The Draft Environment and Natural Resources Code
We expect that once the Environmental Code is adopted, it will have a major impact on Cambodia’s regulatory framework, especially for sustainable energy. The draft Environmental Code currently provides rights and incentives that are very promising to the solar energy sector, including:
- a right to connect to the national grid for companies and consumers using solar energy;
- a requirement to develop regulations on net metering;
- the establishment of a one-year pilot for a feed-in-tariff system, in which the government offers a fixed rate for solar energy fed into the grid; and
- up to a 20% reduction in profit taxes for any company generating at least 20% of its own energy through sustainable sources.
The Solar Regulation
The Solar Regulation is not as forward-thinking as the Environmental Code, and does not provide similar incentives for solar energy. Instead, the Solar Regulation provides a regulatory framework where previous regulation was absent or unclear, and is therefore a welcome development.
The Solar Regulation addresses two types of solar systems, namely solar system projects that are a source to the national grid, and solar systems of consumers that are connected to the grid, but do not supply to the grid.
Providing Electricity to the National Grid
A solar system project must be included in the Power Development Master Plan of the Ministry of Mines and Energy before it can be connected to the grid (Article 3). If the project is not included in the Master Plan, the project must be evaluated by the Ministry of Mines and Energy, and Electricitie du Cambodge (EDC), which operates the national grid. If approved, the project will be included in the Master Plan.
The project’s investment and business conditions are subject to a project implementation agreement, but the regulation does not address this agreement in further detail. Lastly, the project must meet the technical standards and safety conditions in the Solar Regulation.
Any solar energy supplied to the national grid must be sold to EDC under a power purchase agreement (Article 4).
Consumers of Solar Power
Any legal person may operate a solar system for their own consumption if the system is not connected to the national grid (Article 5). In such a case, the person will not be bound by the technical standards and safety conditions in the Solar Regulation.
However, if a consumer wishes to operate a solar system while connected to the national grid, the consumer must be categorized as either a “big” or “bulk” consumer (Article 5). The thresholds for big and bulk consumers are set out in the Regulations on General Conditions of Supply of Electricity in the Kingdom of Cambodia, 2003:
- Big consumers are those whose power is supplied at above 380 volts up to 22,000 volts
- Bulk consumers are those whose power is supplied at above 22,000 volts
Subject to the approval of EDC, big and bulk consumers may connect their solar systems to the national grid; however, any solar energy generated can only be used for their own consumption. Feeding solar energy into the national grid as a consumer is only allowed in exceptional cases and is subject to written agreement from EDC and the approval of the EAC.
Unfortunately, the Solar Regulation fails to incorporate the incentives of the draft Environmental Code and only allows large-scale solar initiatives to supply power to the grid in exceptional cases. However, the Solar Regulation clarifies that solar initiatives not connected to the grid are not regulated under the Solar Regulation, which provides individuals and companies freedom to use solar energy.
Although the Solar Regulation fails to address a number of key issues for the development of the solar industry, such as feed-in tariffs and net metering, it does provide clarity as to the regulatory framework for large-scale initiatives, and will hopefully spur investment in solar projects in Cambodia.
It is expected that the adoption of the Environmental Code and its implementing regulations will provide stronger incentives for investment in solar energy, including for smaller-scale projects.