Mongolia: Upscaling Renewable Energy Sector Project

Energy / Energy sector development and institutional reform

The proposed project will support to (i) deploy the distributed renewable energy systems in remote and less developed regions in Mongolia, and (ii) enhance capacity of local public utilities in investment planning, project management, and grid control for sustainable renewable energy upscaling in the targeted region. Upon successful completion, the project delivers clean electricity to 70,000 households while annually avoiding 82,789 tons of carbon dioxide emission.

The impact will be imported electricity reduced and energy security improved. The outcome will be renewable energy supply in the country increased. The output will be (i) renewable energy capacity addition for electricity and heating supply in remote grid systems implemented, and (ii) capacity of local public utilities in investment planning, project management, and grid control enhanced.

Mongolia currently has a total of 969 megawatt (MW) of installed capacity, but because of aging power facilities that are well past their economic life, only 769 MW is available. Growing power demand over the decade has also pressured such obsolete power system. It resulted in increasing high cost imported electricity which meets around 20% of the country s power demand in 2015. The energy sector in Mongolia relies heavily on coal-fired power generation which accounts for 91% of total installed capacity. Such coal dependent power system has contributed to over 63% of carbon dioxide emission in the country which is the world s fifth most carbon-intense economy; whereas the country has tremendous renewable energy potential which could sufficiently meet long term domestic demand. Promoting a diversified energy mix with a higher share of renewable energy is a core priority both to reduce dependence on high cost imported electricity and to decarbonize the country s energy sector. The Government of Mongolia has taken several initiatives for renewable energy deployment since 2000, most notably (i) implementing the successful 100,000 Solar Ger Electrification Program (2000 2012) which provided access to modern energy to nomadic herders through solar home systems, and (ii) enacting the Law on Renewable Energy, which involves a set of regulatory arrangements with a US dollar denominated feed-in-tariff, facilitated the development of 50 MW Salkit wind firm, the first private power producer. However, a share of renewable energy in total capacity still stands at 7.6%.

The country s power system is comprised of four grid systems which has successfully expanded electricity access to 97% of the population. The central energy system, which covers around 90% of power demand in the country, has already attracted a total of around 200 MW of private sector-led renewable energy projects so far. On the other hand, the other three grid systems in remote and less developed regions which supply power to 32% of the population, and witnessed above 10% of annual load demand growth for the last five years, has failed to attract private investment in renewable energy development due to smaller size of power demand, high transportation cost, and relatively lower renewable energy resource endowments. Inadequate investment in power generation capacity addition for remote grid systems has led to heavy dependence on imported electricity from neighboring countries to meet up to 70% of load demand in geographically scattered load centers, through long stretched transmission lines which has resulted in very high power loss. To address such unique challenges in remote grid systems, the government has sought to develop the first-of-its-kind distributed energy system utilizing renewable energy potential. It is comprised of a smaller scale and modular renewable energy system, which locally produces reliable electricity and thermal energy for local use while minimizing transmission loss.

Renewable energy capacity addition for electricity and heating supply in remote grid systems implemented

Capacity of local public utilities in remote grid systems in investment planning, project management, and grid control enhanced