By:
• Sao Phal Niseiy

• November 2, 2024 , 7:00 PM

PHNOM PENH — Experts have called for the promotion of blended finance and active stakeholder coordination to expedite clean energy transition in the country.

During a panel discussion on financing Cambodia’s energy transition held on the sidelines of Cambodia’s Clean Energy Week on Oct. 31, experts pointed out the challenges facing Cambodia’s clean energy transition, which include the lack of funding and capacity for clean energy.

On the financing issue, Hanh Le, CEO of the consultancy firm Empacte, cited Cambodia’s Power Development Master Plan 2022-2040, noting that the country will need between $11 billion and $60 billion for energy transition by 2050.

However, only around $600 million has been spent on energy investment, indicating huge financing gaps in the transition toward clean energy, she said. More importantly, she added, Cambodia faces many challenges as to boosting energy investment, and two essential barriers exist, one related to the renewable energy policy. 

“That is, we see the lack of policy incentives and the low returns for such a project with the lack of policy transparency,” Le said. Another barrier is the financial market, which has unfavorable financing terms offered on the country’s market, she said.

“These include short-term tenants and high financing costs,” Le said. “This increases the project cost and reduces project returns, which do not match the risk-return expectations of private investors’ high financing cost.”

In addition to the two barriers, Le also echoed that the challenges investors have encountered in Cambodia encompass other risks, such as political risks related to policy consistency, technology, transmission, off-taker credit, and capital market risks.

Supporting blended finance and closer coordination: a key
Regarding solutions, Le suggested focusing on blended finance, which can also enhance returns and lower project costs, to minimize such risks.

“Though many types, blended finance can be a mix of private investment equity plus public funding instruments to address the risk of the project,” Le said, pointing out that scale-up will require a strong government’s role.

“This is because [the government] can provide policy leadership, including incentives and complete energy investments in enhancing transparency to attract international investors.

“In addition to that, it is essential to give capacity to local developers and banks,” she continued.

No Lida, partner of the United Nations Development Programme (UNDP) and CEO of Credit Guarantee Corporation of Cambodia (CGCC), also spoke of the challenges Cambodia has faced when accelerating the clean energy transition, recognizing that the financial gap remains the biggest one.

According to Lida, enhancing coordination among agencies and partners working on green and clean energy will significantly support and accelerate Cambodia's transition to clean energy.

“What I see is a lack of coordination regarding how we mobilize all these resources together and address and support clean energy,” Lida emphasized, pointing out that there are clean and green energy projects here and there. “But what we can do is to develop good coordination among the agencies, and we can bring the results together to address challenges and promote investment together.”

In addition to finance and coordination, Le also stressed the importance of building technical capacity among local institutions and people involved in clean energy so that they can move faster. “It does take time, and it requires institutions with resources, readiness, and technical capacity to do that,” Le pointed out.

Building capacity among local institutions will require an ecosystem that gains support from different stakeholders, such as multilateral organizations, international project developers, and international investors, Le said. “They need to work within the local ecosystem, with the local developers and banks to build that capacity,” she added.