[Vietnamization: Electricity] Industry leaders voice concern over sky-high cost of electricity

Two men work on connecting electricity cables in Kampong Speu province last year. Hong Menea

Industry leaders voice concern over sky-high cost of electricity

Phnom Penh Post | 16 February 2017

Private sector industry leaders speaking at an investment conference yesterday in the capital railed on the high cost of electrical power, which they said was sapping their competitiveness, while state officials offered assurances that state-backed power generation schemes would soon bring prices down.

Addressing a panel on manufacturing at the Cambodia International Business Summit, Sok Chenda Sophea, secretary-general of the Council for the Development of Cambodia (CDC), said the Kingdom’s massive investments into hydropower, and to a lesser extent coal, were reducing the demand on imported electricity. As more projects come online, and more transmission lines are built, industrial consumers should start to see a difference in their electricity bills.

“Cambodia used to import a lot of electricity from Vietnam, but now we have people on the ground investing in transmission lines from power generation sources,” he said. “For example, Bavet will be fully connected to the national grid by next year.”

Sophea expressed confidence that the Kingdom was on track to be fully energy sufficient by as early as next year.

“Last year we were importing 28 percent of our electricity consumption,” he said. “This year it should fall to 25 percent, and we hope by 2018 or 2019 we will be self sufficient when the power projects come online.”

Chea Serey, director-general of the National Bank of Cambodia (NBC), described high electricity costs as the Kingdom’s “biggest challenge on a macroeconomic level”, adding that until prices drop to a manageable level, Cambodia will struggle to be a competitive manufacturing destination among its regional peers. 

However, she also expressed optimism that energy development schemes would soon tip the balance towards surplus generation.

“Our energy prices are right now the highest in ASEAN, but I am confident that in five to 10 years it could be lowest in the region,” she said.

Hiroshi Uematsu, CEO of the Phnom Penh SEZ, a private industrial park with nearly 80 tenants, expressed frustration with the high cost and poor reliability of grid energy. He said the government had made little headway in bringing electricity costs down and private sector investments appeared to be the only immediate solution.

“In our SEZ [special economic zone] we are trying to negotiate with the state-owned electricity supply company to let us build our own substation,” he said. 

“Right now, we are still facing outages and power cuts, and if it was not for Minebea making a large investment, we would not [have the leverage] to improve our electricity problem.” 

Minebea, a Japanese electronics manufacturer, has planned to invest up to $400 million by 2019, with company officials previously highlighting that a secure energy supply agreement was essential to the expansion.

Uematsu added that if the national grid was eventually reliable, these high investment costs and case-by-case negotiations with the state would not be necessary. 

Piet Holden, founder and CEO of Pactics Group, a garment manufacturer based in Siem Reap, took a harder line against government red tape and what he described as a lack of support to lower electricity prices or encourage private sector solutions.

“A perfect example is that we tried to use renewable [energy], wanting to import 280 solar panels,” he said. 

“It took us 18 months to get approval from the CDC to import them with duty-free exemptions. That was 18 months where we couldn’t fully implement our investment into renewables.”

Yet even with the panels in place, the company is still unable to generate a full return on its investment due to the absence of a feed-in tariff, a cashback scheme that pays renewable energy producers for surplus electricity they supply to the grid.

“[The solar array] produces 30 percent of consumption, but we are not allowed by the government to feed that electricity back into the grid over the weekend,” he said. 

“That is perfectly good electricity that goes to waste.”