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Fuelling on dirty energy for economic growth

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Cambodian Energy Ltd’s 100MW unit which began operation in 2014 was the country’s first coal-fired power plant. Heng Chivoan

Fuelling on dirty energy for economic growth

Cambodia's construction and industry boom has forced it to move fast to meet energy demands, even if that scuppers climate mitigation efforts.

Early February this year, Cambodia approved two coal-fired power plants in Oddar Meanchey and Koh Kong provinces. The overall $1.7 billion project, including a transmission line, will generate 965MW of electricity by 2024.

With more in the pipeline amid industrialisation and electrification, the ongoing plan has cast a pall on climate mitigation efforts, forcing a counteractive situation in the Kingdom.

This is a step back for Cambodia, with regards to agreed conventions and protocols on climate change mitigation, said Swedish climate-based NGO Forum Syd.

“Nor is it aligned with the National Strategic Plan on Green Growth [2013-2030]. It could lead to demotivating development partners that invest a lot of resources into climate mitigation work,” it said.

Decades of greenhouse gas emissions from coal-powered plants have contributed to the downwardeffect on the global environment.

As a result, several developed nations, including China, have begun the process of decommissioning coal-burning power plants, widely known as dirty energy.

In Southeast Asia, it is just the opposite.

Driven by exceptional year-on-year gross domestic product (GDP) growth and urbanisation caused by industrialisation, construction, and increased foreign investments, the appetite for more energy has been nothing but voracious.

Five years ago, Japanese firm Chugoku Electric Power Co Inc made a base case projection of 8.8 per cent compound annual growth rate in electricity demand until 2030 for Cambodia.

Energy demand is forecast to rise to 7,700 Gigawatt per hour (GWh) by 2020 and to 18,000GWh by 2030 or a greater than threefold increase relative to demand in 2015.

“This translates to peak demand forecasts of 1,412MW in 2020 and 3,256MW in 2030 versus about 1,000MW in 2016.

“Of the current peak demand, some 70 per cent is used in Phnom Penh,” Chugoku’s data showed, as shared by Asian Development Bank (ADB) in its December 2018 Cambodia Energy Sector Assessment, Strategy and Road Map report.

Energy demand in Southeast Asia makes up five per cent of the global data, a figure that has been rising steadily, revealed the International Energy Agency’s 2019 outlook.

Electricity consumption growth in the region has been among the world’s fastest at six per cent per year since 2000, with demand largely met by an increase in coal-fired power generation, followed by natural gas and hydropower.

In Cambodia, electricity demand rose 18 per cent year-on-year between 2010 and 2016, while power generation grew 19 per cent in that period.

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Southeast Asia Energy Outlook 2019 | IEA 2019

Due to expected growth in demand, a joint ministerial report Cambodia Basic Energy Plan in May 2019 recommended that the power generation mix should comprise coal (35 per cent), hydro (55 per cent) and renewable energy (10 per cent) in 2030.

The plan which addresses energy security issues noted that Cambodia had high import dependency on coal, oil and electricity imports.

Rise in energy demand will see a growth in carbon dioxide emissions from fossil fuel combustion which expected to rise to 5.6 per cent per year from 1.96 million tonnes of carbon in 2015 to 8.62 million tonnes in 2040 under the business as usual scenario, the plan said.

This has raised concerns among climate campaigners and UN Secretary-General Antonio Guterres who warned Asia to stop its coal (power) addiction as its environmental impact is exacerbating climate change, which inevitably puts emerging economies like Cambodia at risk.

The fact is, Cambodia is short of energy supply, which is one of the reasons for its low level of industrial development, a point which was duly noted in its Climate Change Strategic Plan (2014-2030).

Until 2012, Cambodia still relied on oil and diesel generators to produce 90 per cent of electricity but all that has changed.

According to the regulator Electricity Authority of Cambodia’s 2018 annual report, power generation by independent power producers and consolidated licensees consist of hydropower (57.9 per cent), coal (37.4 per cent), diesel (3.7 per cent), biomass (0.8 per cent) and solar (0.2 per cent).

It currently imports about 25 per cent of its electricity from neighbouring countries to plug the shortfall.

Cambodia’s measures and policies are sound, following its ratification of UN Framework Convention on Climate Change (UNFCCC) and the Paris Climate Change Agreement.

It implemented the Climate Change Strategic Plan (2014-2023) and drew up the National Adaptation Plan which calls for low-carbon planning and technologies to support sustainable development.

In 2015, a document submitted to the UN showed Cambodia’s intention to bring down emissions in the energy sector by 16 per cent by 2030 compared to the baseline emissions of 11,600 Gigagrams carbon dioxide (CO2) equivalent.

It planned to do this through various ways including the connection of renewable energy generation such as solar energy, hydropower, biomass and biogas, as well as decentralised renewable to the grid.

Missing from the equation was coal power. When asked to comment on the new coal power addition, the Ministry of Environment declined to comment.

However, ministry spokesman Victor Jona said since the security of power supply is critical, it needed to diversify its sources.

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Combination of data by Ministry of Energy and Mines’s generation development for 2017-2030 and Economic Research Institute for Asean and East Asia’s outlook

“[But] emissions from coal-fired power plants must meet the ministry’s standards,” he said.

The Kingdom’s greenhouse gas emissions are extremely low compared to regional and global averages. In 2000, it emitted 47.6 million tonnes of carbon dioxide (CO2) equivalent. But the forestry sector absorbed 48 million tonnes of CO2 equivalent.

Mean surface temperature has increased by 0.8C since 1960. Future trend indicates temperatures rising nearly 2.7C by 2060 and 4.3C by 2090, according to UNDP Cambodia’s climate profile.

Rising global temperatures will impact agricultural productivity, increase sea levels along its 435km coastline and expose low-lying farming areas to saline intrusion, causing damage to crops.

Cambodia is well aware of its high vulnerability towards climate change and is making all effort to adapt and mitigate the effects.

Yet, decisions on projects that support growth lack transparency and sincerity to meet climate goals on the part of the government, said independent natural resources and environmental governance analyst Ham Oudom.

“Cambodia is contradicting its own premise to reduce emissions under the UN framework,” he said.

A more cohesive energy sector strategy linking policies and physical infrastructure plans to support further economic growth and competitiveness is needed, said ADB.

“The current power development planning process often relies on unsolicited bids and business-to-business arrangements for new power generation, primarily from hydropower and coal,” it added.

Why coal-fired plants?

Cambodia already has two coal-fired power plants operating in the southwest province of Sihanoukville, generating a total of 370MW electricity.

They are independent power producers based either on “build-own-operate” or “build-operate-transfer” business models.

One of them, Cambodian Energy Ltd (Cel1), which produces 100MW of electricity, belongs to Malaysia’s Leader Energy Pte Ltd.

It is currently building its second coal-fired plant of 135MW (Cel2) at an approximate cost of $600 million on the same location, using Japanese technology by Toshiba Plant Systems and Services Corp. The other plant generating 270MW electricity is run by joint venture company CIIDG Erdos Hongjun Electric Power Co Ltd.

The JV is owned by Cambodia International Investment Development Group Co Ltd and China Huadian Corp’s Erdos Hongjun Electric Power Co.

This JV is also behind two 350MW coal-fired power plants (700MW) in Sihanoukville, valued at $1.2 billion, which broke ground in December 2019.

What makes this type of power plants attractive in Asia is also the impressive investment returns, scalable model due to abundant coal resources, and the robust sale of electricity.

Coal-fired power plants remain competitive in emerging countries especially in Southeast Asia and East Asia, because the heating value of coal is lower than gas.

“Coal [plants] is profitable as they are built, [further supported] by long-term power purchase agreements such as that in Cambodia,” said energy economist Han Phoumin from the Economic Research Institute for Asean and East Asia.

Based on his assessment, some plants inflate the investment cost of coal-fired power plants, which is supposed to be fitted with clean coal technology. In reality, the plants deploy lower technology which produces higher emissions, making the plants less efficient.

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Source : Electricity Authority of Cambodia

“This could make their investment more profitable in the investment environment where governance of electricity is not transparent,” Han said.

The Koh Kong 700MW coal-fired plant, to be built by one of Cambodia’s largest conglomerates, Royal Group, at a cost of $1.5 billion, is the latter’s first after years of feasibility studies, albeit in Sihanoukville.

Royal Group is also a co-developer of the Lower Sesan II hydroelectric dam in Stung Treng province.

Its change in decision to set one up in Koh Kong’s Botum Sakor district instead is possibly connected to the economic boom anticipated from Chinese industries and infrastructure in the province where an airport, seaport and special economic zones are taking shape.

In Oddar Meanchey, local miner Han Seng Coal Mines Co Ltd will develop the 265MW coal plant and a 230kW transmission line to Siem Reap East substation.

According to the law, power plants that are more than 50MW require environmental impact assessments but whether the companies employ clean coal technology that can lower the emission of nitrogen oxide and sulphur dioxide to zero levels is unknown as the reports are never made public.

UNDP country director Nick Beresford felt that a good environmental and social impact assessment would help the government identify the actions necessary to mitigate at least some of the risk to local communities.

“If modern equipment is used to build the plant, including ‘scrubbers’ to remove some of the harmful carbon dioxide and other air pollutants, and if high quality coal is used, the pollution and damage to health could be reduced,” he said.

The use of fresh water is another concern for coal plants which consume billions of gallons of water for the cooling process and the production of steam to generate electricity. A quick take on the location of the plants reveal their close proximity to water sources.

“With increasing temperatures and more frequent droughts, scarcity of water could affect energy production or impact local communities that need water for domestic use or irrigation. This will require careful planning,” Beresford advised.

More coal plants

The business of energy production is never without faults or controversy.

Even hydropower dams which fall under the category of clean energy have its drawbacks due to its environmental and social impacts.

In Cambodia, the water level drops in the Mekong River and its tributaries have dampened hydroelectric activity, limiting power supply.

Vulnerability to river conditions, climate change and the threat of architectural defects could hinge upon its reliability, giving coal power a boost.

Han believes that there will be more coal power plants in the future as part of Cambodia’s energy mix.

“Its main priority is to provide affordable electricity and lower prices. And coal is one of the options to achieve this goal.

“However, Cambodia can choose better options by changing to gas power generation, although that requires the construction of gas infrastructure and investment,” he said.

One of the policy recommendations under the Basic Energy Plan urged that collective measure and actions are taken to develop energy efficiency and savings in all sectors. It also recommended the doubling of renewable energy share in the overall energy mix for inclusive and sustainable development.

For now, it is left to be seen when this will happen.

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