Mongolia

Major achievements

With the adoption of a new Energy Law by Parliament in 2001, the legal base for restructuring the energy sector in Mongolia was established. The Government of Mongolia has taken steps to enable independent regulatory mechanisms to promote private sector involvement, in an effort to produce a competitive environment in the energy market.

The establishment of the Energy Regulatory Authority was an important step towards creating an independent regulatory mechanism by enabling an institutional environment for foreign and domestic private investors to enter the energy market.

The Parliament also adopted the Mongolia Integrated Power System (MIPS) programme in 2002, which aims to contribute to improving energy access, create a reliable electricity supply system and help reduce operational expenses towards creating favourable socioeconomic conditions for regional development.

In 2002, the Government of Mongolia approved the Mongolia Sustainable Energy Sector Development Strategy Plan (2002-2010), which reflects goals reinforced in the Poverty Reduction Growth Facility. The main objective of the energy sector strategy of Mongolia is to create a financially sustainable energy sector that will provide costeffective energy access, thereby reducing poverty and enabling greater private sector and civil society participation. Mongolia’s energy sector should be developed within a regional energy context, while at the same time taking advantage of new technologies and sources of energy that might further promote economic efficiency and environmental sustainability.

Major challenges

The Durgun hydropower plant has been included in the Government Action Plan, and in 2001 an agreement was signed between Energy Authority and Shanghai SFECO Group of China to begin construction. The installed capacity of the Durgun plant will be 12 MW, and US$ 26.5 million will be required to finance this turnkey project.

The Taishir hydropower plant has also been included in the Government Action Plan. With a planned capacity of 8 MW, it will cost US$ 39.8 million. Development of the Taishir plant will help to improve the power supply for two remote aimags or provinces, Gobi-Altai and Zavkhan. The proposed project is planned to be implemented jointly by the Government of Mongolia, the Kuwait Fund for Arab Economic Development and the Abu Dhabi Fund for Arab Economic Development.

As of 1 June 2003, 156 soum or district centres were connected to the power grid in addition to the current aimag centres from 314 soum centres. The Government of Mongolia had set an agenda to connect 40 soums to the central grid between 2000 and 2004. From 2000 to 2003, a total of 33 soums were connected to the grid by 10, 35, and 110kV lines. Construction of overhead lines for a further 15 soum centres has also begun.

National energy plan

In the immediate future, the government of Mongolia faces major challenges, such as an assurance of financial sustainability of the energy sector, strengthening of institutional framework for greater private sector participation, developing rural energy access and dealing with affordability issues.

Financial sustainability of the energy sector

In order to improve the financial performance of the energy sector in Mongolia, it is vital to resolve inter-company arrears. Although the reasons for increasing inter-company arrears are complex and interdependent, the government of Mongolia has taken many actions to reduce these arrears.

Rural energy access and affordability

In order to facilitate regional development and improve socioeconomic conditions, the Government of Mongolia has consistently developed the concept of regional development and related projects, such as the MIPS project and projects in telecommunications.

As the energy sector in Mongolia is transformed into a more market-oriented entity, it is necessary to mitigate the social impact. Under the energy strategy, market assessments in central and off-grid areas are needed for various reasons, such as to introduce lifeline tariffs, to improve subsidy mechanisms, to increase the efficiency of the electricity and heat supply, and to improve the efficiency of heat-only boilers.

As the Government searches for appropriate ways to provide isolated and remote areas with access to electricity, one possibility is to seek resources from climate change funds, such as the Global Environment Facility and the Prototype Carbon Fund. The expertise of the World Bank could also be useful in acquiring financing from these funds.

Further restructuring and private sector participation

In order to increase private sector participation in the energy sector, it is important to transform the market with appropriate rules and regulations to increase the flow of energy and cash. To improve power and payment settlements between power companies, new power-exchange rules and regulations need to be introduced.

The Government of Mongolia has taken important steps to accelerate economic growth, to reduce poverty, to increase private sector participation, to strengthen civil society and to create the institutional environment for greater private sector participation. During the last year, the Government has restructured the energy sector to conform to a market economy with a view to facilitating increased private sector participation, commercializing energy sector enterprises and commencing the privatization of other State enterprises.

Stakeholders

Ministry of Infrastructure

The Ministry of Infrastructure is responsible for energy sector policy-making, including energy resource development, import and export of energy, power infrastructure construction, energy conservation, renewable energy, rules and regulations and international cooperation.

Ministry of Finance and Economics
http://www.mof.pmis.gov.mn

The Ministry of Finance and Economics is responsible for socioeconomic development policy, sustainable development strategy, economic security, economic conditions, regulation, investment credit and aid integrated policy, balance of payments, and economic cooperation policies.

Fuel and Energy Authority

The Fuel and Energy Authority serves as a government agency in charge of implementing international projects and loans. It carries out procurement services for energy sector enterprises based on their requests. It also implements investment projects financed under the State budget.

Energy Regulatory Authority

The Energy Regulatory Authority is in charge of regulating energy production, transmission, distribution, supply and dispatch according to the Energy Law. This includes issuing licences to operators and monitoring the tariffs charged by them.

Energy Corporation

The Energy Corporation includes representatives of the Ministry of Infrastructure, the Ministry of Education and other government agencies, and was established as a research institute to conduct long-term planning for the energy sector. Currently, it focuses on design and engineering work for energy-sector entities rather than long-term planning.

Renewable Energy Corporation

As with the Energy Corporation, the Renewable Energy Corporation was established as a scientific organization aimed at increasing the use of renewable energy sources and conducting research for the Government. It now focuses primarily on commercial activities.

Corporatized energy entities

The energy sector has been unbundled into 18 distinct generating, dispatching, transmission and distribution companies. Currently, all of these companies are State-owned and are assuming responsibility for the financing and operation of their businesses.

National Dispatch Centre

The National Dispatch Centre (NDC) organizes the implementation of energy projects based on short- and long-term policies and needs, and develops contingency plans for the sector. NDC is also responsible for providing technical and methodological assistance for local authorities and other organizations.

Energy Training Centre

The Energy Training Centre provides short-term technical (non-professional) training for energy sector personnel.