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EuroCham urges end to solar fee for industry

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Environment minister Say Samal visits a network of solar panels in Kampong Thom province in February 2021. MOE

EuroCham urges end to solar fee for industry

The European Chamber of Commerce in Cambodia (EuroCham) is encouraging the industrial sector to implement effective renewable energy (RE) policies and calling on the government to remove capacity charges on solar energy and fully embrace renewable sources.

In its “Position Paper on Renewable Energy in Cambodia” released on September 2, EuroCham pointed out that “ensuring reliable, affordable and improved energy security is a priority for the Royal Government of Cambodia [RGC], as stated in the Power Development Plan [PDP] 2040”.

“However, for international manufacturers and investors in higher quality production, those with high carbon neutrality targets, and those who consider investing into sustainable production in attractive markets, [RE] is the most important factor for the continued, renewed, or initial investment into a market, followed by affordability and reliability,” it said.

As Germany’s GIZ notes, the state-run utility Electricite du Cambodge (EdC) levies a monthly “capacity charge” based on the demand contracted with customers that connect at higher voltage levels, although this only applies to solar systems at present. “All other technologies [are] charged a simple, one-part, per-kWh [kilowatt-hour] tariff.”

EuroCham adds: “Capacity charges are too high. The penalty for solar electricity is about $0.07/kWh for larger solar systems and $0.84/kWh for smaller systems. This cannot be the intent of the solar regulation and makes the investment economically unattractive and unviable.

“The implementation of solar rooftops could push Cambodia towards an energy transition and also help to meet the growing demand.”

EuroCham chairman Tassilo Brinzer said: “A full endorsement and support of rooftop solar by the Cambodian government would be a huge step towards modernising Cambodia’s manufacturing base, to green the image of the country and to become more competitive while better integrating itself into regional economies.

“It would boost Cambodia as an investment destination, as an investment in [RE] can be supported as a Qualified Investment Project [QIP] within the new investment law and thus attract manufacturers who have clean energy targets to fulfil,” he said, referring to the Law on Investment promulgated on October 15, 2021.

Speaking to The Post on September 4, Garment Manufacturers Association in Cambodia (GMAC) deputy secretary general Kaing Monika commented that the EuroCham paper mirrors the demands made by GMAC over the past “few years”.

“It’s important to look at the issue of capacity charges and make the policy more favourable for solar installation. This would address international market demands for green production as well as most buyers’ policies and commitments to meet their RE targets. Environmental protection has become a very serious issue now,” he stressed.

The paper argues for the full implementation of solar infrastructure in industrial compounds and factories, along with increased investments in the area, to help Cambodia compete with Vietnam, Thailand and other countries.

In addition to curbing carbon emissions, enabling rooftop solar adoption could create a “future-proof industrial sector in sustainable energy” spearheaded by solar technologies, and allow the government to save on expenditures related to power costs.

Although the Kingdom’s current energy mix stands at 51 per cent RE, this share is expected to drop to 35 per cent by 2030, before rising back to 43 per cent by 2040. Overall, this would represent an 8.1 per cent fall in RE use over the following two decades.

Rogier van Mansvelt, vice-chairman of EuroCham’s Green Business Committee, said: “Most garment factories are pressured by buyers to install solar. However, the current tariffs take about 50 per cent of the solar benefit away, increasing the payback time from about four to eight years.

“Also, the 50 per cent capacity installation is hindering the percentage of solar replacement. If Cambodia wants to stay attractive for garment investors, it should create supportive solar rooftop regulations and tariffs,” he said.

To illustrate the potentiality of RE, EuroCham said: “In terms of investments … 10GW of solar energy and 1.5GW of wind power could generate a potential aggregate of $6.8 billion in investments for Cambodia.

“More specifically, a recent UNDP study on attracting new FDI [foreign direct investment] concluded that … ‘Cambodia has the potential to attract significant private sector investment in solar PV, estimated at $903 million across the four solar PV sub-sectors to achieve the report’s targets’.”

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