Position Paper on the Renewable Energy Sector in Mongolia: Challenges and Opportunities June, 2016

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2 Position Paper on the Renewable Energy Sector in Mongolia: Challenges and Opportunities June, 2016 Background The American Chamber of Commerce (AmCham) in Mongolia recognizes that the minerals resources sector is the backbone of Mongolia s economy and this is not expected to change anytime soon. However, economic diversification is vital to Mongolia s long-term economic growth whereby the energy sector, in particular the renewable energy, will play a critical role. AmCham Mongolia advocates for elevating the development of the energy sector both renewable and non-renewable, by utilizing American innovative and advanced technologies, machinery and know-how. Sector Context Mongolia has ample natural resources; rich not only in coal, but also in renewables, such as, solar, wind and hydropower resources. The long-term development goal of the renewable energy sector of Mongolia as stipulated in the Green Development Policy of Mongolia is to increase the installed power-generation capacity from the current rate of 7% to 20% by 2023, and 30% by Experts note that only a small portion of Mongolia s enormous renewable energy potential has been utilized. To date, the use of solar and wind sources have been largely limited to off-grid applications, mainly for nomadic herders or isolated mini-grids. The ambition of the government of Mongolia is to actively explore energy export opportunities for regional integration in northeast Asia. Wind Mongolia has been identified as having the potential to be a major wind power producer and it is estimated to have more than 1.1 TW of installed generating capacity, distributed largely in the southern and eastern regions. Thirteen aimags have more than 20,000 megawatts of wind potential, nine aimags have more than 50,000 megawatts of wind potential, and the Umnogobi aimag alone has 300,000 megawatts of wind potential. On the other hand, due to geographic and demographic peculiarities, there is a limited demand to justify investment to capitalize on this potential, even if grid stability does not cause an issue. The Salkhit Wind Farm is the country s first private operational utility-scale wind farm. Solar On average, Mongolia has sunny days annually and an estimated 2,250-3,300 hours of daylight in a typical year. This indicates that the availability of solar radiation in Mongolia is fairly reliable. Centralized heating from solar energy is one of the solutions to provide cleaner, more sustainable heating services in public institutions in soum centers and districts.

3 Hydropower The latest analysis indicates that out of the 13 hydropower stations in Mongolia, only nine are in operation. This includes the two largest ones: Durgun with 12 MW and Taishir with 11 MW. This indicates that much of the identified potential has yet to be utilized. Annual precipitation is low and its distribution varies in time and space. There is a recent move towards developing a large hydropower plant in Mongolia. The planned 220 MW Egiin Hydroelectric Power Generation project, located on the Eg River, is advancing swiftly with the completion of the preliminary feasibility study and environmental impact assessment. Russia, which shares the transboundary Selenge River, has expressed concerns over this plan. Bioenergy Mongolian herders have long used dried cow dung. Analysis indicates that some 1 million hectares of unused farming land is reportedly suitable for production of biodiesel. Mongolia could develop biofuel by growing corn in abandoned wheat fields. While Mongolia imports almost 100% of its oil products, the opportunity to develop biodiesel could be an option to study further. Government Efforts Recently, the Government has taken several legal and regulatory initiatives to boost the renewable energy sector development. In June 2014, the Green Development Policy was endorsed by the Parliament resolution. The policy serves as a guideline for the country s transition to green development. The policy aims to reduce greenhouse gas emissions by 20% through increased energy efficiency by The government has set ambitious renewable targets for the years 2023 and 2030 in the State Energy Sector Policy. The policy document aims to transform Mongolia into an energy exporter, applying advanced and environmentally friendly energy technologies. Mongolia s Renewable Energy Law was approved by the Parliament in January In support of the 2005 National Renewable Energy Program, the law specifies the duties and rights of entities generating and transmitting energy produced from renewable sources and the main provisions of power purchase and sale agreements to be concluded between them. The purpose of this law is to regulate the generation and supply of energy based on renewable sources, and is applicable to legal entities generating and delivering heat and electricity.

4 Challenges and Ways Forward Despite enormous growth potential the sector faces several systemic challenges that need to be addressed: The Renewable Energy Law has not been strictly enforced. With the introduction of the Renewable Energy Law in 2007, feed-in- tariffs (FiT) for various renewable energy technologies were established. Incentives from the FiT programs have led to the initiation of several solar and wind farm projects by private companies. Lack of knowledge about the current grid status raises grid-stability concerns. A critical concern is related to what could happen if more variable renewable energy is put on-line, and how to deal with the flexibility constraints of the system. There are obvious institutional and human resource capacity issues. Mongolia needs fully functional institutions for renewable energy. Although renewable energy is not a completely new sector in Mongolia, only a few skilled employees are able to undertake both management and planning functions and to perform financial analyses. Mongolia has a considerable nomadic population; therefore, addressing rural electricity will remain a priority issue with a need to develop mini grids with solar and wind sources. Mongolia has much more renewable energy potential than is required by its domestic consumers. Therefore, export opportunities and access to the regional market is taken seriously. Mongolia is well positioned to provide renewable electricity through a jointly built regional grid infrastructure. However, further feasibility studies need to be done with involvement and support from the relevant countries and collaboration with regional and international organizations.

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