Mongolia: Energy Efficiency and Urban Environment Improvement

Sovereign Project | 46343-001

Summary

The proposed project will upgrade the electricity transmission and distribution networks in and around Ulaanbaatar, thereby improving energy efficiency, reducing transmission and distribution losses, and reducing emission of greenhouse gases and other air pollutants from existing power plants in Ulaanbaatar. The project will also facilitate financial closure of an ongoing combined heat and power (CHP) plant plant number 5 (CHP 5) through a public private partnership (PPP) model that the Asian Development Bank (ADB) has been supporting. The components of the project include (i) upgrading the electricity transmission and distribution networks; (ii) computerizing the system at load dispatch center, transmission, and distribution level; and (iii) capacity building.

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Consulting Notices

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Project Name Energy Efficiency and Urban Environment Improvement
Project Number 46343-001
Country Mongolia
Project Status Proposed
Project Type / Modality of Assistance Loan
Technical Assistance
Source of Funding / Amount
Loan: Energy Efficiency and Urban Environment Improvement
Ordinary capital resources US$ 105.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Knowledge solutions
Partnerships
Private sector development
Sector / Subsector Energy - Electricity transmission and distribution
Gender Equity and Mainstreaming No gender elements
Description The proposed project will upgrade the electricity transmission and distribution networks in and around Ulaanbaatar, thereby improving energy efficiency, reducing transmission and distribution losses, and reducing emission of greenhouse gases and other air pollutants from existing power plants in Ulaanbaatar. The project will also facilitate financial closure of an ongoing combined heat and power (CHP) plant plant number 5 (CHP 5) through a public private partnership (PPP) model that the Asian Development Bank (ADB) has been supporting. The components of the project include (i) upgrading the electricity transmission and distribution networks; (ii) computerizing the system at load dispatch center, transmission, and distribution level; and (iii) capacity building.
Project Rationale and Linkage to Country/Regional Strategy Mongolia has experienced rapid economic growth (11.5% in 2013) led by mining development. Electricity and heating demand has also been growing in Ulaanbaatar due to rapid urbanization and more economic and commercial activities. But due to the unavailability of new power and heat plants, this demand is largely unmet and suppressed. As a result, electricity consumption in the central energy system, which covers Ulaanbaatar, other major cities, and mining development areas, grew modestly to 3,542 gigawatt-hours (GWh) in 2012, about 34% more than in 2003. It is projected that electricity consumption in the central energy system will increase to 4,422 GWh in 2015 and by 2025 reach 8,189 GWh, more than double the 2012 rate. The reserve margin of heat and power supply has become close to zero. To overcome the potential supply shortage, the government plans to build a new CHP 5 in Ulaanbaatar through a PPP model, and install additional capacity in the existing CHP 4. In parallel to the construction of the new CHP 5 and the capacity expansion at the CHP 4, associated downstream facilities e.g., power transmission and distribution networks managed by the Central Regional Electricity Transmission Company (CRETC) and Ulaanbaatar Electricity Distribution Network Company (UBEDC), and district heating networks managed by Ulaanbaatar District Heating Company have to be strengthened and expanded to be able to supply reliable electricity and heat not only to existing customers but also to as-yet unserved communities and entities in Ulaanbaatar. This will ensure that new investments in CHP plants will be optimally utilized. The existing power transmission and distribution infrastructure is inefficient and unreliable for lack of investment and maintenance, and is in urgent need of rehabilitation and upgrade. Electricity distribution losses totaled 19.6% in 2012, much higher than international best practice of about 5%. The average outage duration of the distribution network in Ulaanbaatar was 2,084.5 minutes per customer with more than 13 interruptions per customer in 2012, unacceptably high for any modern electricity distribution network. Improving transmission and distribution networks will reduce the power losses and thereby avoid additional consumption of coal and associated greenhouse gas emissions and pollutants; and improve the reliability and quality of electricity services to a population of 1.2 million, or 40% of the total population of Mongolia. In addition to the above investments, there is an urgent need to strengthen the capacity of the Energy Regulatory Commission (ERC), which is mandated to issue operational licenses to power plants, review and approve tariffs of licensees, and propose the end-user tariffs to the government. Since no new plants have been set up for a long time in Mongolia, the ERC does not have hands-on experience in setting electricity and heating tariffs that would allow an adequate return on new investments and promote energy-efficient practices in the sector. This is a critical capacity gap that may undermine investments in new plants. With the large proposed investments in two CHP plants, this need has become more urgent.
Impact Improved energy services in Mongolia
Outcome Improved efficiency of the power transmission and distribution systems in Ulaanbaatar
Outputs

Rehabilitate and expand power transmission and distribution systems

Develop institutional capacity of the ERC

Geographical Location
Safeguard Categories
Environment B
Involuntary Resettlement B
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services All consulting services will be undertaken in conformity with ADB's Guidelines on the Use of Consultant's (2013, as amended from time to time).
Procurement All procurement will be undertaken in conformity with ADB's Procurement Guidelines (2010, as amended from time to time).
Responsible ADB Officer Teruhisa Oi
Responsible ADB Department East Asia Department
Responsible ADB Division Energy Division, EARD
Executing Agencies
Ministry of EnergyGovernment Building XIV,Chinggis Avenue
Khan-Uul District, Ulaanbaatar, 17060
Timetable
Concept Clearance 12 May 2014
Fact Finding 24 Aug 2015 to 26 Aug 2015
MRM 01 Apr 2016
Approval 30 Jun 2016
Last Review Mission -
Last PDS Update 30 Mar 2015

Safeguard Documents

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Evaluation Documents

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