Lack of Energy Efficiency Impedes Industrial Profits

A mixture of poor energy efficiency, high operating costs and concerns over Cambodia?s environmental footprint is leading some to look deeper into how the country?s industrial sectors that are heavily energy dependent can save on costs and boost their productivity.

As several sectors?namely garments, rice and rubber production further expand into foreign markets, it is becoming increasingly evident that Cambodia must become more energy efficient in order to compete with neighboring countries who currently operate at a much more efficient level.

To study the matter, the UN Industrial Development Organization is collaborating with the ministries of environment and industry, among other partners, to study ways local industries can improve their energy efficiency.

?Nowadays one has to compete globally,? said Permod Kumar Gupta, chief technical adviser for UNIDO in Cambodia. ?We have to think in the coming years if we are not able to compete economically, environmentally and socially then difficulties will remain in how to compete with countries like China.?

Preliminary findings released last week show that total energy consumption in the garment; rubber, brick and rice sectors is 14.5 million gega joules per year?equivalent to about 360,000 tons of oil and responsible for emitting one million tons of greenhouse gas emissions, according to the UNIDO.

But results also show that Cambodia has a realistic potential of saving from 20 to 42 percent of its current energy consumption.

Low cost options ? improved air filtration for combustion and energy saving light bulbs for example?can reduce energy consumption by the equivalent of 72,000 tons of oil, or 200,000 tons of greenhouse gas emissions. Technology based options, findings show, could save twice that amount, the UNIDO said.

Presently, Cambodia is at a major disadvantage as the amount of energy required to manufacture and process raw materials is way beyond levels needed elsewhere in the region.

According to Mr Gupta, the average amount of energy required to produce one kilogram of brick in Cambodia is eight mega joules compared to just two mega joules in China and Vietnam. Part of the reason for that, he said, are high levels of thermal loss from poorly constructed brick kilns.

Rice milling operations?an area of the Cambodian economy attracting interest from investors?also suffers from poor energy efficiency. Mr Gupta said that whereas in Thailand it takes 25 kilowatt hours of energy to process one ton of rice, Cambodian rice millers need 60 kilowatt hours, or 20 liters of diesel fuel.
Installing energy efficient solutions is ?critical,? said Scott Lewis, a partner with the private equity fund Leopard Capital, which has plans to invest in a rice milling operation in Battambang province.

?Electricity is one of your biggest costs by far. If your electricity costs are double or more than Thailand and Vietnam, how can you be competitive?? he asked.

Mr Lewis said that despite heavy down payments on better technology, the amount saved in energy expenses pays dividends in the long run, with energy costs in Cambodia one of the highest in the region.

Cambodia?s garment sector is also in desperate need of increased energy efficiency with the average energy cost to produce a ton of garments at $560, according to a November report by the International Finance Corporation, the private wing of the World Bank. In some cases factories were calculated to spend more than $1,700 to produce the same amount, according to the IFC.

Nearly 50 percent of all energy consumption in Cambodian garment factories comes from burning wood as fuel, which often combusts poorly, releasing soot, or black carbon in to the atmosphere.

?In terms of energy efficiency, the sectors that are using biomass are particularly wasteful,? said Mr Gupta.

Rin Seyha, managing director of SME Renewable Energy, said his company had been approached by a number of garment factories looking to use gasification?which converts carbon based materials into gas fuel. But the technology available in Cambodia is still insufficient for enterprises of such a large size as garment factories, he said.

Very often the engines needed to run a gasifier large enough to support a garment factory are not available in Cambodia and, therefore, prove too expensive for businesses to import.

In 2009, Mr Seyha?s company sold just one gasifier to a garment factory and so far in 2010 one more deal has been struck.

Efforts to become more energy efficient are still in their infancy and much work remains to convince investors that spending on energy-saving measures is the way to go.

Experts say that improving energy efficiency in industrial sectors could also refine their environmental image as consumer conscience vis-a-vis the environment takes root in terms of purchasing decisions.

Profit orientated private investors often stall at the first hurdle in any attempt to become energy efficient as the costs involved are considered as being too high, said Yohanes Iwan Baskoro, country director for French environmental NGO Geres.

Investors need to be educated that improved technology can achieve a profitable return for companies in the long run, he said, adding that as well as fiscal incentive from the government, the banking sector also needs more encouragement to provide loans for those in industries looking to become more energy efficient.

?If we can?t show that there is profits in it for them I don?t think they will participate,? Mr Baskoro added.

Sourced = The Cambodia Daily