingdom of Cambodia EAC October 28, 2003
6 Regulations on Overall Performance Standards for
Electricity Suppliers in the Kingdom of Cambodia EAC April 2, 2004
7 Procedure for Filing Complaint to EAC and for
Resolution of Complaint by EAC EAC April 2, 2004
155
No. Name of Standard Documents Promulgated by Date Promulgated
8 General Requirements of Electric Power Technical
Standards of the Kingdom of Cambodia MIME July 16, 2004
First Amendment August 9, 2007
9 Sub-Degree on Creation of Rural Electricity Fund of the
Kingdom of Cambodia RGC December 4, 2004
10 Sub-Degree on Principles for Determining the
Reasonable Cost in Electricity Business RGC April 8, 2005
11 Prakas on Principles and Conditions for issuing Special
Purpose Transmission License in the Kingdom of
Cambodia MIME July 21, 2006
12 Specific Requirements of Electric Power Technical
Standards of the Kingdom of Cambodia MIME July 17, 2007
13 Regulations on General Principles for Regulating
Electricity Tariffs in the Kingdom of Cambodia EAC October 26, 2007
14 Procedures for Data Monitoring, Application, Review
and Determination of Electricity Tariff EAC October 26, 2007
15 Grid Code EAC May 22, 2009
Source: EAC Annual Report 2010.
4.2. Institutions
Under the electricity law, there are two main institutions playing important roles in
governing the electric power sector in Cambodia, namely MIME and EAC. Whilst
MIME is mainly responsible for the formulation of policies and strategies, EAC is a
legal public entity being granted the right from RGC to be an autonomous agency to
regulate the electricity services and to govern the relation between the delivery,
receiving, and use of electricity. Roles of these two government agencies are illustrated
in the following Figure 4.
Figure 4: Governance of the Electricity Sector in Cambodia
Source: EAC Annual Report 2010.
Ministry
of Industry, Mines and Energy
-Energy Policies
-
Electric
Power Strategies
- Power development plan
-Technical, Safety, Environment
Standards
-Other Duties
Electricity Authority of Cambodia
- To issu e regulatio ns
- To issu e Licenses to Electric Pow er Service
Providers
- To review cost and approve tariffs
- To resolve disputes
- To regu late, impo se penalty
Electric Power User s
Electric Power Supp lies
Royal Government of Cambodia
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4.2.1. Ministry of Industry, Mines and Energy
As set out in the Law on Electricity, the MIME has the following roles:
Responsible for setting and administrating the government policies, strategies
and planning in the energy sector.
Providing the EAC information on policies, strategies, planning of energy
sector and its decision on:
Investments in the rehabilitation and development of the energy sector in
the short, medium and long term;
Restructuring, private sector participation and privatization of public
utilities;
Promotion of the use of indigenous energy resources in the generation of
electricity;
Planning and agreements on the export and import of electricity;
Subsidies to specific classes of customers and priorities regarding
consumers of electricity;
Promotion of efficiency in generation, transmission, distribution and
consumption of electricity and action taken to create a comprehensive
electricity conservation program for Cambodia; and
Electricity sector emergency and energy security strategies.
4.2.2. Electricity Authority of Cambodia
The EAC is a legal public entity, being granted the right from the RGC to be an
autonomous agency to regulate electricity services and to govern the relation between
the delivery, receiving and use of electricity.
The Law on Electricity regulates the roles of the EAC as follows:
To issue, revise, suspend, revoke or deny the licenses for the supply of
electricity services;
To approve tariff rates and charges and terms and conditions of electric power
services of licensees, except where the authority (EAC) consider those rates or
charges and terms and conditions are established pursuant to a competitive,
market-based process;
To order to implement guidance procedures and standards for investment
programs by licensees;
To review the financial activities and corporate organization structure of
licensees to the extent that these activities and organization directly affect the
operation of the power sector and the efficiency of electricity supply;
To approve and enforce the performance standards for licensees;
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To evaluate and resolve consumer complaints and contract disputes involving
licensees, to the extent that the complaints and disputes relate to the violation
of the condition of licenses;
To approve and enforce a uniform system of accounts for all licensees;
To prescribe fees applicable to licensees;
To determine the procedures for informing the public about affairs within its
duties, in order to ensure that the EAC comply with the principle of
transparency;
To issue rules and regulations and to make appropriate orders, and to issue
temporary and permanent injunction for electric power service;
To impose monetary penalty, disconnect power supply, suspend or revoke the
license for the violations of this Law, standards and regulations of EAC; and
To require the electric power services and the customers to obey the rules
relating to the national energy security, economic, environment and other
government policies.
4.2.3. Electricite Du Cambodge
According to the EDC Annual Report 2007, the EDC, the state-owned public
utilities entity, has the following functions and responsibilities:
To develop, generate, transmit and distribute electric power throughout
Cambodia;
To operate as a commercial entity, independently organize production and
operation in accordance with market demand and seek to earn a profit, increase
the value of its assets, create economic, benefits and raise labor productivity;
To prepare, build, own, finance, lease and operate power generation and sub-
stations, transmission lines, distribution networks and other infrastructure
necessary;
Eliminate inefficiencies from operation, reduce unnecessary costs;
Maximize the output and reliability of the assets, customer satisfaction with
higher quality and better services; and
To be polite, receptive, act promptly with customers’ concerns.
Co-owners of the EDC are the MIME and the Ministry of Economy and Finance
(MEF). Based on the EAC Annual Report 2010, the EDC is currently holding a
consolidate license that has the following components:
1. Generation license: giving the right to EDC to generate electricity for the
purpose of supply to its transmission and distribution system.
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2. National Transmission License: giving the right to EDC to transmit electricity
for the purpose of supply to any distribution system and bulk power consumers
throughout Cambodia.
3. Distribution license: giving the right to EDC to distribute and supply
electricity to any premises in the authorization distribution areas.
Figure 5: Structure of the Electricity Sector
Source: Adapted from MIME (2009).
4.3. Electricity Service Providers
There are different types of licensees providing electric power services throughout
the country. They are the state-owned EDC, private entities including IPPs in
provincial towns, provincial department of MIME electricity operators, licensees in
small towns, and REEs (World Bank, 2006).
Royal Government of Cambodia (RGC)
PEU IPP PEC EDC
Cambodia’s Electricit
y
Business
Electricity Authority of Cambodia
(EAC) Ministry of Industry, Mines and
Energy (MIME) Ministry of Economy and
Finance (MEF)
Ownership of EDC
Policy; Planning; Development; Technical standard, Tariff, License, Reviews
the planned investments
Finance and performance; Enforcement of regulations, rules and standards
PEU: Provincial Electricity Utility; PEC: Provincial Electricity Company; EDC:
Electricite Du Cambodge; IPP: Independent Power Producers
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The EDC, a national utility enterprise co-owned by MIME and MEF, was granted a
consolidate license from the EAC to generate, distribute and transmit electricity
throughout Cambodia. It currently supplies electricity in the areas of Phnom
Penh/Kandal, eight provincial towns, and four small isolated systems near the
Vietnamese border. As a consolidate licensee, the EDC can also generate power up to
95 MW and purchase from IPPs around 86.4 Megawatts in 2004 (CRCD, 2006a).
Licensed ESPs have been dramatically increased during the past seven years. This
increase has edged up from 104 valid licensees in 2004 to 278 in 2010, an increase of
167 percent. However the supply of electricity is still in shortage, especially in Phnom
Penh capital city, and is accompanied by high tariffs. REEs operate small diesel
generators and produce electricity for their own use and for neighboring customers.
Their supply operation ranges from twenty to a few hundred customers. The number of
REEs in the country overall was estimated at around 500 (CRCD, 2006a).
Table 9: Types of ESPs with Installed Capacity (MW) in 2001
Supplier Areas Supplied Installed Capacity
Electricite du Cambodge
(EDC) 6 Major towns, including
Phnom Penh (MIME 2002) 32
Independent Power Producers
selling to EDC Phnom Penh and Kompong
Cham 127
Provincial Electricity
Operators (provincial
departments of MIME) 10 Provincial towns 14
Rural Electricity Enterprises
(REE) operating mini-grids
4 Provincial towns and
hundreds of smaller towns and
villages (estimated 600 REEs) 60
Battery Charging Services
(REEs which do not also
operate a mini-grid)
1500 battery charging services
(REEs) in hundreds of towns 38
Imported Power from
Thailand and Vietnam (22kV
lines) 7 Borders towns 15
Private stand-by diesel
generation (large scale only) All areas, bug mainly Phnom
Penh and Siem Reap 116
Total 402
Source: CRCD 2004.
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5. Regional Cooperation and Trade
5.1. ASEAN Power Grid
Shared concerns among the ASEAN nations over energy security and sustainability
are the key drivers for the opening up of energy markets within the region. To
accentuate energy cooperation, the Heads of ASEAN Power Utilities Authorities
(HAPUA) was established in 1981. However, little progress had been achieved until
1999 when the ASEAN Plan of Action for Energy Cooperation 1999-2004 (APAEC), a
five-year plan covering energy cooperation which is a component of the ASEAN Vision
2020, was adopted. This was followed by the second five-year APAEC 2004-2009
which was endorsed by ASEAN energy ministers in 2004; Both APAECs consists of six
programs including ASEAN Power Grid (APG), Trans-ASEAN Gas Pipeline (TAGP),
coal utilization, energy efficiency and conservation, renewable energy utilization, and
regional energy policy and planning.
APAEC 2010-2015 is the third action plan for the implementation of energy
cooperation, which continues from the previous two series of APAEC. This third
APAEC enacted in 2009 composes of seven programs including: (1) APG, (2) trans-
ASEAN gas pipeline, (3) coal and clean coal technology, (4) renewable energy, (5)
energy efficiency and conservation, (6) regional energy policy and planning, and (7)
civilian nuclear energy.
In this regard, APG remains one of the key thrusts in energy cooperation; the
implementation of APG is under the supervision and coordination of HAPUA. The
implementation of APG so far is in the form of bilateral arrangements among member
countries (APAEC, 2009). As of June 2011, the implementation plan laid out 16
projects proposed cross-border interconnection bilaterally; the plan then proposes
gradually enlarging to a sub-regional basis aiming to form a totally integrated region. Of
the 16 interconnection projects, 4 are in operation, 3 are under construction, and 9 are
under preparation (e.g. study or negotiation) (Table 10).
Enhancement of bilateral political relations between member countries and closer
regional energy cooperation were recorded as the benefits of the operation of the four
completed interconnection projects (Nicolas, 2009).
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Figure 6: Interconnection of Power Grid in ASEAN
Source: Power Engineering International
Table 10: Status of Implementation of Interconnection Projects under APG
No. Project Status
1 P. Malaysia – Singapore Operation
2 Thailand - P. Malaysia Operation
3 Sarawak - P. Malaysia Preparation
4 P. Malaysia – Sumatra Preparation
5 Batam – Singapore Preparation
6 Sarawak - West Kalimantan Preparation
7 Philippines – Sabah Preparation
8 Sarawak - Sabah – Brunei Preparation
9 Thailand - Lao PDR Construction
10 Lao PDR – Vietnam Construction
11 Thailand – Myanmar Preparation
12 Vietnam – Cambodia Operation
13 Lao PDR – Cambodia Construction
14 Thailand – Cambodia Operation
15 East Sabah - East Kalimantan Preparation
16 Singapore – Sumatra Preparation
Source: Compiled from Hermawanto (2011).
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Cambodia joined ASEAN as the 10th member country in 1999. Being a signatory
party of the Memorandum of Understanding on ASEAN Power Grid (APG-MoU)
endorsed in 2007, Cambodia has duties to fulfill the objective of the MoU that states
that “member countries agree to strengthen and promote a broad framework for the
Member Countries to cooperate towards the development of a common ASEAN policy
on power interconnection and trade, and ultimately towards the realisation of the
ASEAN Power Grid to help ensure greater regional energy security and sustainability
on the basis of mutual benefit.”
Against this backdrop, Cambodia has actively implemented the agreed plan of
actions. Cambodia has completed the construction and put into operation the two
projects under the APG framework. They are Project No. 12 and 14, which is the
bilateral arrangement between Cambodia and Vietnam, and Cambodia and Thailand,
respectively. However, it is noteworthy that under Project No. 12 and No. 14, as well as
Project No. 1 and No. 2 which are presently under operation, new sub projects have
been proposed to promote further interconnection in the region.
There is no specific policy document to carry out the APG in Cambodia. Given the
proposed projects in the APG framework are bilateral agreements among member
countries in characteristics, Cambodia has incorporated those agreed projects into its
overall national power development plan. In this regard, the Power Sector Development
Plan (PSDP) was prepared by MIME in 2007 (EDC, 2010).
A rural Electrification Mater Plan focusing on the use of renewable energy has also
been prepared and implemented. To implement the Rural Electrification Policy, the
government has established a Rural Electrification Funds (REF) to promote equity in
access to electricity supply services and encourage private sector to participate in
investments in rural power supply services in a sustainable manner, in particular to
encourage the use of new technologies and renewable energy. These efforts have been
undertaken not only to advance the domestic electricity sector but also to facilitate
regional cooperation under the frameworks of GMS, ASEAN, and EAS, and other sub-
regional cooperation.
Moreover, the RGC will encourage construction of electricity transmission lines
covering all parts of the country to enable the supply of quality and low cost energy
from all sources to meet the demand in cities, provinces, urban and rural areas. The
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government has indicated that it intends to gradually integrate Cambodia’s electric
power system into the networks of the GMS and ASEAN countries (Ministry of
Planning (MoP), 2009).
5.2. Greater Mekong Subregion
As initiated by the ADB, the Greater Mekong Subregion Economic Cooperation
Program (GMSECP) was launched by six member countries around the Mekong River
including Cambodia, China, Lao PDR, Myanmar, Thailand, and Vietnam. The energy
sector is one of the focal priorities of this sub-regional cooperation. According to IRM-
AG (2008), most of the tasks of the energy sector are included in the overall work plan
for the development of power trade in the region agreed to in April 2005 by all GMS
countries and their development partners through the Regional Power Trade
Coordination Committee (RPTCC).
In this spirit, Cambodia has signed various power sector cooperation agreements
with its neighboring countries. These agreements are in line with energy cooperation
and eventual regional integration of the Greater Mekong Subregion. A power
cooperation agreement between Cambodia and Vietnam was signed on June 10, 1999.
With this agreement, power supply to border areas by medium voltage connections and
interconnection between high voltage lines are promoted (EDC, 2010). Likewise,
Cambodia and Lao PDR entered into a power sector cooperation agreement on October
21, 1999.
MoU on power cooperation between Cambodia and Thailand was signed on
February 3, 2000. EDC (2010) stated that “this MoU provided a framework for the
power trade and technical assistance between these two countries and opened power
access to the third countries.” ADB (2007b) stated that the power sector cooperation
agreement between Cambodia and Thailand set up a framework for power trade and
technical assistance between the two economies.
The national power master plan was updated in 2004 for the purpose to promote
electric power development to be in line with the GMS regional master plan (ADB,
2009). At the present, PSDP 2007 provided an overall plan of action for the
implementation of electric power development plan. Generation and transmission
master plan is presented in the following Tables 11 and 12.
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Table 11: Generation Master Plan 2008-2021
No. Year Power Station Type MW Remark
1 2008 SR-BTB-BMC - Thailand Import 80 Completed in 2007
2 Kampong Cham - Vietnam Import 25 By 22 kV
3 2009 Phnom Penh - Vietnam Import 200 Completed
4
2010
Stung Treng - Lao PDR Import 10 By 22 kV
5 Kamchay Hydro 193 Postpone to 2011
6 Kampong Cham - Vietnam Import 10 Cancel
7 2011 Kirirom III Hydro 18
8 Coal SHV Coal 100
9 2012 Stung Atay Hydro 120
10 Coal SHV Coal 100
11
2013
Retirement - C3 (GM) DO 3
12 Coal SHV Coal 100
13 Lower Russei Chrum Hydro 338
14 Upper Russei Chrum Hydro
15 2014 Coal SHV Coal 100
16
2015
Stung Tatay Hydro 246
17 Coal SHV Coal 100
18 Stung Treng - Lao PDR Import 20
19 Kampong Cham - Vietnam Import 22
20 2016 Lower Se San II Hydro 420
21 Lower Sre Pok II Hydro
22 2017 Stung Chay Areng Hydro 240
23 2018 Coal SHV Coal 300
24 2019 Sambo Hydro 450
25 2020 Kampong Cham - Vietnam Import 31
26 2021 Coal/Gas SHV Coal/Gas 450
Source: EDC Annual Report 2010.
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Table 12: Transmission Master Plan 2008-2021
No. Year Project High Case Remark
Line
Type Section
(mm2)
Line
Length
(Km)
1 2008 230kV VN-PP
S/S Connection D-C 630 111 Completed in 2009
2 2010 230kV Takeo-Kampot D-C 400 100 Postpone to 2011
3 2010 115kV Lao PDR-Stung Treng D-C 240 56 Postpone to 2014
4 2010 230kV Kampot-SHV D-C 630 82 Postpone to 2013
5 2011 115kV Kampong Cham-Kratie D-C 630 87 Postpone to 2015
6 2011 230kV Kampot-Kamchay Hydro Connection D-C 630 20
7 2011 115kV Stung Treng-Kratie D-C 400 130
8 2012 230kV WPP-Kampong Chhnang-Pursat-
Battambang D-C 630*2B 310
9 2012 230kV Pursat-O Soam D-C 630 80
10 2012 115kV O Soam - Atay include S/S D-C 630 30
11 2012 115kV GS1-SWS-NPP D-C 250*2B 28
12 2012 115kV GS2-SPP D-C 250*2B 25
13 2012 115/230kV NPP-Kampong Cham D-C 400*2B 120
14 2013 230kV Lower & Upper Russei Chrum - O
Soam D-C 630 30
15 2013 230kV WPP-SHV include Veal Rinh S/S D-C 630 220
16 2014 115kV SPP-EPP-NPP D-C 250 20
17 2014 115kV EPP-Neak Loeung-Svay Rieng S/S
connection D-C 250*2B 122
18 2017 230kV Kratie-Lower Se San 2 - Vietnam D-C 630 90
19 2017 230kV WPP-NPP D-C 630 25
20 2017 230kV NPP-Kampong Cham-Kratie-Se San
2 - VN D-C 630 300
21 2018 230kV Sre Ambil-Koh Kong-O Soam D-C 400 200
22 2019 230kV Sambor-Kratie D-C 630 30
23 2021 230kV Kampong Cham-Kampong Thom-
Siem Reap-Battambang-Thailand D-C 630 350
Source: EDC Annual Report 2010.
5.3. Electricity Import from Vietnam
As outlined in the MoU on APG and GMSECP, electricity is one of major energy
commodities identified for cooperation in terms of assistance, trade and investment.
With limited capacity to produce electricity domestically, Cambodia needs to cooperate
with neighboring countries to fill the energy gap. Currently, Cambodia imports
electricity from all neighboring countries, including Lao PDR, Thailand, and Vietnam.
Cambodia’s import of electricity from Lao PDR is currently at 22 kilovolts (kV) to
areas in Steung Treng province. The import from Thailand is currently at 22 kV via
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various connections and currently at 115 kV through the Thailand-Banteay Meanchey-
Battambang and Siem Reap lines. Likewise, the import from Vietnam is at present at
22 kV via a number of connections and at 230 kV through the Vietnam-Takeo-Phnom
Penh 230 kV line (EAC, 2010).
In regard to Vietnam, there is an Electricity Trade Agreement between the MIME of
Cambodia and the Ministry of Industry of Vietnam. Governmental agencies, such as the
EDC and Electricity of Kratie of Cambodia, have signed Power Purchase Agreements
(PPAs) with Vietnam Power No.2 for the electricity import at a number of points for
supply of electricity to areas located near the Cambodia-Vietnam border either by
themselves or through other licensees.
According to the report released by EAC, Cambodia’s import of electricity from
Vietnam totaled 518.1 million kWh in 2009 (EAC, 2010). It jumped about five times
the level of the previous year which was 100.1 kWh. This substantial import was about
40.0 percent of the total electricity produced domestically; the total electricity generated
in 2009 was 1,234.6 million kWh according to data released by EAC in 2010.
EAC (2010) also stated that with grid substations (GS) at Takeo province and GS4
at Phnom Penh in Cambodia, the double circuit 230 kV line from Vietnam to Phnom
Penh was commissioned in 2009. Hence, given stable electricity import from Vietnam,
EDC could terminate PPA with SHC (Cambodia) International Pte Ltd for the high-cost
diesel generation at Phnom Penh.
It is noteworthy that import of electricity from Vietnam has not only reduced the
burden of demand for electricity but also the price. EAC (2010) revealed that based on
the PPA, which was signed between Vietnam Power No. 2 and the EDC and other state-
owned utilities in Cambodia, the Vietnam Power No. 2 charges a fixed tariff rate at 6.9
US¢ per kWh for supply to Cambodia at medium voltage lines (22 kV or 15 kV).
Meanwhile, investments from Vietnam in the electricity sector are significant.
Recently, an electrical Vietnamese company has invested USD 3 million in its
Cambodian factory, and is hoping to inaugurate its operation in mid-2012 and employ
between 100-120 people (PPP, 2011).
Increased trade and investment in the electricity sector between Cambodia and
Vietnam are rather substantive, but their challenges, obstacles, and opportunities have
not been widely studied. More importantly, the economic impact of this electricity
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market integration has been barely noticed. Therefore, a study to review this integrated
electricity market and its impact should be conducted to shed light on the possibilities
arising from further integration.
6. Investments in the Electricity Sectors
6.1. Current Situation
In line with the policy of the RGC in increasing electricity coverage, investments in
the electricity sector have continued to increase over the past decade. With sole
responsibilities of EAC in granting licenses to ESPs, the number of licenses issued is on
the rise. According to data released by the latest report of EAC, the total licenses issued
by EAC increased from 21 in 2002 to 278 in 2010.
Out of the total 278 licenses issued in 2010, the number of consolidate licenses is
221 which takes the biggest share. The second biggest share is the distribution license
which reached 27 followed by the generation license which is at 19 licenses. The break-
down of licenses by category is illustrated in the following Table 13.
Table 13: Number of Licenses Issued by Category during 2002-2010
Type of License 2002 2003 2004 2005 2006 2007 2008 2009 2010
EDC 1 1 1 1 1 1 1 1 1
Generation 6 7 8 11 14 14 20 19 19
Distribution 4 7 8 9 13 16 21 25 27
Consolidate
(Generation + Distribution) 10 69 87 98 114 147 172 197 221
Retail 1 1 1 1 1
Special Purpose Transmission 1 1 3 3
Consolidate
(SPT + Distribution) 2 3 6
Total 21 84 104 119 143 180 218 249 278
Source: EAC Annual Report 2010.
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Regarding big energy investment (over USD 1 million), four investment projects
were approved by the Council for the Development of Cambodia (CDC) in 2010. Total
registered capital for those four projects was USD 20 million. It recorded an increase of
around 41% from USD 14.2 million in 2009.2 Though there was no investment project
in the energy sector approved in 2011.
6.2. Investment Shortage in Electricity
Expansion of electricity capacity and coverage requires enormous capital
investments. Yet, the government is unlikely to be able to allocate its limited budget for
this huge financial requisite of investments. As a result, private sector participation is of
crucial importance to accelerate power sector development.
Low cost of electricity is one of the RGC’s priorities to attract both foreign and
domestic investments and to eradicate poverty as clearly stated in the NSDP Update
2009-2013, an overarching national development policy paper (MoP, 2009). This
policy paper encourages participation of the private sector in electricity investment in
various areas such as electricity generation and distribution, expansion of national
transmission grid that facilitates power imports from neighboring countries, and the
hydropower development projects (Ryder, 2009).
A national power grid is a crystal-clear goal of RGC to distribute electric power
service to all villages across the countries (EAC, 2011). It is also to connect with
transmission lines of neighboring countries, as regional integration is the defined target.
Hence, high-voltage transmission connections, large-scale hydropower dams, and coal-
fired plants have been the focused priority for Cambodia’s power development plan
(Ryder, 2009).
Private electric power producers are, thus, unlikely to sustain their businesses in the
long term. Ryder (2009) found that “Cambodia’s private electricity companies provide
essential service yet the EAC describes them as an ‘interim solution’ until the state
utility, EDC, can bring its preferred IPP projects online.”
According to Purka & Litwin (2003) and Ryder (2009), REEs, small-scale electric
power service providers delivering electricity to rural households, are operating in a stiff
2 Data compiled from the CDC.
169
business environment. Access to affordable capital is a common obstacle for most of
REEs if not all, and requesting long-term permit from the regulatory agency to operate
their businesses is very difficult. They also operate under high levels of uncertainty due
to unclear rules for stand-alone operations, mini-grid operations, and future larger grid
connections (Ryder, 2009).
Hence, private small-scale investments in the electricity sector seem unable to be
sustained in the long term, and only large-scale investments appear to be viable. Break
through investments in the electricity sector require a huge amount of capital, and risk is
quite high in terms of investment payback. Therefore, capital requirement is very likely
an investment barrier causing the current investment shortage in this sector. A lack of
legal and regulatory framework in the sector is also a determinant of the investment
shortage.
6.3. Policy Options
As electricity imports represent a large proportion of total electricity supply and
electricity shortage remains persistent, developing further electricity production in the
country is a necessity. Moreover, Cambodia is endowed with an abundance of hydro
resources which should be utilized to increase electricity generation.
The power grid is, on the other hand, quite integrated with neighboring countries in
the GMS region, but is noticeably limited within the country. Specifically, the electric
power networks are well connected to neighboring countries such as Thailand, Lao
PDR, and Vietnam, but have not yet been sufficiently developed to provide electricity
across the country. Hence, more investment is required to hasten development of the
national power grid.
With these critical challenges, there are a few policy options readily available to the
government. First, enhancing the investment environment with a clear-cut policy
direction for this sector is of fundamental importance in order to attract foreign and
local investment. Second, public-private partnership for hydropower development and
grid expansion appears as a preferable solution as long as it is accompanied with good
environmental policy. Third, joint development of hydropower resources with countries
in the ASEAN or GMS region is one of the viable options to electricity sector
development in the country.
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7. Concluding Remarks
Sources in the energy sector in Cambodia are mixed. However, the main source
consists mainly of diesel and HFO. As a result, the electricity price is significantly
volatile given the cost of diesel and HFO in the market. More importantly, the
electricity price is the highest in the Southeast Asia region as electricity is extracted
from these costly energy sources. A great discrepancy of electricity price is also found
between urban and rural areas due to difference in supply capacity, economies of scale,
load factor, power supply loss and risk premium between urban and rural ESPs.
However, demand for electricity keeps increasing dramatically in urban and rural areas.
MIME and EAC are the regulatory entities in the electricity sector. As set out in the
Law on Electricity, these two institutions have different functions and responsibilities.
Meanwhile, key players in the electricity market include the EDC, IPPs, and REEs.
Nonetheless, the EDC is the most influential, forming almost a monopolistic public
utility providing electricity to Phnom Penh capital and other provincial towns.
Cambodia seems to be on track in implementing the APG action plan, completing
two connection projects with Thailand and Vietnam. MoUs with three neighboring
countries have already been signed to implement the electricity market integration as set
out in the GMS cooperation framework. This has reduced the burden for electricity
demand as well as tariffs to some extent.
Investment in the electricity sector has increased steadily during the past decade.
However, this sector still remains under invested given rising demand. Big investment
projects seem to be preferred in the energy sector development plan of the government.
Thus, capital is very likely the most challenging constraint in addition to the lack of
legal and regulatory framework, and high risk of investment paybacks.
Therefore, an improved investment environment is the pre-requisite to attract more
investment in the sector to serve increasing demand for electricity as the economy
grows steadily.
171
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