In Cambodia, a Cry for Small-Scale Subsidies

November 2, 2009
By Simon Marks
The New York Times

A $20 solar-powered lamp could benefit millions of rural Cambodian residents, but most still can’t afford it. Subsidies, its makers say, are sorely needed. (Kamworks)

Generous subsidies for businesses and tax incentives for consumers are needed if developing countries like Cambodia are to promote renewable energy alternatives — particularly in rural areas — a conference in Phnom Penh on green energy was told last week.

At the moment, conference participants complained, such incentives are sorely lacking.

“Cambodian investors have low investment capital,” said Rin Seyha, the managing director of SME Renewable Energy, a Cambodian-based renewable energy investment firm. Unlike neighboring Vietnam, there is very little in the way of tax incentives and subsidies on loans for renewable energy companies, he said.

Jeroen Verschelling, the director of Kamworks, a Cambodian-based solar energy company, said consumers who wish to use more environmentally friendly energy sources are often forced to ask for assistance from microfinance institutions that tend to provide loans with extremely high interest rates.

Mr Verschelling complained that large scale coal plant and hydropower projects are able to easily secure financing. For smaller, renewable projects, “it is much harder to do that,” he said.

According to the environmental group Geres, 80 percent of Cambodia’s energy consumption comes from biomass, mostly from burning timber. The United Nations Development Program estimates that just 20 percent of the population has access to the national power grid.

Small, renewable energy developers say this means most energy-sector financing is directed at projects that benefit only a fifth of Cambodia’s residents.

Kamworks has recently launched a basic solar powered light for people in rural areas. The lamp, which retails for about $20, needs direct sunlight during the day and at night runs for about 12 hours on its lowest setting, or about three hours on its highest.

“To pay $20 at once is a huge amount for local people,” said Patrick Kooijman, the marketing director for Kamworks, who added that the lamps really ought to be given away for free. “I think that the private sector getting involved in things like this is the only way it really can work in the long term.”

Meanwhile, Margaret Ryan, an energy consultant for Khmer Solar, which specializes in solar power installation, said that despite government efforts to slash import tariffs on equipment used for renewable energy sources — tariff rates on imports have been reduced from 35 percent to seven percent on items such as solar panels and battery chargers and have been altogether eliminated for items such as wind and hydraulic turbines — the Cambodian consumer is generally unable to afford the costs of installing solar panels.

“Even if labor is very inexpensive, it is still costly,” she said. “Any expense is too much expense.”

In order to reduce prices, Khmer solar is encouraging Cambodians to install the equipment themselves by disseminating simple installation leaflets and employing operators who can troubleshoot for clients with technical issues.

But these efforts are merely a drop in the pond when trying to make any major inroad into Cambodia’s energy sector.

“The next obstacle to overcome will be a workable plan for a subsidy,” Ms. Ryan said. “It would be wonderful if the government subsidizes the poorest to get solar systems. But I doubt it will happen.”