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BRI Hydropower Projects See Cambodian Electricity Costs Tumble

With the Lower Sesan Two Dam just the latest Cambodian beneficiary of BRI funding, further collaborations await.

Photo: China’s BRI-motivated largesse marks a new economic dawn for Cambodia. (Shutterstock.com)
China's BRI-motivated largesse marks a new economic dawn for Cambodia.
Photo: China’s BRI-motivated largesse marks a new economic dawn for Cambodia. (Shutterstock.com)
China's BRI-motivated largesse marks a new economic dawn for Cambodia.

As the waters of the Lower Sesan Two Dam began to rise last month, it marked the completion of just one of the many Belt and Road Initiative (BRI) projects currently underway in Cambodia. While China and Cambodia have a long history of co-operation, the BRI – the mainland's ambitious infrastructure development and trade facilitation programme – has taken this to new heights, particularly with regard to power generation.

Sesan Two is just the latest in a series of hydropower projects, largely built in collaboration with China, that have transformed Cambodia's energy landscape. The country has long suffered from a severe electricity shortage and, with its power generation largely fueled by diesel oil, its per watt prices have been among the world's highest. With its booming manufacturing economy sending demand growing by 18% a year, a large-scale hydropower development plan was seen as a priority as far back as 2003.

Even in those pre BRI-days, China recognised the strategic importance of nurturing the economic development of its near-neighbour. As a consequence, mainland businesses have long-bankrolled the development of Cambodia's hydropower sector.

In 2006, Sinohydro invested about US$280 million in such projects, while Sinomach and China Gezhouba jointly provided funding of around $540 million in 2008, with Huadian Power adding in another $580 million in the same year. More recently, China Huaneng, via its HydroLancang subsidiary, injected $410 million into the Sesan Two project. The outstanding costs of this $977 million project were then jointly met by Vietnam's EVN International and the Royal Group, one of Cambodia's largest investment-oriented conglomerates.

At present, seven of the hydropower facilities already online feed into the country's national grid, with a further two installations servicing more local power requirements. By the end of the year, when it is fully-operational, Sesan Two will have an annual capacity of 400MW, making it the country's largest single hydropower source.

As a result of the programme, electricity generation has soared across the country, sending prices tumbling. In 2014, when the hydro plants of Stung Tatai (246MW) and Lower Stung Russei Chrum (338MW) plants came online, the country's total level of hydropower-sourced energy soared by 82%, rising from 1,015.54 million kWh in 2013 to 1,851.60 million kWh. Despite such massive steps forward, the hydropower programme is still seen as in its infancy, with many more installations planned.

Despite the clear benefits to the country in terms of more affordable and more readily-accessible power, the hydropower programme has not been without its critics. Indeed, the Mekong River Commission (MRC), a regional advisory body, has warned that any further expansion of the sector could actually impair Cambodia's economic development.

More specifically, the MRC sees further hydropower developments as likely to result in a 70% drop in lake and floodplain fisheries production across the Mekong basin areas. This, it says, could see Cambodia's GDP drop by between $3 billion and $5 billion for the period 2020-2040.

On top of such dire prognostications, others have maintained that the economic argument in favour of further hydropower development may actually be fundamentally flawed. In particular, the steady decline in solar power costs – a technology that has a far lower environmental impact – is seen as making it an increasingly viable alternative.

Perhaps sensing a likely change in national and international sentiment on this front, last December saw China's Hengtong Optic sign a $200 million BRI-related deal with the Inner Renewable Energy (Cambodia) Company. This will see the businesses jointly develop two solar-powered 100-MW generating plants.

Geoff de Freitas, Special Correspondent, Phnom Penh

Content provided by Picture: HKTDC Research
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