Improving Yields Through Green Energy

By the IAP Team, with contributions from Heng Sun, Sreyna Khom, Benjamin Cok, and Corjan van der Jagt

Solar Green Energy (SOGE) Cambodia Ltd is a small family business that sells high quality solar products (on- and off-grid systems, hybrid systems, mini grid systems, street lighting, and water pumps) and provides additional services such as installation, maintenance, and repair for customers in Cambodia. SOGE was awarded with IAP co-funding for their inclusive business model innovation on solar-driven irrigation services for small-scale rice farmers. IAP selected SOGE’s innovation because of the potential for the business model to be replicated in other geographies, either by SOGE or others. The model promises to bring economic and social benefits for rice farmers. The model will result in increased amount of farmland under year-round irrigation leading to higher and more reliable yields, and in lower production costs per hectare resulting in higher profit margins. Of major significance for smallholder farmers is the substantial reduction in variability of yields and increase in income. Additionally, more produce is available for home consumption, thus contributing to increased household food security.

SOGE’s overall impact target is to reach 350 smallholder rice farmers as customers of their irrigation service. Early August 2021, the company submitted their first milestone report. In short, completed activities relate to recruitment of staff, procurement of assets, building of solar trackers, and conducting a face-to-face marketing meeting with 200 farmers on the service offer.  In addition, SOGE successfully conducted a survey by phone interviewing 75 farmers that participate in the irrigation scheme. By December 2021, 630 hectares of land was under irrigation (out of a target of 1,000 hectares of irrigated rice cultivation).

The survey results, verification visits, and frequent engagements with SOGE allowed us to get an improved understanding of the story of expected change for smallholder rice farmers. The value proposition to farmers as we understood it initially mainly had to do with doubling the number of rice harvests in a year and thereby increasing the annual income. However, as our interactions with the grantee intensified, new insights were gained about the value proposition of the irrigation service model.

SOGE is building its first solar-powered water pumping station at an existing rice irrigation system, where it replaces a diesel-powered water pumping station (see figure 1). The station pumps water from the river into the main water canal (which is 7.6 meter higher). From there farmers pump it to their fields using smaller pumps. Before the diesel-powered station was replaced by SOGE, most farmers were able to harvest twice a year if water was available. But they did not get the same value for money. The high operation and maintenance costs, as well as the frequent breakdowns of the diesel pump, made its service to farmers erratic and unpredictable, resulting in insufficient water levels in the main canal to guarantee the required amount of water supply for year-round irrigation of all hectares intended for rice cultivation. This was confirmed through a survey where many farmers indicated that the unstable water supply was limiting their annual rice production. Thus, we learned that SOGE’s service model plays an important role in removing the uncertainty of unstable water supply in rice production, making smallholders more resilient to droughts.

By December 2021, the initial solar-powered water pumping station located in Kampong Cham Province has been operational for only three months and already provides a consistent supply of water to the main canal for 134 contracted farmers who paid an initial fee (revenue of about EUR 16k). The first rice harvest under the new system is expected in March 2022. SOGE’s reliable service is grounded in a grid-connected solar hybrid system with low operational costs, low maintenance costs, and availability of in-house skilled technicians. The station currently runs more than 60% on solar energy, complemented by grid electricity. Diesel price hikes do not significantly endanger profitability to operate the water pumping station any longer.

A key role for IAP is to support and steer the company towards scaling its customer base to maximize social impact while ensuring commercial viability. After IAP raised questions on the limitations of serving customers in one site only, SOGE accelerated their search for new areas where their model could be replicated. Recently, three new locations were identified: Kampong Krasang Ler (62 farmers), Kampong Krasang Krom (65 farmers) and Boeung Chouk community (101 farmers), see figures 2 to 4, respectively. In these farming communities, smallholders also suffered from unstable water supply and fluctuating irrigation costs from the use of diesel pumps.

SOGE remains committed to building 50 solar trackers at the site in Kampong Cham Province to ensure the required volume of water will be pumped as planned. IAP has allowed SOGE to allocate some of the solar equipment (sun trackers) from the original site for use at the other sites, with the understanding that these sun trackers will be replaced at a later stage and returned to the Kampong Cham site for completion of the site there. SOGE will be able to finance this additional investment in the new sites through increased revenue generation from higher numbers of paying customers across multiple sites. The IAP grant contribution to the project budget (EUR 199,740) remains unchanged.

To further support SOGE’s expansion plans, the IAP team procured consultancy services to assess the potential for scaling up the solar-powered water service provision model across other parts of Cambodia. Results of this market study are expected in 2022 and will provide SOGE with the necessary market information for developing scaling up plans. Besides, SOGE is currently undertaking a cost-benefit analysis of different water storage options to decrease the use of grid electricity during cloudy periods and at night. Such options will improve the commercial viability of the solar-powered station. All these efforts – the expansion to three more sites, the additional information on market potential, and the improved commercial viability – should convince investors to finance SOGE’s near-future capital needs.