Cambodia is racing to prevent a new spate of power outages, similar to the unexpected rolling blackouts suffered earlier this year that caused untold damage to the economy.
Prime Minister Hun Sen warned in November that water levels at the country’s hydropower dams are running exceptionally low, driving down power plant production to about one-tenth of their normal output.
The leader has warned urban residents to prepare for more energy shortages during the dry season, typically running from October to April, if water levels do not rise sufficiently. Hun Sen had promised residents in June that there would not be power cuts in 2020.
The shortages threaten to short-circuit the economy, which in recent years has boasted gross domestic product growth (GDP) rates as high as 8%. The economy grew 6.9% in 2018.
Government planners have struggled, however, to keep pace with the associated surge in power demand, restraining the country’s growth potential. Last year energy consumption rose to 2,650MW of electricity, up 15% from 2017.
Half of this power was derived from domestic hydropower dams while the rest was generated from either local coal-fired or diesel power plants, or imported from neighboring Laos and Thailand.
Hun Sen’s government has promised to electrify all national villages by 2020, and for at least 70% of all households to be plugged into the national grid by 2030. That will be easier said than done, however.
An Asia Development Bank (ADB) report published last year predicts that Cambodia’s energy demand will double by 2030, though some independent analysts see that as an underestimate.
Cambodia’s energy prices are currently among the highest in Southeast Asia, driving up significantly the cost of doing business while undermining competitiveness vis-à-vis regional peers.
The World Bank’s latest economic update on Cambodia, published in May, says repeatedly that “cheaper energy” and “competitive energy prices” are necessary if the country is to continue attracting quality foreign investment and boost domestic investment.
It is a long-term problem that will only be solved through long-term solutions. Planners are looking to solar energy to meet some of that demand.
In September, the government approved four new solar power projects with a combined capacity of 140MW. The country’s combined solar capacity is expected to rise to 410MW when all planned projects are operational in 2021.
According to the recently approved National Strategic Development Plan 2019-2023, the government will spend US$14.3 billion, while the private sector is expected to contribute $43.4 billion, on infrastructure development over the next five years.
As part of the plan, the government has vowed to increase its investments in solar energy by 12% by the end of 2020.
Since early 2018 the Electricity Authority has also allowed households and businesses to install their own solar power devices while remaining on the national grid, as long as they still purchase more than 50% of their energy usage from the national provider.
Oil and gas projects will also ideally fuel new power generation, though not fast enough to prevent short-term energy shortages. On November 13, Singapore’s KrisEnergy confirmed it will begin extracting oil from Cambodia’s Apsara field beginning early next year, seven years after the government promised extraction would begin.
KrisEnergy has faced severe financial problems, with trading of its shares suspended in August after it was forced to divest from a number of oil projects in the region.
Some question whether the Apsara project makes economic sense, as US oil giant Chevron backed away from the same oil field previously. But state planners are moving ahead with multi-million dollar plans to refine the extracted fuel.
In 2017, the Cambodian Petrochemical Company started construction on a $620 million oil refinery in Preah Sihanouk province, which is now scheduled for completion in 2022 after a series of delays.
Kos Sila, deputy director of the Ministry of Mines and Energy’s department of petroleum technology, told local media earlier this year that crude extracted from Apsara before the refinery is opened will be sold abroad.
In April, the Cabinet approved a $231 million hydroelectric power plant in Pursat province, but it won’t be operational until at least 2022. Moreover, an agreement signed in September to buy 2,400 MW of electricity from Laos will not start deliveries until the end of 2024.
To meet short-term demand, the Ministry of Mines and Energy plans to buy 200MW of electricity from Laos early next year, while negotiations are underway on buying an additional 300MW from the state-run Electricity Generating Authority of Thailand.
The government has also spent $400 million on two new diesel generators from Germany and Finland that will be installed at a power station in Kandal province and provide electricity to the capital, Phnom Penh, beginning in May 2020.
Still, analysts say that the government should start making contingency plans for power shortages in 2020, including the creation of a new national emergency organization.
Composed of officials from the Ministry of Mines and Energy, provincial government, city hall, and business organizations, such a body could manage power redistribution and dialogue with businesses affected by the blackouts.
Energy rationing in urban areas was often haphazard during the blackouts earlier this year, with businesses and households given little information about the hours of the day they would go without power.
Reports of bribery and unfair distribution were common. The poorest parts of cities often went without electricity nearly all day, while the richer areas were affected for only a few hours.
The government has not released any statistics on how much the blackouts cost the economy, but many businesses reported lengthy shutdowns and disrupted operations. Some analysts predict hundreds of millions of dollars were likely lost to this year’s blackouts.
And as Cambodia earns a reputation for unreliable power generation and persistent rolling blackouts, the toll on investor sentiment could be even higher.