Mongolia : Supporting Renewable Energy Development

Energy / Electricity transmission and distribution - Energy efficiency and conservation - Large hydropower generation - Renewable energy generation - geothermal

The ensuing project is to support the government of Mongolia in expanding renewable energy. In spite of vast renewable energy potential, Mongolia depends on 93% of total electricity production from coal fired thermal power plants. Coal has also been used as the primary source for heating. As a result, the energy sector becomes the major contributor to large greenhouse gas emissions and serious air pollution in the country. The air pollution level in Ulaanbaatar and other towns have become worse than that in cities such as Beijing and New Delhi. UNICEF warned that this has become the public health crisis, especially among children. Nevertheless, the use of coal cannot be reduced to meet growing domestic demand for electricity and heating. To be worse, the peak demand for electricity has almost been reaching to the present generation capacity limit. Under the situation, the country has overcome any power shortfall through more expensive power import from Russia. Thus, the energy security and social and economic impacts have been toward conflicting and complicating situation.

To tackle the dilemma, the government issued the State Policy on Energy, 20152030 to increase the share of renewable energy to 20% by 2023 and 30% by 2030. ADB's country partnership strategy and country operations business plan (COBP) for Mongolia responded to this priority to expand renewable energy even in remote and less developed regions, and to enable air quality and carbon footprint improvements. Subsequently, the government's mid-term plan for 20192023 includes concrete activities for renewable energy development. For this purpose, this transaction technical assistance (TA) was programmed for 2019 and the ensuing loan project for 2021 in the COBP, 20202021. Given the strategy and rationale, the following were the intended outputs of the ensuing project:

(i)Output 1: Transmission strengthened to help evacuate more renewable energy to grid.

(ii)Output 2: Pilot pumped storage hydropower generation assessed for detailed engineering studies.

(iii)Output 3: Pilot geothermal heat and power generation assessed for detailed engineering studies.

(iv)Output 4: Advance heating technologies deployed.

However, given project readiness, the project scope has been revised to focus on the transmission expansion and a cleaner heating pilot.

The project impact will be increased renewable energy capacity, and the outcome will be increased and diversified clean energy supply schemes.

The ensuing project is estimated to cost $150 million. ADB will consider a project loan of $140.0 million from ADB's ordinary capital resources, and the balance is expected to be supported by cofinanciers and/or the government.