Degree of reliance on imported energy:
Almost all energy demand in the Western zone of the country is supplied by the imported energy from Russia.
Main sources of Energy:
Mongolia has seven coal-fired power plants, two hydropower plants and some small diesel and renewable energy generators. The current installed capacity in Mongolia is 1,050 MW, of which only 728 MW is available due to losses from ageing plants and transmission.
The energy sector is almost entirely fossil fuel-based and is dominated by coal. With low historical growth in energy demand, there has been virtually no investment in new power generation since 1985. In recent years, driven by the economic boom, domestic consumption has been increasing rapidly.
Mongolia has seasonal variations in electricity demand, with winter requiring additional energy to be imported from Russia for heating. The financial viability of Mongolia's electricity providers is being threatened by the increasing price of Russian electricity, inefficient infrastructure and the low cost of electricity for consumers.
Extent of the network:
There are three separate electricity systems in Mongolia:
- the Central Energy System, which serves Ulan Bator and surrounding areas, represents the vast majority of all Mongolian electricity supply and is comprised of five coal powered plants and an interconnection with Russia;
- the Eastern Energy System, which has one combined heat and power plant; and
- the Western Energy System, which relies on the importation of electricity from Russia.
Apart the Central (CES), West (WES), East (EES), there are is the Altai-Uliastai (AUES) autonomous energy systems, Dalanzadgad steam power plant and diesel generators with provisional operations installed at small settlements.
In Mongolia there are 678,000 households, and nearly 400,000 households are connected to the grid (60 %). Out of 333 counties of 21 provinces, 318 counties are connected to transmission lines.
Large parts of Mongolia’s grid are inefficient and require modernization. Transmission lines have to cover long distances and operate with a low power load. This leads to high losses and grid instability, which could potentially hardly allowing additional power fluctuations as e.g. caused by wind turbines or solar installations.
Demand for power is increasing by 5-7% each year. A gap in peak load of the energy system is filled by power from Russia; in 2007 the gap was 98 MW, in 2010 it reached 70 MW. The power supply will barely suffice for some years, but heating, for Ulaanbaatar, faces serious problems. There is need for a new CHPS or heating station to manage peak load, and more power from Russia will be needed to maintain reserve capacity at an appropriate level; a.an urgent need for construction of new power sources, since in 2013-2015 domestic sources will face a capacity shortfall. New power sources include Mogoin Gol CHPS (30-60 MW, 2011-2013); Dalanzadgad extension of 3 MW (added in 2011); the 100 MW extension of the Dornod source (2012-2013); CHPS-5 in Ulaanbaatar and Tavan Tolgoi CHPS (2011-2015). New power lines and networks will need to be built for electricity transmission to consumers from both operating and new plants.
Potential for Renewable Energy:
A recent study by the US National Renewable Energy Laboratory and the Mongolian National Renewable Energy Centre, estimated that Mongolia has potential to generate 2,600 GW of wind, solar, geothermal and hydropower-based energy. This figure represents approximately 25% of total global electricity demand and encapsulates the vast potential of Mongolia for renewables development.
Mongolian President Tsakhiagiin Elbegdorj has been lauded internationally for his eco-friendly policies and for his promotion of renewable energy. At the Northeast Asia Renewable Energy Cooperation Forum in November 2012, the President outlined Mongolia's long term goal of exporting renewable energy to China and Russia.
Government rhetoric on renewable energy has been strong with authorities claiming that Mongolia can become "the Saudi Arabia of the East, not for coal but for renewable energy."
With regard to wind, good sites can be found throughout the country. The most attractive sites are located the South Gobi region, which is alone estimated to contain 300 GW of high quality wind energy potential. The South Gobi also contains some of Mongolia’s largest mines and is well-situated for exports to China.
The first commercial wind farm project in Mongolia – a 50 MW Salkhit wind farm outside of the capital Ulaanbaatar – was connected to the electricity grid in 2013 and is now generating electricity. The European Bank for Reconstruction and Development (EBRD) provided debt and equity funding for the project.
Mongolia's 3,800 streams and rivers, which are located primarily in the northern and western areas of the country, have the potential for the generation of up to 6.4 GW of hydropower. Currently, Mongolia has approximately 12 MW of hydropower capacity, with an additional 12 MW under construction.
"The land of the blue sky" has, in an average year, 270 to 300 'sunny' days. Accordingly, solar potential in the country is quite high, estimated to be 11 GW. There are three solar PV installations in operation:
- the Naran Plant (5kW);
- the Noyon plant (200kW); and
- the Tsagaanchuluut plant (1kW).
One of Mongolia's most successful renewable energy initiatives has been the Solar Gers Project. Under the project, 100,146 herder families have been provided with portable solar energy systems since 1999. The project is jointly funded by the World Bank and Dutch Government and provides a 50% subsidy on the cost of solar systems. The Gobi Desert has been earmarked as a possible location for a large solar PV or concentrated solar plant.
40 possible geothermal sites have been identified, with projects at Tsenkher, Khujirt and Shargaljuut in the Khangai region deemed the most feasible. There is potential for 45 MW to 900 MW of geothermal power in Mongolia, however Mongolia has not generated power from geothermal resources yet.
The biomass potential of the country has not been extensively researched, however production from animal manures, particularly in rural areas, is deemed to have potential. There are currently no biofuels or biomass facilities in Mongolia.
Potential for Energy Efficiency:
Mongolia deregulated and privatised the power sector in 2001 upon the passing of the Energy Law of Mongolia. The law sought to vertically separate the sector by separating the generation, transmission and distribution companies. Despite this separation, all energy enterprises remain government-owned. This resulted in 18 state-owned companies involved in generation, transmission or distribution, and operating under the framework of the ‘Single-Buyer Model’:
- Five generation companies arranged around Thermal Power Plants (TPPs): UB, Darkhan TPP and Erdenet TPP
- Central Regional Electricity Transmission Company (CRET)
- National Dispatching Centre Company (NDC)
- Regional electricity distribution network companies (EDNs) including: UB, Darkhan-Selenge, Erdenet-Bulgan, Baganuur and South-Eastern Region
- District Heating Network Companies (DHN) including UB and Darkhan
The share entitlements of these companies (except NDC) were distributed as follows:
- 41% - to the Ministry of Infrastructure
- 39% - to the State Property Committee
- 20% - to the Ministry of Finance and Economy
Structure / extent of competition:
After the 2001 enactment of the Energy Law, the government approved Resolution 164 on structural reform of the energy sector. The centralized structure set up in the socialist era was disbanded and 18 independent companies were established, including state-owned shareholding companies of energy producers and distributor networks and the National Dispatching Centre. The industry has been supporting private investment and private management, and most small heat supply companies in urban and rural areas are privatized. The government showed support for initiatives of private investors and issued licenses for wind power stations and large capacity CHPS.
In 2011 the privately-managed Uliastai Energy LLC started operating and the Darkhan-Selenge power distribution network became a 100% private company. The Bayankhongor power distribution network LLC and the Khuvsgul power distribution network are both locally-owned companies. 2010 industry statistics indicate that a total of 73 companies had received 173 licenses (ten kinds) for provision of different services related to energy.
In 2011, licenses to build new energy sources were issued to the East Energy Development LLC (600 MW CHPS); to United Power LLC (18 MW CHPS); Sainshand Wind Park LLC (52 MW wind park); Clean Energy LLC (50 MW wind station); AB Solar Wind LLC (100 MW wind station); Idener Global LLC (50.4 MW WPS); Oyu Tolgoi LLC (44 MW diesel station and 72 MW heating plant); and the Civil Aviation Authority (443 MW solar power plant). All these (except the CAA) are private companies.
Vertical separation of an integrated utility enterprise took place in 2001 according to the Law on the Energy Sector. The integrated enterprise was unbundled into generation, transmission and distribution companies; the law does not require separation between distribution and retail/supply functions and such separation has not occurred.
The ERA launched a market model with a single buyer in 2002. Five power generating companies sell electricity at regulated tariffs to the single buyer. The central regional energy transmission company sells the purchased electricity to ten distribution companies. The central regional distribution company, which functions as the single buyer, sells the purchased electricity at wholesale prices.
Distribution companies distribute electricity and supply it to the end-users at distribution prices. In accordance with this sequence, regulated generation tariffs are set, then tariffs for transmission and distribution, and finally, tariffs for end-users. In addition to the single buyer market, a spot market has been operating since 2006 and an auction market has been operating since 2007. Incremental electricity demand is now auctioned among generating licensees for the best price reducing percentages.
Existence of an energy framework and programmes to promote sustainable energy:
On 9 June 2005, the Parliament of Mongolia approved “A National Renewable Energy Programme” for the period 2005-2020, to facilitate the wider use of renewable energy in Mongolia. The Programme’s goals include: a total installed capacity generated by renewable energy power sources of 3-5% by 2010 and 20-25% by 2020 of the total energy production; and a programme for increased decentralised electrification of remote rural villages to provide electricity to 100,000 households by 2010 and all rural families by 2020.
A Renewable Energy Law was adopted in 2007. This law sets forth feed-in tariff ranges for renewable energy, categorised by type. Pursuant to the framework established by the Renewable Energy Law, ERA developed and approved the first long term Power Purchase Agreement to be signed between the “Central Regional Electricity Transmission Network” State Owned Stock Company and private investor “Newcom” Co., LTd. Approval of this agreement was the first step to encourage private sector participation in the energy sector.
Mongolia ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change in 1999.
The “Building Energy Efficiency Project” (BEEP) started in 2009 to support the Government of Mongolia in enhancing energy efficiency in the wider Mongolian building sector by removing the barriers, including noncompliant and outdated building codes, norms and standards (BCNS). The project is funded by the Global Environment Facility (GEF), the Korean Energy Management Corporation (KEMCO) and UNDP Mongolia. Its goal is the reduction in the annual growth rate of GHG emissions from the buildings sector. BEEP will contribute to the reduction of greenhouse gas emissions through the transformation of the Mongolian buildings market towards more energy-efficient building technologies and services, sustainable private house insulation and energy efficiency financing mechanisms.
Furthermore, the project is intended to widen the scope of the current EE programs of the GoM (Government of Mongolia) through the Ministry of Roads, Transportation, Construction and Urban Development (MRTCUD) by addressing all the pertinent aspects of improving and further introducing EE concepts in the buildings sector in Mongolia.
100,000 Solar Houses (Gers) - National Programme for Providing Rural Areas with Electricity through the Utilization of Renewable Energy (2000-2012).
The main goals of the programme were:
- Electrification of all households in rural areas through Solar Home Systems (SHS).
- Development of Solar-Wind-Hydro-Diesel power hybrid system to meet electricity demand of livestock herdsmen’s households, villages, rural schools, hospitals, tourist camps, frontier posts, etc.
The SHS were subsidised through contributions from various bilateral donors over the course of its lifetime (2000-2012). More than 30,000 subsidised SHS were sold to herder families by 2004. Over 40,000 SHS were distributed to herder families financed by the Mongolian National Budget in 2006-2007. After the inclusion of the World Bank in 2006, 27,000 more subsidised SHS were sold. The programme has also improved electricity distribution systems in 30 soums (districts), and installed hybrid systems to reduce the use of costly diesel in 15 soums. It has increased the electrification rate among nomadic herders from zero to 70%.
Current energy debates or legislation:
Under an agreement signed in February 2014, Taiwan will provide solar and wind technology to help Mongolia reach its target of a share of 20% to 25% of renewable power in its total electricity generation by 2020. Taiwan will also offer short-term training in energy efficiency management, renewable energy policy and promotions strategies. In addition, Taiwan will provide its know-how in coal-fired power technology as coal currently accounts for 48% of Mongolia's total electricity production.
Major energy studies:
Since 1990, Mongolia has been cooperating with the International Renewable Energy Association and mainstreamed the goal of extensive use of renewable energy sources in the CNDS and Government Action programmes as one of the priority targets. Mongolia joined the “Global Energy Council” and the European “Energy Chart”. Three projects from Mongolia have been made signatory to the Executive Council of Clean Development Mechanism, established under the UN Framework Convention on Climate Change.
Role of government:
Ministry of Mineral Resources and Energy (MMRE)
The Ministry of Mineral Resources and Energy is the central state administrative body in charge of energy issues, while the Energy Authority is the government’s implementing agency and the Energy Regulatory Committee is the regulatory body.
The MMRE is in charge of energy sector planning, though there is no distinct MMRE planning/policy agency. MMRE activities and projects at the macro level receive suggestions from the Finance Ministry and the National Development and Innovation Committee. The MMRE Energy Policy Department is responsible for energy sector planning and policy at the sector level. On the macro level the MMRE cooperates with the Finance Ministry and the National Development and Innovation Committee, on the sector level implementing agencies and centres work with the MMRE Energy Policy Department.
Government agencies in sustainable energy:
There is no specialized division or unit and staff responsible for sustainable development within the Ministry of Mineral Resources and Energy (MMRE) which is in charge of fuel and energy policy in Mongolia. Its contribution to sustainable development is limited to preparing and submitting a report to the Ministry of Nature, Environment and Tourism (MNET).
However, the MMRE has been restructured and established several implementation agencies. The Energy Department and the National Centre for Renewable Energy were formed to implement sector wise sustainable development, particularly to promote renewable energy and its role in the energy sector.
The Sustainable Energy Development Council was set up in 2009 to attain sustainable and efficient energy sector in Mongolia. The council has the following duties:
- Support sustainable energy production
- Introduce new technique and technologies in energy production
- Advise policy makers
- Conduct research on renewable energy
- Provide necessary information and referral services for energy companies and bridge them with the government and agencies.
The “Mongolian Energy Association NGO - a member of the Global Energy Council operates within two sectors: traditional and renewable energy. The renewable energy sector of the association is proactively engaged in development of solar, hydro and wind energy sources. It has carried out “Technical and Economic Feasibility for Innovation and Expansion of Energy System in the Eastern Region”.
Energy Authority, which conducts broader research and technical monitoring of the energy sector. One of the divisions within the Authority is the Renewable Energy Division.
Energy planning procedures:
There is an energy planning procedure, where a legal and organizational mechanism has been established to evaluate environmental impacts of project proposals before approval of implementation of programs and projects to build sources, facilities, power lines and grids of renewable and non-renewable energy. Some elements of the mechanism relating to the natural environment are under the authority of the Ministry of Nature, Environment and Tourism (MNET) and local administrations.
Energy regulator Date of creation:
With the 2001 establishment of the Energy Regulatory Authority (Energy Regulatory Committee since 2012), energy regulation has been in place for over a decade. Under the amendments to the Energy Law passed in December 2012, the above authority was expanded and named an Energy Regulatory Committee (ERC). The number of regulators was increased to five and external representatives were included, aiming to strengthen agency autonomy.
Degree of independence:
The Energy Regulatory Committee is an independent body for energy regulation in Mongolia. However, in reality the autonomy of the regulatory authority remained unsatisfactory, as confirmed by Deputy Minister T. Enkhtaivan in October 2011, when he said: “Although at present the law states that the ERA should operate independently from the government, in a legal sense it remains dependent on the government”.
Regulatory framework for sustainable energy:
At present the following laws, regulations and legal documents relate to the energy regulation process in Mongolia.
Laws of Mongolia
1. Energy Law
2. Economic Activity Licenses Law
3. Civil Code
4. Administrative Responsibility Law
5. Consumers Rights Protection Law
6. Minerals Law
7. Renewable Energy Law
8. Competition Law
Renewable Energy Law
The Renewable Energy Law of 2007 allowed the setting of tariffs suitable to facilitate development of ecologically clean energy production from renewable energy sources, and specified that the tariffs set by law shall apply for not less than 10 years from the date of adoption of the law. This was to ensure favourable conditions for the national development of renewable energy.
With the 2010 enactment of the Concession Law, the legal grounds were laid for private investment in state- and locally-owned assets, without privatization. At present Uliastai Energy LLc (privately managed) operates on the basis of an energy production concession agreement. Under the Concession Law, energy sources with private investment, as well as those with investment directed to further privatization, are included in the list of concessions approved by Government Resolution 198.
The Energy Law defines the rights and duties of the ERC and focuses specifically on regulation of prices and licensing; for instance, 23 articles deal with prices and tariffs, including principles of determining tariffs, prices of tariffs and agreements and other general directions.
Role of government department in energy regulation:
The Ministry has authority for developing policy in the sector, for ex ante approval of investment plans in electricity transmission and distribution and gas transportation and distribution; and for ex post prudential review of investment decisions.
From a regulative perspective, the electricity market is monopolised and tariffs are politically determined at very low level, making it difficult for utilities to work profitably. Additionally, there is a lack of skilled personnel able to maintain and operate renewable energy power plants, complicating RE supply for remote villages with small populations.
Currently international donors are the main investors in renewable energy projects. Attractiveness for private investors is very low due to the state influenced market structure. The elaboration of a comprehensive renewable energy strategy, coupled with structural and technical reforms, allowing to use also private capital, would be important to achieve higher RE shares.
ebrd.com (2013): SALKHIT WIND FARM IN MONGOLIA STARTS PRODUCTION; EBRD READY TO DOUBLE FUNDING FOR WIND. Available at http://www.ebrd.com/pages/news/press/2013/130620.shtml Accessed 13th March
UNDP (2013): Derisking Renewable Energy Investment Available at http://www.undp.org/content/dam/undp/library/Environment%20and%20Energy/Climate%20Strategies/UNDP%20Derisking%20Renewable%20Energy%20Investment%20-%20Full%20Report%20(April%202013).pdf Accessed 13th March
Climate Investment Funds (2013): Progress Updates from Countries without Endorsed Investment Plans Country/regional pilot: Mongolia Available at https://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/Mongolia%20-%20Meeting%20of%20SREP%20Pilot%20Countries,%20Progress%20Update%20-%20May%202013.pdf Accessed 13th March
renewables.seenews.com (2014): Taiwan, Mongolia enter renewable energy cooperation. Available at http://renewables.seenews.com/news/taiwan-mongolia-enter-renewable-energy-cooperation-405850 Accessed 13th March
Open Society Forum (2013): ENERGY GOVERNANCE INITIATIVE ASSESSMENT MONGOLIA Available at http://forum.mn/res_mat/OSF/Energy%20Governance_English.pdf Accessed 14th March
UNDP (2012): MONGOLIA’S SUSTAINABLE DEVELOPMENT AGENDA: PROGRESSES, BOTTLENECKS AND VISION FOR THE FUTURE. Available at http://www.mn.undp.org/content/dam/mongolia/Publications/Environment/rio_report_mongolia_eng.pdf Accessed 13th March
Webb, Stephen (2013): Mongolia: Renewable energy in the Asia Pacific: a legal overview (3rd edition) - Mongolia. Available at http://www.mondaq.com/x/261458/Renewables/Renewable+energy+in+the+Asia+Pacific+a+legal+overview+3rd+edition+Mongolia Accessed 14th March