With an estimated 3,800 rivers and streams with a total length of 6,500 kilometres, Mongolia has significant hydropower potential. There are currently 5 small hydro plants operating with total installed capacity of 3.4 MW.

The small hydro plants are run-of-river designs that provide electricity to neighbouring rural areas except during the winter. Consideration is being given to further develop small hydro plants in order to reduce diesel imports.

A number of larger hydro projects have been identified. Because of the demand of CES, serious consideration is being given to developing the Orkhon project. It would provide peak capacity for CES and eliminate the need for electricity imports. Although the current cost of imports is below Orkhon’s estimated cost of power generation, the project is viewed as a key capacity addition to improved management of CES load. The Orkhon project would require a 20 kilometre transmission line to the 220 kV Erdenet-Ulaanbaatar line. Government is promoting the development of the Orkhon project as a priority over the next 5 years.

In the WES, a loan agreement has been signed with the Kuwait Fund to develop the Ulaanbom/Taishir project. The project would supply electricity to two aimag centres and 8 soums. Although energy cost is high because of the size of the dam and the low capacity, the feasibility study determined a 13.2 per cent Economic Internal Rate of Return (EIRR). The Durgun project has an even higher EIRR (24.7 per cent) and would connect to the WES grid. Government would like to see this developed within the next 5 years.

Solar

Known as the “land of eternal blue skies,” Mongolia has substantial solar potential. Approximately 71 per cent of the total land receives insolation at a rate of 5.5-6.0 kWh/m2 per day, and 2,900-3,000 sunshine hours per year. An additional 18 per cent of the country receives insolation at the rate of 4.5-5.5 kWh/m2 per day, and 2,600-2,900 sunshine hours per year. Solar energy could be a suitable source for electricity for lighting and possibly cooking in rural areas. But it is likely that heating and most cooking would be based on other energy sources.

The “100,000 Solar Ger” program has been established. Mechanisms to accelerate participation in this program are being considered. One of the key issues is that while costs of the smaller household units vary from US$300-US$500, many households would still require a loan for this amount.

Wind

Up to 70 per cent of the country has wind resources, which may be suitable for development. In particular, the Gobi desert area, Dornod and Sukhbaatar provinces have wind regimes of 150-200 W/m2 with wind duration of 4000-4500 hours per year.

Wind power is anticipated to play a major role in rural electrification. The Government intends to pursue wind power development where viable.

Geothermal

A geophysical study has identified 42 small hot springs in Hangai, Hentii, Huvsgol, Altai Mountains, Dornot-Darigangiin Steppe, and the Orhon-Selenge region. Although the local population makes some use of the hot springs, no commercial power or heat development has occurred.

Electricity exports

As noted before, the Russian Federation currently exports electricity to Mongolia. In addition, negotiations have been conducted between Russian and Chinese companies about constructing large transmission lines for export of electricity from the Russian Federation to China.

As with natural gas and crude oil pipelines, it is not clear what the outcome of the negotiations will be — Siberia has excess generating capacity, available hydropower, natural gas and oil resources, and produces electricity at low costs. China is also developing its domestic generation options. Mongolia could benefit from the transmission grid in the form of transit fees and/or tapping the line for additional electricity supplies.

Improvement of rural energy access and mitigation of social impact

Not everyone in Mongolia has access to modern sources of electricity and heat: some 33 per cent of the population currently lacks access to electricity and 43 per cent lacks access to central heating. The Government of Mongolia intends to improve energy supply equity so that the around 40 per cent of the population living below the poverty line will obtain minimal access to modern energy sources.

Electricity

There are essentially three separate markets for electricity in Mongolia:

• The first and largest is the urban market, where grid connections provide low-cost electricity to the majority of households.
• The second market is non-connected Aimag and Soum centres, where stand-alone diesel generators provide limited service. This market accounts for about 3 per cent of the electricity supply. Around 13-16 per cent of population without access to electricity lives here.
• The third market consists of individual electrification solutions for rural areas, for which no public assistance is provided and users are on their own. Some 82 per cent of people without access to electricity live in rural areas (around 145,000 households). The only practical way for these people to gain access is through renewable energy equipment, such as solar PV or wind generators.

It is obvious that the electricity sector will require subsidies for some time to come, and that the 3 different electricity markets in Mongolia require different approaches for the most optimal use of subsidies.

To help those who are not connected to the main grid, the objectives of the Strategy are to:

• Increase the financial sustainability of the isolated utilities:
  - reduce losses as much as possible;
  - connect as many households as possible;
  - increase end-use efficiency of electricity.
• Create a financing mechanism to assist rural herders in acquiring their own small-scale solar or wind electricity-generating equipment.