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Summary:
Cambodia is one of the fastest-growing economies in the world, sustaining an average real growth rate of 7.7 percent between 1998 and 2019.
As its economy blossoms and poverty rates drop, demand for energy is exploding both in the consumer and industrial sectors.
Given Cambodia’s lack of established energy infrastructure, there is a golden opportunity for renewable energy to be installed so Cambodia can start off relying less on fossil fuels as it grows.
Solar power is particularly well-suited to Cambodia due to four key factors:
Cambodia has relatively high amounts of daily sunshine at over 6 hours per day.
Solar power systems are easily scalable and non-destructive, unlike other technologies like hydroelectric dams.
Solar can be a highly reliable source of energy, particularly during dry seasons when power shortages frequently occur.
Electricity in Cambodia is currently rather expensive, making the cost savings from solar power highly compelling.
During ancient times, a variety of locations in Southeast Asia have been given the title of Suvarnabhumi, meaning “Golden Land”, referring to lands in the region which were famed for its fertility or prosperity.
Cambodia was one of the likely countries that, at some point, housed a city which was crowned with the title of the “Golden Lands”. But today, for those in the renewable energy sector, this name could soon take on a very different meaning – it houses a golden ray of opportunity for solar energy to be utilized to great effect as this country’s economy continues to chart upwards, and we are going to tell you why.
A Growing Economy with a Growing Energy Diet
According to the World Bank, Cambodia is one of the fastest growing economies in the world, having sustained an average real growth rate of 7.7% in its gross domestic product (GDP) between 1998 and 2019. Although GDP growth took a hit in 2019 with the economy contracting by 2.8% due to Covid-19, Cambodia displayed remarkable recovery, with GDP growth bouncing back to 4% in 2020.
This considerable growth rate has also reflected the country’s growing appetite for power, as both consumers and industrial sectors adopt modern comforts like Internet-capable electronics and manufacturing machinery due to the country’s people now possessing a higher level of buying power. Furthermore, as the economy expands, industries will demand more energy to increase the country’s output. This growing economy has caused demand for energy in Cambodia to skyrocket. To put Cambodia’s surge in power demand into perspective, the country’s forecasted demand for electricity is projected to increase by 1 Terawatt-hour yearly, which is enough electricity to power roughly 300 million homes. That’s a lot of power!
One key factor that is fueling this rapidly growing energy demand is Cambodia’s growing population. As more people are born and especially as the youth in the country are starting to use an increasing amount of electronics such as smartphones, energy consumption is expected to rise by 46% between 2020 and 2025, from 10.9 TWh to 15.9 TWh.
All these trends are great for Cambodia as a country, but looking at the nations with the largest economies in the world and our global concern about sustainable growth, the question has to be asked: would Cambodia be able to continue fueling its growth without threatening to cause an environmental crisis, unlike all other nations before it?
Fortunately, there are already changes in Cambodia that signal a brighter, hopefully more sustainable future.
Fast Fashion’s Quick Draw on Renewable Energy
Manufacturing is one of Cambodia’s largest contributors to economic growth, with textiles, garments and apparel collectively accounting for over 80% of Cambodia’s total exports and 16% of GDP. Currently, Manufacturing employs over 600,000 people, making this industry Cambodia’s biggest employer. However, despite its imperative role played in Cambodia’s economy, the Manufacturing sector is experiencing threats to its development due to its intensive use of non-renewable energy.
For example, many companies in Cambodia operate as contract manufacturers for multinational fast fashion brands such as Adidas, Gap, H&M, Marks & Spencer, and Uniqlo. Currently, Cambodia’s heavy use of fossil fuels for energy has drawn concern from said prominent brands, including clothing giants H&M, Adidas, Puma and Gap. Given the key importance of the manufacturing industry, it is vital for Cambodia to shift to renewable energy to drive economic growth, with reliable, sustainable, and affordable energy sources being crucial for the economic development of a rapidly expanding country such as Cambodia.
According to the International Renewable Energy Agency’s analysis on renewable energy usage by country, the commercial sector is already the largest consumer of renewable energy in Cambodia at 63%. With fast fashion brands leading the charge in consumer brands demanding for lower carbon footprints from contract manufacturers, this opens up opportunities for renewable energy to continue to grow in the highly promising commercial sector.
With Great Data, Comes A Greater Need for Energy
Cambodia’s electricity usage will also be fuelled by its constant technological advances, and in this regard, “data” is the word of the day.
According to the Digital 2020 report on digital trends in Cambodia, the number of Internet users in Cambodia increased by 1.3 million for a growth rate of 15% from 2019 to 2020. That same report outlined that almost 60% of Cambodians use social media, and the number of mobile connections in Cambodia in January 2020 was equivalent to 128% of the total population.
Cambodia’s digitalization is also extending to areas like digital currencies, evident with the recent announcement of Project Bakong, a blockchain-based payment system that was launched in late 2020. As of now, 78% of Cambodians do not have access to banking services. Project Bakong runs on Distributed Ledger Technology (DLT), and its promoted digital currency Riel will provide Cambodians with easy access to financial services like online banking for the first time.
These trends are relevant because all these connections to the Internet and cellular data means data centers and data networks would need to be installed. And these aspects of infrastructure are energy hogs, responsible for as much as 2% of the current world’s total energy consumption. Bakong, as a blockchain-based digital currency, would also have to contend with the massive energy usage of blockchain, which we discussed inour last blog article.
However, data centers are also a prime target to adopt renewable energy technology, because of the cost savings involved. For example, data centers in Singapore, another country in Southeast Asia with a hot and tropical climate, spend as much as 40% of their electricity consumption on cooling servers alone, which is why both data center operators in the country and the Singapore government are working together to implement solar panels and other renewable energy technologies.
This shows how renewable energy sources can heavily offset the energy costs and carbon emissions from new data centers which will inevitably appear in Cambodia as its digitalization continues to demand for more and more energy.
A Bright Future for Solar Power in Cambodia
Now that we understand how Cambodia will see a growing need for adoption of renewable energy, a natural question comes up: what kind of technology will be suitable for Cambodia?
Many, including the World Economic Forum, believe that solar power has the biggest potential for growth in the country, and there are four key reasons why.
First, with an average duration of sunshine at 6 to 9 hours per day, Cambodia’s climate is perfect for solar energy harvesting. Cambodia’s measured solar irradiation, a measure of how much solar energy is received over a square meter, has a very high daily average of 5 kilowatt-hours per square metre. In Phnom Penh, it gets even hotter, with a solar irradiation of over 5.6 kilowatt-hours per square metre. These levels are significantly higher than many other countries such as Germany, which was the first to start using solar power.
Second, solar systems are easily scalable, and do not carry huge environmental costs with them. Currently, Cambodia’s renewable electricity mix is dominated by hydro power. However, building dams can often destroy natural habitats and cause unwanted environmental changes, leading to Cambodia’s halting of the Mekong River dam project and instead looking to solar for renewable energy. Solar systems are scalable as they can easily be installed on available spaces such as roofs without taking up as much space as dams and wind turbines. Due to this easy implementation, solar home systems also provide an excellent solution for off-grid homes in Cambodia to have access to electricity, with 26% of Cambodia’s population already relying on off-grid solar systems.
Third, given Cambodia’s climate, solar systems can provide consistent and reliable access to energy, which will be essential during Cambodia’s dry seasons. Cambodia experiences regular energy shortages during its dry seasons as hydroelectric dams do not have enough water to generate reliable amounts of power. Solar power systems can be a reliable way to mitigate against this issue which frequently incapacitates small businesses in the country.
Lastly, solar energy is highly cost competitive due to high prices of electricity in the country. A large percentage of Cambodia’s electricity needs are met by importing it from nearby countries like Thailand, Myanmar, and Laos, which bumps up the cost of each watt in the country because transporting electricity is one of the biggest cost factors in buying power from other locations. In fact, electricity can be so expensive in rural areas of Cambodia, it can cost up to a shocking US $1.00 per kilowatt (the average American pays just US $0.13 per kilowatt). In stark contrast, solar power can cost between US $0.10 to $0.12 per kilowatt, which means some Cambodians can see as much as a 90% reduction in their electricity bill once the switch to solar is made.
For these reasons, electricity giants in Cambodia are looking to solar energy to take on a much larger share of renewable energy in Cambodia and expand solar energy investment by 12% by the end of 2022, and increase it up to 20% over the next three years.
Jumping on a Golden Opportunity
The data clearly shows that there is a huge potential for growth with solar energy businesses in Cambodia, which is why we at REANGLE are excited to be working with our latest partner for business development: Khmer Energy Solution.
We will be helping this early-stage solar energy solution provider in obtaining green financing, undertaking digital transformation, and launching digital marketing efforts with the goal of attracting investors and strengthening Khmer Energy Solution’s presence as a reliable supplier of solar energy in Cambodia.
As our project grows and more work is done, we at REANGLE will be proud to share our insights and what we have learned while working within Cambodia’s market. But until then, we shall make the most of the exciting golden opportunities to make a big difference in the Golden Land that is Cambodia.
About REANGLE
Our mission is to bridge the gap between deserving talent and opportunities, particularly for digital and green businesses in the Asia-Pacific region. Contact REANGLE for digital talent development, business development and transformation, or consulting for green companies.
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