The solar roadmap for Cambodia How to scale-up solar diffusion in Cambodia? Strategy formulated by stakeholders Summary edition, Phnom Penh, June 2011
Preface Cambodia has a high potential for solar energy and with about 80% living in rural areas and 75% of the households without grid electricity. Solar could be a sustainable source for daily lighting needs for many of the about 2.3 million rural families. The high price, few solar companies active in rural areas, low level of awareness and limited donor projects place Cambodia far behind other countries in the region that have disseminated hundred thousands of solar home systems over the last decade. The government policy on rural electrification and the import tax reduction enables the environment for solar diffusion. The ADB with the Energy for All initiative in co-operation with ETC-the Netherlands and Pico Sol Cambodia have initiated the formulation of this road map. Interviews and stakeholder consultations resulted in a wide range of suggestions and contribution that are included in this report. June, 2011 Study, analysis and reporting by: Rogier van Mansvelt Renewable Energy and Climate Change Specialist Email: Rogiervanmansvelt@gmail.com Phone: + 855 (0) 12 304332 Editing and design: Henry de Gooijer This roadmap is funded by:
Summary The solar roadmap for Cambodia presents perspectives to create access to energy to 200,000 rural families in 2020 with solar powered solutions. The ongoing international trend in cost price reduction of solar panels will contribute to the feasibility of this ambitious aim. However, this large amount is only possible if donor organizations and the government will take concerted actions on the short term. It requires the creation of a solar fund of 20 Million US$, enabling distributors and end-users to overcome the investment barrier of the relatively high initial system costs. Also companies, in cooperation with financing institutions need to expand their activities in the provinces to establish distribution points with one-stop shops of both providing standardized technical solutions and financing opportunities for the families. Why a roadmap? Abundance of solar irradiation averaging around 6 full solar hours per day makes Cambodia one of the sunniest countries in the world. However at present the utilization of solar energy in Cambodia is still low with only a few thousand solar home systems installed, a few hundred NGOs and private residences have larger systems and a small percentage of telephone masts run the antenna s on solar energy. Legend: Average irradiation (kwh/m2/day) High: 6.5 Low: 6.2 Water Body Provincial Boundary International Boundary A solar lanterns provides basic lighting for rural families (Photo Kamworks) Solar products are not easy to sell in rural areas. Actually any product is difficult to sell in rural areas. In rural villages only the most rudimentary products are sold such as, rice, vegetables, fruits, sugar, sold, oil and Monosodium Glutamate (MSG). Even for mobile telephones one has to go to the district market. Reasons why solar has not taken off yet on a large scale in Cambodia is analyzed by asking several questions: Is solar attractive, competitive, affordable, and available? The analyses for Cambodia are stratified per social income class, indicated by the type of house. This has been a good predictor of socio-economic status of household in rural areas. Three types of solar products are analyzed 1) solar lanterns, 2) a 40Wp and 3) a 80Wp solar home system. The solar home system can replace kerosene lighting, the 40Wp system provide enough energy to power a few lights and a black and white television and the 80Wp system power for a color television, fans and lighting. Products attractive for the 36% Cambodians living under the 1$/day income rate are not affordable. Solar sets for the richer households are not competitive as a SHS has a high up-front cost compared to battery charging. A SWOT analyses shows the strength and weaknesses of solar diffusion in Cambodia. Solar irradiation map of Cambodia (Source: CRCD 2005)
SWOT Analysis of the Cambodian solar market Strengths: Abundantly available sunshine Competitive with other fuels with increasing prices Over 1.5 million hh without grid Rural Electrification by Renewable Energy Policy Reduced import tax for solar equipment About 20 established solar companies Solar is considered a luxury item and appreciated Solar panels last very long Many players, Companies and NGO s active government Pico Sol Cambodia Solar energy will not disturb anyone compared to large hydro or coal fired energy Easy to use Motivated solar companies Opportunities: Extensive un-electrified areas Alternative for battery charging Expensive grid electricity in rural areas High demand for energy, people like solar Shops in every village and economical growth Support from the World Bank, government and other donors, REF rent to own systems Many companies invest in solar energy Create soft solar MFI loans New technology developments Decreasing price of solar compared to increasing price of fossil fuels NAMAs ( climate change mitigation finance scheme) Interest to setup a solar branch organization that could lobby to support sector development Limited coverage of grid electricity, still many not connected in the next 15 years Awareness can improve attitude towards solar Weaknesses: Limited solar companies active in rural areas, limited number of solar shops Limited finance opportunities, no specific MFI s for financing solar, high interest rates No solar strategy or implementation plan Not financial competitive with battery charging Expensive, high initial cost, low income rural households Limited marketing of solar companies Potential clients live far apart Complicated technology, limited knowledge No branch organization/association for solar companies Batteries have limited lifetime (about 3 years) Inexperienced sellers can not inform clients well New market, still very small, lack of investors Lack of financial support from the government No feed-inn tariffs, grid connection policy by EAC/EDC Badly designed systems have during rainy and cloudy days not enough power Threats: Informal fees in importing Grid extension World Bank-REF rental scheme, potential market distortion, Limited financing Remoteness of servicing Bad reputation of solar made by some people, including some fake and low quality Chinese products Bad quality and service, poor installation Other competing Renewable Energy technologies Complexity of technology requires regular servicing to keep solar systems working Not financially competitive with battery charging Corruption, high fees for import of products Market distortion of donors Can break easy No level playing field due to tax-evasion Indicators of solar product diffusion potential per type of households in rural areas Attractive Competitive Affordable Available Type of House Solar Lantern 40W 80W Solar Lantern 40W 80W Solar Lantern 40W 80W Solar Lantern 40W 80W Brick, with tile roof no no yes No no no yes yes yes yes yes yes Brick/wood, with tile roof no no yes No no no yes yes - no no no Wood, with tile roof no yes yes No no no yes - no no no no Wood, corrugated iron roof - yes yes No no no yes no no no no no Wood with thatch roof yes yes yes Yes no no no no no no no no
Target for the Solar Road Map The main challenge in Cambodia is to make solar affordable for the 1.6 million rural families that depend on battery charging and kerosene lighting for their daily lighting needs. The target of the Road map is to identify areas and activities required to professionalize the solar market that result in solar products and services affordable, attractive and accessible for those that rely on batteries and kerosene. It is not easy to setup dissemination channels, retail and maintenance and repair service in rural areas with only limited profits. Priority of solar diffusion 1. Solar Home Systems 1: Households in rural areas 2: Institutions in rural areas 3: Large PV systems Solar Home Systems Solar Lanterns Hospitals Schools Commune/district centers Grid connected large PV Small grid connected PV Private PV systems About 1.6 of the 2.3 million rural households depend on car batteries and those who cannot afford car batteries on kerosene lighting. If solar home systems where affordable all these households could benefit from solar as they are not connected to the grid. A Solar home system is a small isolated solar option that can be installed at any house, or building anywhere. It consists of a solar panel usually between 40 and 160 Wp placed on the roof, cables to connect to a charge controller and a battery. It can power several appliances similar to families using batteries that are charged by battery charging stations. A small 40Wp solar system can power a few lights, radio and charge mobile phones, and a black and white TV for a A solar home system provides lighting and television for a rural family (photo Kamworks) few hours, larger systems can also power color TVs and fans. The high initial cost of a solar system is the main barrier for household to buy a solar home system (SHS). The price in April 2011 of solar home system for a set with solar panel, charge controller, cables, transport and installation (without battery) is $298 for a 40Wp and $450 for a 80Wp system. These prices are much lower than a few years ago. The prices are reduced as a result of the lower world market prices for solar and the reduction of the import tax which was 35% (now reduced to 7%). The prices however are still too high to result in an increased uptake by rural households. A 40Wp at a cost of $298 (without battery) could provide about 45kWh per year. With a price of $1 per kwh similar to that of battery charging the IRR over 10 years is 1%. With an 80Wp system for $450 generating 130kWh/year the IRR reaches 11% which is a good investment. 2. Solar Lanterns Over the past years three different (solar) lantern rental or rent to own systems have been piloted in Cambodia. The experiences with these schemes provide lessons for up-scaling and new initiatives. The
schemes, although subsidized resulted in positive feedback from users. Kamworks designed a solar lantern rental project. The initial pilots are positive and families pay $0.075 per day or $2.25 per month similar to that of buying kerosene for lighting. The rental service can generate a substantial additional income for the entrepreneurs who only have to collect fees during one or two days a week. With the rental fee Kamworks can earn back the price of the lantern in about 2 years. To enable up-scaling to larger numbers external financing is essential and developing banks or social investment funds could be mobilized to support solar lantern rental schemes. As for now financing has not yet been included in the Kamworks rental business model. Solar lanterns are a good and affordable alternative to dangerous and expensive kerosene lighting that is at present the only lighting source for about 800,000 Cambodian rural families including all the poor who mainly live in thatch houses with the highest risk to catch fire. Aim at remote rural areas This Solar Road Map focuses on solar diffusion strategies for rural areas. The aim is to enable as many as possible of the 1.6 million household that are at present relying on car batteries and kerosene lamps with affordable solar lanterns or solar home systems for basic lighting needs, television, radio and mobile phone charging. Access to modern energy services is very unequally divided in Cambodia. The richer households in urban and peri-urban areas have access to the cheapest and most convenient grid electricity. The further away from urban centers the poorer the households get and the higher the price for electricity. The price of the national grid is about $0.18 per kwh and increases to $1 per kwh for local grids and the most expensive is the electricity provided by car batteries costing about $1.5 to $2 per kwh. For this reason the highest support is required to reach remote rural areas. Number 2. rural areas are a bit easier to reach but also require substantial support. Many households in peri-urban areas do not yet have access to grid electricity however in the following years the grid will extend rapidly. Urban areas are the last priority for solar support programs however there is a great opportunity to develop grid connected systems, a grid feed-in tariff policy for solar and larger grid connected systems to reduce peak demand in Phnom Penh. The experience and profit of solar companies in urban areas will have a positive spin-off effect to also invest in dissemination of solar in rural areas which might be less profitable. Solar Companies will most likely first serve the more accessible areas, subsidies and donor should encourage and support companies to also reach further out towards remote areas. 1: Remote rural areas 2: Rural 3: Peri Urban 4: Urban Center Classification of target areas for solar lighting services Three scenarios for the Solar Road Map There are 3 scenarios developed, 1) the business as usual scenario (BAU), 2) the solar scenario and 3) the high solar scenario. For each scenario the expected requirements are analyzed and were discussed in detail during a stakeholder meeting.
Solar dissemination for three scenarios. Business as Usual (BAU) refers to a 10% annual growth rate, Solar to a 20% and High Solar to a 30% annual growth rate. The numbers in the table refers to the sales in the base year of the scenarios in 2012. BAU Solar High Solar initial #/a initial #/a initial #/a SHS 2000 3000 5000 Solar lanterns 1000 2000 3000 Solar for schools and 100 200 all in 2020 health centers Solar on rural 100 200 all in 2020 government buildings Grid connected solar 3 50 100 Large grid systems 0 1-2 5 The above scenarios will result in the following figure of actual sales for each scenario. The peak in 2012 is a result of the 12,000 SHS Rural Electrification Fund project. After that year the sales will be reduced to the full commercial level. 35000 30000 25000 20000 15000 10000 5000 0 Growth of annual SHS sales in Cambodia BAU Solar high solar Solar panels used in a solar battery charging station energy by rural households that now depend on battery charging and kerosene lighting. A flow-chart is developed to highlight the activities required by solar 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 companies, banks, donors and the government over 3 stages or three years to 2015 and a vision for activities Growth of annual SHS sales in Cambodia required to reach 200,000 households by 2020. The business as usual scenario will result in a continuing slow uptake of solar in rural areas. The Solar Scenario required active marketing, assembling in Cambodia by solar companies, loans and subsidies by donors and banksand strategy development by MIME. The High Solar Scenario requires a consorted effort of companies, donors, NGOs and government to prioritize solar PV in strategy development, funding allocation and marketing. Implementation strategy for the Solar Roadmap The solar and high solar scenarios require step by step activities to accelerate the diffusion of solar. The focus of this solar road map is to enable access to solar
Requirements to implement solar scenarios BAU Scenario Solar Scenario High Solar Scenario Marketing Solar Companies will undertake limited marketing A national initiative will promote solar regularly on television, radio and other media. Solar will be promoted by a National Initiative as the best option for rural households. Corporate Solar companies do not cooperate A Solar Branch organization is developed for lobby and list quality companies A Solar Branch organization is developed for lobby and list quality companies and actively promotes solar, support standard and sector development Technology Cambodia will import solar technology. Only limited products or assembling in Cambodia. Assembling of solar charge controllers will be setup in Cambodia. Smaller products such as solar lanterns will be produced in Cambodia. Feasibility studies will be carried out and investment support promoted for the production of solar panels and solar thin film in Cambodia. The assembling and potential production of batteries, charge controllers, converters etc will be encouraged and invest supported with special financial incentives and start-up capital. Finance Limited finance for solar companies Only regular loans for households Specific loans for solar systems and solar companies will be developed with interest rates of about 10% per year. Start-up capital will be provided to solar companies with promising business plans. Subsidy system per household Support business plan development of Solar Companies Specific loans and subsidies for assembly of solar products in Cambodia. Loans will be provided with interest rates of about 6% per year. Start-up capital will be provided to solar companies with promising business plans. Subsidy to household Grants to schools and health centers. TA support to provide national service on quality assurance Policy Government will follow JICA master plan for rural electrification A solar implementation plan will be developed by MIME Solar will be promoted by the Royal Government of Cambodia as a major drive for sustainable development. A solar implementation plan will be developed by MIME with all other relevant ministries and government agencies involved. Monitoring and control No guidelines or quality assurance MIME s department of standards has developed a standard for solar product and companies. The standard enable companies to promote their standardized product s however there is limited control. MIME s department of standards has developed a standard for solar product and companies. The standard is actively monitored and companies without the standard are withhold from sales. Training institutions and Capacity Building Limited capacity building will be provided by several NGOs Capacity building is a very important aspect to support solar diffusion. Several NGOs are actively involved in training and capacity building programs Capacity building is a main pillar of this scenario. It is part of the government policy and NGOs and technical training institutions have integrated solar as part of their standard curriculum. Solar NGOs such as CKN, Pico Sol and Smart Training Center and perhaps others play a major role in capacity building of the solar market. Donor support Fragmented solar support scene with small initiatives by a number of donors with a limited donor support. Finance requirements about 5 million till 2020. Grant and loan structures will be developed with consolidated donor support. Finance requirements 10 million till 2020. Grant and loan structures will be developed with consolidated large donor support over several years. Finance requirement 20 million till 2020.
Flowchart of the solar roadmap Conclusion The road map clearly indicates the high potential of solar diffusion in Cambodia. However without support by donor organizations only richer households will benefit from solar. To enable households in remote rural areas to access solar subsidy and support programs should be developed. Solar energy provides a clean and good alternative for diesel generation and has far less environmental impacts compared to hydro dams that threaten to reduce the fish stock that is the main source of protein in Cambodia and biomass gasification that produces hazardous waste such as tar and polluted cleaning water. The international trend clearly indicates a decreasing price of solar and the price of only $2.1 per Wp. Cambodia offers great opportunities to reach many households with solar in the near future. Together with larger systems installed in urban areas - with solar reaching prices below local grids and similar to that of the national grid solar companies will generate profit to also work in less profitably rural areas. With consorted effort of the government, donor organizations, NGOs and companies solar diffusion can reach many of the 1.6 million rural households that now depend on car battery and kerosene lighting. However to teach the target of this road map, 200,000 solar systems installed in rural areas, requires a solar fund of $20 million for the high solar scenario. It will enable companies and households to access finance with a reasonable conditions to purchase solar over a 5 year period. The flowchart shows clearly the activities that have to be undertaken by each of the stakeholders. The main result will be a healthy market driven solar diffusion, providing solar systems not only to rich but also offering payment schemes for
middle class rural households and an option for the poor who can replace their dangerous kerosene lamps with a sustainable brighter alternative, a solar lantern. Recommendations Development of a solar branch organization to improve the quality of products and services. The Solar Branch Organization could: o Develop a list quality solar companies to be disseminated to government and rural areas; o Organize awareness campaigns together and be a focal point for government and donors; o Lobby to ease import of solar products, special benefits for companies that establish service delivery in rural areas; o Regular publication about solar, including total sales reached, new products and qualified companies. Identification of a large donor funds for Micro Finance Institutions to loan to households for solar home systems and entrepreneurs for selling/rent to own and smaller solar options such as solar lanterns (similar to bio-digester loan with FMO/ Prasac 1 ). Setting up a support program for solar companies to develop rural networks of one-stop shops that provide both technical solutions for families and financing mechanisms to make it affordable. Initiate pilots in rural areas to make solar home systems and solar lanterns affordable; Development of standards for solar (in Cooperation with the Department of Industrial Standards Cambodia (ISC)). The ICS can audit companies that provide products conform the standard. The branch organization could publish this list to enable customers to choose for decent quality products and companies. National awareness campaigns once solar companies have been established in district centers Awareness projects at schools to make solar part of the curriculum with practical solar test and tasks. Feasibility and pilot studies for grid connected systems especially in REE isolated grids. Support to solar companies to expand product and services to district centers. 1 The Dutch Development Bank FMO provides loan to the MFI Prasac in Cambodia at a discounted rate enabling household that want to purchase a biodigester to loan money at a reasonable interest rate.
Pico Sol Cambodia provides vocational trainings for technicians at the Solar Campus near Phnom Penh
Pico Sol Cambodia Pico Sol Cambodia closely co-operates with the Dutch foundation Pico Sol. Pico Sol's program in Cambodia started in 1999 with realization of small projects at orphanages. Projects succeeded each other. Scaling up the solar support program required to establish a local NGO, Pico Sol Cambodia, established as an independent Cambodian NGO in 2008 to facilitate the development of the upcoming solar sector Visitor's address: Srê Ampil Village Keansvay District Kandal Province Postal address: P.O.Box 2497 Phnom Penh Cambodia Other: Phone: +855 85 772 637 Internet: www.cambodia.picosol.nl E-mail: cambodia@picosol.nl Bank account: ANZ 933355 Registered at Ministry of Interior under Nr. 388 S.G.N. The complete report The solar roadmap for Cambodia is also available. Please write an e-mail to us to get your digital copy.