Mongolia: Supporting Renewable Energy Development

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

This project will have the following two outputs:

Output 1: Transmission strengthened to help evacuate more renewable energy to grid. The proposed scope includes a new 220 kV transmission line to connect Erdeneburen to Myangad and Uliastai and two new 220 kV substations, which will connect to the existing 110 kV network. Currently, the western region is still dependent on power imports from Russia with high electricity prices, and the Altai-Uliastai region is facing a tightening demand and supply gap. Connecting the three transmission systems will allow for use of renewable generation in the western part of the country, will reduce_systems losses, and stabilize power supply as a whole. It will also enhance energy security through reduced power imports and reduce the demand-supply gap._

Output 2: Advanced heating technologies deployed. To reduce the use of coal for heating purposes, clean technologies for heat supply are required. The popularity of using renewable sources for heat supply is rapidly increasing worldwide. ADB has studied and implemented district heating in Ulaanbaatar and rural areas and is installing heat pumps in public buildings in the western region. Other international development parties also implemented some similar projects. Heat pumps were assessed as an efficient and clean solution to replace polluting coal stoves with renewable and electric heating systems. Based on the lessons learned from the past projects and ongoing programs, the loan will deploy suitable clean heating technologies.

ADB programmatic support. In 2018, ADB provided a loan and grants for solar and wind power subprojects with battery storage technology in remote areas and heat pumps in public buildings. In 2019, ADB also approved a loan to the private sector to develop a solar power plant._An ADB knowledge and support TA studied energy battery storage options, and the government requested an ADB loan to install large-scale battery storage systems to respond to daily peak demand fluctuations. Another knowledge and support TA was approved to study smart grid operations at the national load dispatch center and potential benefits. A policy-based loan aims to tackle Ulaanbaatar's air pollution through clean heating solutions to ger area households._Collectively, these ongoing interventions aim to increase supply of clean electricity and heat while strengthening and stabilizing the country's energy systems. The proposed loan will complement these efforts by increasing grid stability and advancing renewable energy storage, electricity, and heat in Mongolia's energy mix. System strengthening, deployment of clean heat technologies, and refining knowledge of additional renewable energy options will support Mongolia in its efforts to develop a clean, resilient, and secure energy system.

Mongolia has enormous potential for clean and cost-effective renewable energy generation. Solar and wind potential are estimated at 1,500 GW and 1,100 GW, respectively. The electricity that would be generated from full development of these resources far exceeds domestic electricity demand from Mongolia's population of 3 million.

Mongolia's use of its clean energy resources is quite limited. The Government of Mongolia introduced policy incentives for investments in renewable energy, and 10 solar and wind power stations have been commissioned, and several are under construction or preparation by private parties. Nevertheless, installed capacity of renewable energy in Mongolia is modest at 260 megawatts (MW), representing only 0.01% of the potential. Hydropower potential was also assessed at 1.2 GW to 3.8 GW in 3,800 small and big streams and rivers within the country, but there are only two hydropower stations totaling 23 MW.

Instead, the country is highly dependent on coal. Coal-fired thermal power plants provide 93% of total electricity. Mongolia has approximately 10% of the world's known coal reserves, which has supported the build out of the current energy system. However, coal burning generates air pollutants including sulphur dioxide (SO2), nitrogen oxides (NO2), and particulate matter less than 2.5 micrometer in diameter (PM2.5). Ulaanbaatar has been one of the most air-polluted cities in the world, at times worse than Beijing and New Delhi. The United Nations Children Fund (UNICEF) warned of a public health crisis that is caused by indoor and outdoor air pollution. In Mongolia, the energy sector is the major contributor to serious air pollution as well as greenhouse gas emissions.

Despite the known issues with air pollution from coal use, reducing reliance on coal has been difficult, in large part because it is the primary source of fuel for space heating during the winter period. Coal-fired thermal plants in Mongolia are designed as combined heat and power (CHP) systems to supply both heat and electricity to consumers.

In addition to air pollution, Mongloia is also facing a demand and supply gap that is reaching a critical level. During the peak time in winter, actual electricity output is already exceeding 90% of the maximum generation capacity and the shortfall has been overcome through more expensive power import from Russia. Considering growing electricity demand and lack of capacity addition, the domestic capacity reserve is likely to be gone in 2020.

This power shortage risk stems from multiple bottlenecks. First, many CHP plants are aged and inefficient so that the actual generation output is well below rated capacity. Additionally, the low cost of generation from domestic coal has impeded development of alternative generation from renewable energy and hydropower. Second, the four regional transmission grid systems are not integrated, limiting the potential for balancing of supply and demand across the regions and their various resources. This technical constraint has already curtailed renewable energy output. Third, as a collective result from these physical restrictions, actual investments in renewable energy projects have been limited, impeded further by insufficient system planning and regulatory frameworks.

Renewable energy capacity increased to 30% by 2030

Clean energy supply schemes increased and diversified.

Transmission strengthened to help evacuate more renewable energy to grid.

Advance heating technologies deployed.