Solar power for poor rural households in ASEAN: Lessons from Cambodia

Solar power for poor rural households in ASEAN: Lessons from Cambodia

In an innovative initiative to increase access to electrical power, the
Royal Government of Cambodia (RGC) has adopted a rural electrification
master plan that promotes the use of Solar Home Systems (SHS) to increase
access to electricity in Cambodia's rural areas.

As a result of a long period of underinvestment in the electricity sector,
the proportion of households with access to electricity in Cambodia stood at
just 34 percent in 2013, a bare increase from the figure of 31pc recorded in
2012.

To address the adverse consequences of high electricity costs, the rural
electrification plan aims to ensure that 70pc of Cambodian households are
connected to the national electricity grid by 2030. In the medium term, the
plan promotes the development of mini-grids that use small hydropower and
solar PV systems, including SHS, to provide access to electricity in rural
areas.

Under a five-year project first implemented in 2008 through the World
Bank-funded Rural Electrification Fund (REF), around 12,000 households
installed SHS. Initially, the rate of uptake of these systems by rural
households was very low. This was mainly due to the fact that at first, the
project required rural households to pay the installation cost upfront, with
these costs amounting to US$ 260 for a 30 Watt peak system and US$333 for a
50 Watt peak system. Many poor households were unable to afford these costs.
Thus, after five years, when the cause of the low rate of uptake was
identified, a new business model was adopted. Under the new model,
households were able to pay on the basis of a daily rate, spreading their
costs across time. This new model resulted in a rapid uptake of the system
towards the end of the project, which terminated in 2012. Following the
termination of this project, in the period from 2014 to 2015, under the
management of Electricity of Cambodia (EDC), the REF sold and installed
13,240 50 WP SHS to rural households in remote areas.

The lessons learnt from Cambodia's experience could be valuable for a number
of other countries and communities within ASEAN, where approximately 134
million people still do not have access to regular supplies of electricity.
While at 31.1pc, Cambodia's rate is the lowest amongst these countries, it
is closely followed by Myanmar, where the rate stands at 32pc. In addition,
the rate in rural areas stands below 50pc in the Philippines and Laos PDR.
Lack of access to electricity has a negative impact on human development,
affecting health and education. It also constrains economic activity and can
exacerbate environmental issues.

In fact, Cambodia recorded significant success in promoting SHS, despite the
fact that the cost of this system in Cambodia was relatively expensive
compared to the costs of similar systems elsewhere in the world. To better
understand why rural households accepted the system to the extent they did,
the Economic Research Institute of ASEAN and East Asia (ERIA) undertook an
analysis of the Levelized Cost of Electricity (LCOE) provided by SHS and
compared to its cost to the current electricity price in rural Cambodia. The
study found that the current cost of electricity in Cambodia is very high,
ranging from $0.15/kWh in Phnom Penh to $1.00/kWh in rural areas. This might
explain the high level of acceptance of SHS, despite the relatively high
upfront costs of the system in Cambodia. The study found that LCOE of SHS
without any government subsidy is about 50pc cheaper than the current
electricity price in rural areas charged by electricity providers using
diesel engine. With a government subsidy of $100 per SHS unit, the LCOE of
SHS falls to about one third of the current electricity price in rural
areas.

The study proposed a number of recommendations that could be used to
increase the uptake in Cambodia or elsewhere in Asia where the system may be
implemented in the future. In particular, it found that the high initial
cost of installing SHS was a major barrier on acceptance. Thus, it is very
important to design an appropriate business model for rural households, such
as by charging a daily fee rather than requiring households to pay the whole
cost of installing the system upfront. It also emphasised the importance of
efficiency throughout the whole SHS value chain, from procurement through to
installment, to ensure that transition and system costs are minimised.

The study also noted that compared to SHS, mini-grids powered by solar PV
provided significant economies of scale, thus potentially offering lower
systems costs. Thus, the authorities should consider measures to attract
investments in these grids as a possible alternative.

Finally, the study noted that while these various systems had good potential
to enable an increase in the rate of electrification, particularly in remote
rural areas, the expansion of SHS and solar mini grid systems required that
local technicians and small business entrepreneurs had the appropriate
skills and capacities. Therefore, in order to ensure the success of programs
that emphasise the use of these systems, measures to build these capacities
are essential.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
http://thebodia.com/cambodia/cambodia-news/solar-power-for-poor-rural-househ
olds-in-asean-lessons-from-cambodia-myanmar-times/

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com