Pacific Money

Powering Cambodia’s Economy

The country needs innovative solutions to make good its energy deficit.

Powering Cambodia’s Economy
Credit: Phnom Penh via Perfect Lazybones /

According to the Asian Development Bank (ADB), the greatest obstacle to foreign investment in the Cambodian economy is the country’s deep energy shortfall. In 2002, 80-85 percent of rural households were without power in Cambodia, and rice millers were forced to import electricity from Vietnam and Thailand at significantly marked-up rates. According to Cambodia’s Ministry of Industry, Mines, and Energy, the situation has not improved much in more than a decade, with only 26 percent of households nationally supplied with electricity and the capital of Phnom Penh accounting for approximately 80 percent of consumption.

The Cambodian government’s approach has been to court investment in major power generation projects. For example, as a result of Chinese-Cambodian collaboration, the 338 MW hydropower station Russei Chrum Krom River began operations in January 2015. But such projects largely serve only to drive down electricity prices in Phnom Penh as, according to reporting from the Economic Research Institute for ASEAN and East Asia (ERIA), Cambodia still lacks a national power grid. Of what transmission lines there are, most fail to reach rural communities. This stunts the growth of Cambodia’s agriculture industry, as many of the rural communities without power in the Mekong region are vital to rice cultivation.

One solution would be for international investors and foreign donors to dedicate more resources toward the development of a national power grid. General Electric inked a contract worth $1 million with Cambodia in December 2014 to study the reliability of existing transmission infrastructure, identifying weaknesses to be addressed by local authorities. But this study seems primarily concerned with the efficiency of transmitting power from generation facilities in the south of the country to Phnom Penh in the interior. The Association of Southeast Asian Nations (ASEAN) is supporting construction of large-scale transmission lines between Cambodia and its neighbors Thailand and Vietnam under the ASEAN Power Grid (APG) project. For its part, the ADB has invested in the construction of 2,110 kilometers of 22 kilovolt (kV) sub-transmission lines in order to improve access to electricity in rural communities, which is the most promising initiative to date in addressing rural power shortages in Cambodia.

But these projects do not address the Cambodian consumer’s vulnerability to rising prices. The rapid economic growth of ASEAN member states means a projected annual increase in the region’s energy consumption by 4.0 percent until 2030. The increasing demand for Thai and Vietnamese power will mean steadily climbing power bills for Cambodian consumers, especially for those living in rural communities located in the north and quite some distance from domestic generation facilities in Cambodia’s south. Perhaps the best solution for addressing the underlying causes of Cambodia’s energy shortfall would be to invest in micro-grids and projects allowing rural communities to generate their own power.

To some extent, these communities are already attempting to generate power independently, using expensive imports of kerosene for lighting and diesel fuel for machinery. But cheaper alternatives can be made available. Japan is funding a project in Phnom Penh designed to promote the use of biofuels in Cambodia, derived from Jatropha seeds. Research conducted in Cambodia by Japan’s New Energy and Industrial Technology Development Organization (NEDO) indicated significant potential to harness rice husk, acacia, cassava luscenia, and coconut for biomass-fueled power. Investing in the cultivation of such energy sources would not likely be viable for the large-scale “greening” of the Cambodian economy, but it would certainly be a wise investment on the part of Cambodian authorities and regional partners to promote biomass-fueled power as a stopgap measure. While the construction of energy infrastructure – both generation facilities and transmission lines – is ongoing, the use of unorthodox but locally available resources can help raise the standard of living in rural Cambodia. Without such innovative solutions, Cambodia beyond Phnom Penh will be an unattractive place in which to do business.

Paul Pryce is the Political Advisor to the Consul General of Japan in Calgary and writes on security and energy issues for such institutions as the Atlantic Council of Canada and the Centre for International Maritime Security.