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Universal Access to Energy in ASEAN: the Cases of Cambodia and Lao PDR

18 October 2016
This article was originally submitted as ANNEX Document of the G20 Energy Ministers Meeting, China 2016.

The Association of Southeast Asian Nations (ASEAN) comprises of ten ASEAN Member States (AMS) within Southeast Asia. Despite disparity between the economic level and performance among the Member States, ASEAN is considered one of the fastest growing regions in the world. ASEAN has a combined total land area of 4,435,618 km2 which is inhabited by more than 622 million people, of which more than 50% live in rural areas (2014). Having quickly recovered from the 1997 economic crisis, the region averaged GDP growth rates of 5.1% from 1990 to 2013. In 2014, ASEAN wide GDP at current prices was USD 2.6 trillion, equivalent to USD 4,135 per capita.

Providing citizens with access to electricity and modern energy is one of key goals under the ASEAN Plan of Action of Energy Cooperation (APAEC) 2016-2025 “Enhancing Energy Connectivity and Market Integration in ASEAN to Achieve Energy Security, Accessibility, Affordability and Sustainability for All”.

Over the last decades, AMS have made efforts, including the utilisation of their Renewable Energy Technology (RET) potential, to increase their respective electrification rates. The number of people without access to electricity today is still more than 100 million people, but it is a significant reduction compared to 190 million in 2005.

Rural Electrification Programme in Cambodia

Cambodia lies entirely within the tropics and is dominated by the Mekong River. The country’s total land area is 181,035 km2, of which approximately 49 percent is covered by forest, and inhabited by 14.8 million people (2014). In 2014, the GDP growth reached 7.1%, resulting GDP per capita $1,130. Cambodia has moved closer to lower middle-income status with resounding economic growth driven by solid performances in garment manufacture, tourism, paddy and milled rice, and construction. The Cambodia Socio-Economic Survey indicated that poverty in Cambodia fell dramatically between 2007 and 2012, from about 50% to below 20%.

In recent decades, Cambodia has focused efforts on the rehabilitation and expansion of the commercial energy sector to fulfil the need of economic growth. A priority goal of the government is to reduce poverty, and a key strategy for this is the development of sustainable and affordable energy supplies for all its constituents. The Royal Government of Cambodia has set an ambitious target to reach 100% of the village with certain type of electricity by 2020 (including battery power) and 70% of household connected with grid-quality electricity by 2030. This target is further detailed in the National Strategic Development Plan Update 2009-2013 and Rural Electrification Master Plan (REMP) with Ministry of Mines and Energy as the focal point. Presently, 62% of villages and 53% of households have access to grid quality electricity in Cambodia.

According to REMP, the total cost to electrify all villages is about US$ 427 million or US$ 490 per household with 872,000 households to be connected. A total of 272,000 households will be electrified in the off-grid areas by decentralized mini-grids and solar battery charging by the target year 2020. The gross investment costs will amount to about $147 million. The remaining villages will be connected through grid extension.

The Royal Government of Cambodia has issued a Royal Decree to establish a public institution the Rural Electrification Fund (REF). The objectives of the REF are to facilitate access to electricity infrastructure and provide a secure, reliable, environmentally safe, and sustainable energy supply of various types, at reasonable and affordable price. The Rural Electrification Fund (REF) is also part of the Renewable Energy Action Plan (REAP) with the goal of providing financial support to achieve Cambodia’s electrification targets. Renewable energy plays a role in its program. Mini hydro plants and solar home systems are eligible to receive subsidies up to 25% of total investment costs. The International Development Association (IDA) and Global Environmental Facility (GEF) provide financial support to the REF. REF’s activities include:

  • Grant assistance of US$ 45 per connection (subsidy) to Rural Electricity Enterprises (REE) to increase household connections (the target of 50,000 additional connections is almost achieved) based on eligibility criteria such as location, distance from national grid, licenses, price/kWh, etc. An association of REEs has been established (2011) to collect information from REEs (possible improvements, challenges, etc.) and to spread technical knowledge and training information;
  • Financial support to the 12,000 Solar Home System (SHS) rent-to-own program: around US$ 3.85 million of which US$ 1.2 million is grant and US$ 2.65 million is loan;
  • The repaid loans will be used for the project “Power to the Poor”, to provide poor households a US$ 100 soft-loan (no interest) to pay for the grid connection. This loan should be paid back over a two-year period with the monthly electricity bill. Households that are not connected one year after the construction of the grid, or households headed by females, are considered for this loan.

REF has started a pilot project in Kampong Speu with the first US$ 10,000 repaid from the 12,000 SHS rent-to-own programme. The target of this pilot project is 1,000 households. REEs are identifying the families and managing the loans with the customers. Under this initiative, an ice husk gasification power system has replaced a diesel generator and is in operation since December 2008. The system consists of a rice husk gasifier, a 50 kW 100%-gas engine generator, a 150 kW dual gas/diesel engine generator (modified) and an existing mini-grid to supply electricity to 1,300 households in the village. With the new technology the electricity generated is sold at US$ 0.58/kWh (36% lower than electricity price from diesel generators). The electricity production cost was estimated at US$ 0.29/kWh. REE reported that the biomass gasification project would make a profit of up to US $64,000/year and investment costs can be paid back within less than 1.5 years.

Rural Electrification Programme in Lao PDR

Lao People’s Democratic Republic (Lao PDR) is the only land-locked country in ASEAN. It has a border with five countries namely China in the North, Vietnam in the East, Cambodia in the South, Thailand and Myanmar in the West. Lao PDR has a total area of 236,800 km2 and about 70% of that is covered by mountains. National Statistics recorded that in 2014, the GDP per capita reached USD 1,720 as the consequence of 7.65% growth of GDP in the same year. Lao PDR is considered one of the fastest growing economies in the East Asia and Pacific region.

The Rural Electrification Master Plan (REMP) in Lao PDR sets a National Electrification Target of 94.7% on household basis by 2020. This will be achieved through on grid systems, i.e. grid extension (90.9%) and by off-grid systems using mini/micro hydropower and Solar Home System (SHS) (3.8%). The electrification ratio in Lao PDR in 2014 was around 88%.

The rent-to-own Solar Home System (SHS) project is implemented in 16 provinces in three phases: phase 1 (1999-2004), phase 2 (2004-2009) and phase 3 (2009-2014). By the end of phase 2, a total of 15,000 SHSs had been installed. Each rent-to-own SHS consists of solar kit (i.e. solar panels, outdoor wiring, mounting pole and charge controller) and house kit (i.e. indoor wiring, saving lamps, car battery and battery box). The project costs are financed by grants (20%),  soft loans (50%) and  down (upfront) payment (30%) by the households. The project is managed by the Village Off-grid Promotion and Support (VOPS) office established by the Ministry of Industry and Handicraft (MIH) (now Ministry of Energy and Mines). The installation, operation and maintenance of SHSs are performed by trained Village Electric Managers (VEM). Newly-formed or existing Local Electricity Service Companies (ESCO) are responsible to support the VEMs during installation and O&M. A Village Electricity Advisory Committee (VEAC) is formed in each target village and plays an advisory role for the village electrification strategy and implementation. VOPS owns the SHS during the renting period of 5 or 10 years, and the household will own the SHS at the end of renting term. The households pay monthly rental fees, ranging from USD 2.0-5.0 for 5-year, or USD 1.0-2.5 for 10-year repayment period, depending on the size of the SHS (20 to 50 Wp). The household is also responsible for the cost of replacing house kit’s components, which is estimated at USD 6.0-14.0 per year depending on whether the system is used carefully or not. The collected monthly rental fee is used by VOPS for paying the costs of services provided by VEM, VEAC and ESCO and for repaying the soft loan.

Lessons Learned 

The success of off-grid rural electrification approaches with RET in ASEAN can be attributed to a broad range of influencing factors: geography, availability of natural resources, and reliability of technical solutions, financial feasibility, as well as human capacity and dedication of individuals. These factors vary greatly between countries and framework conditions are comparable only to a limited extent. However, from previous experiences, we have identified key factors contributing to successful rural electrification approaches; namely (i) a stable and predictable policy framework; (ii) reliable support policies and a feasible financing mechanism; (iii) a sustainable project setup and business models; (iv) the application of appropriate technology; (v) the due consideration of socio-economic aspects and community involvement; and (vi) continuous training and capacity building.

However, the ASEAN region is still facing many challenges regarding rural electrification. Increasing exchanges of experience and innovative approaches between the AMS and beyond is essential and  high on the agenda of the ASEAN community.

  • The ASEAN Centre for Energy (ACE) conducted a study to assess the experiences and lessons learnt from past and ongoing off-grid rural electrification projects in various AMS. Based on its finding under the publication “ASEAN Guideline on Off-grid Rural Electrification Approaches” in 2013, there are a number of key experiences that could be considered in the planning and implementation of off-grid rural electrification using renewable energy technologies. This includes: A clear legal framework for private investment in off-grid rural electrification needs to be established in order to mobilize the private sector to become actively involved in this market.
  • A central institution/agency shall be created to coordinate the planning and implementation of all off-grid rural electrification activities in a country.
  • The public sector should use its resources to finance off-grid projects in poor rural areas where business models can hardly be established and projects are less or not profitable. Wherever possible and economically viable, priority should be given to the private sector to get engaged for investment and project development.
  • The business model selected for an off-grid rural electrification project shall have some degree of flexibility and fit the specific conditions of the community implementing the project. The business model may have to be modified along the way in order to cater to the actual developments and changes in the project structure during project implementation.
  • Whatever is the selected business model, care should be taken to ensure that end-users have access to quality electricity services at affordable prices.
  • The project design must not be technology driven. Technology choices are to be based on practical considerations. A cost-benefit analysis of different technology options (including grid extension) should be carried out to determine the least-cost solution.
  • Productive and institutional applications of electricity not only help to improve standards of living (e.g. job creation, better health care) but also increase the economic attractiveness of the off-grid power project. The project developers therefore must consider initiating or enhancing productive activities as they significantly increase the sustainability of the project.
  • Maximizing the awareness and involvement of the benefitting community in the early stages of the project cycle, especially during the project assessment phase, is vital to the success of off-grid project implementation. Key activities include public awareness campaign, regular meetings with community leaders and focus-group meetings.
  • Capacity building and training to develop local capacities in design, implementation, management and Operation and Maintenance (O&M) are essential for the success of off-grid rural electrification projects. Therefore, adequate resources should be devoted to developing local capacities. (BS. Photo credit:  ASEC)