IEEJ : August 2014

Mongolian power sector:
Background and current policy

Kh.Erdenechuluun
Representing UBEDN , Mongolia

BRIEFLY ABOUT MONGOLIA Territory: 1.564 million km2
 Population: 2.7 million
 Capital city: Ulaanbaatar
 Highest point: Huiten peak (4653a.s.l.m) Lowest point: Khukh nuur
depressions (532 a.s.l.m) Lowest annual average temperature:-330C (-500C)
 Highest annual averagetemperature: +230C (+35.80C)

NOMADIC TRADITIONCAPITAL CITY - ULAANBAATARMONGOLIAN POWER SECTOR BACKGROUNDMongolia’s energy sector consists of five independent electric power systems:- Central Energy System (814 MW)- Western Energy System (12 MW)- Eastern Energy System (36MW)- Altai-Uliastai Energy System (15MW)- Dalanzadgad Energy System (24MW)TOTAL CAPACITY
901 MW

 The Central Energy System, represents 80.2% of total electricity generation in Mongolia Power generated by thermal power plants using coal accounts 96% of total domestic
generation.
 Transmission and distribution system
220 kV = 1044 km
110 kV = 4240 km
35 kV = 6921 km
15 kV = 2112 km
6-10 kV = 9639 km
0.22-0.4 kV = 7942 km
 Number of consumer
 Industrail Residential

20 000300 000CURRENT POLICY IN ENERGY SECTOR

1. The most urgent priority for the government concerning the energy sector aims
to reach the following characteristics:
Financial self-sustainability
Efficiency
Energy access for rural area
Increase of privatization level
2. To fully supply energy and fuel demands by domestic production through theuse of coal and other energy sources / increasing coal production capacities, producingliquefied and gas fuel from coal for local consumers/
3. Establish Integrated Energy System by interconnecting CES and WES via highvoltage electricity transmission line
4. Increase the share of renewable energy in total energy production bysupporting construction of renewable energy power sources
5. To increase the private sector participation into the energy sector

CURRENT POLICY IN ENERGY SECTORThe Government of Mongolia has developed the following policies in the energysector
1. Energy Law of Mongolia 2001
2. Mongolian Coal Sector Master plan 1995-2014
3. Mongolian Energy Sector Master plan 2000-2020
4. Oil Law of Mongolia 2002
5. Mongolia’s Sustainable Energy Strategy 2002-2010
6. National Program of Renewable Energy 2005-2020
7. Mongolian Integrated Power System program 2007-2040
8. Renewable Energy Law 2007
9. Coal Program 2008
9. Energy efficiency law is expected to be approved in 2014

PASR ENERGY DEMAND AND SUPPLYELECTRICITY PRODUCTION

ThermalDiesel
Hydro
WindTotal

Heat production
By water
By steamPASR ENERGY DEMAND AND SUPPLY

hydrowinddiesel
importSince 2008, Power demandin industry, transportation,agriculture and households
has increased by 30%.
But installed capacity only
grew by 6.8%.
ThermalELECTRICITY AND HEAT DEMAND INCREASE

Heat and electricity demand
expected to grow due to theeconomic development
Need to secure reliable energy
supply which will ensure othersectors development Demand increase creates therevenue growth of energy sector

MAJOR DIFFICULTIES AND BOTTLENECKS Unstable policy /Generallly, political parties, taking a power, revising the energy policy during theirgovernance causing barriers in development of energy sector./
 Current condition, power generation, transmission, distribution systems and supply service owned
by state owned companies, promoting monopoly in energy market. Its doesn’t meet municipality’sand consumers needs.
 The influence from Government in setting the energy tariff giving the bad impact to financial
situation of energy sector
 State owned conpanies has opportunities to impelement projects financed by international andlocal investment. The most projects dedicated to expansion and rehabilition of technologicalequipment not for customer service quality improvement.
 Proposed recommendations:
1. Intensivize competition in energy market by privitizing supply service as a international
practice /to create retailer companies/
2. Give the attention in policy level for raising the funds by enabling stock exchange ofcompanies in energy sector
3. “Costrecovery” tariif system• To set capacity tariff• certain rate of return on investment should be considered in setting the energytariff.

ECONOMIC OBJECTIVESDEVELOPMENT DRIVING DEMAND GROWTH
 The International Monetary Fund (IMF) forecasts Mongolia's Gross Domestic Product willgrow on average by 14% per year between 2012 and 2016.
 Currently, Mongolia’s energy demand is driven largely by rapid development of the country’smining sector, especially in the South Gobi region as a result of mining activities including
gold, copper and coal mines.
 There is a critical need to modernize the country's ageing energy infrastructure and to
expand its power and heat distribution systems.

GDP Growth Forecast
40
30
2010

8.9 10.2
6.6 7.7

12.3

15.3

19.1

23.7

28

31.9

35.1

17.3% by 2011,12,3% by 2012
The trade of mining products
depends on economical situationof neighboring countries

02010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GDP, US…

Actual GDP growth:

Source: Eurasia Capital

ECONOMIC OBJECTIVESACCESS TO MODERN ENERGY SERVICES The main policy is to connect soum/administration unit rural area/ centers to the centralized
grids step-by-step.
 Out of total 331 soum centers, some 318 have been connected to the CES, EES and WES by2012
 “The 100,000 Solar Ger” program was initiated by the Government of Mongolia in 2001 which
has been implemented until 2009. Currently, over 104,000 Solar Home Systems are operating
throughout the country. This sytem sold to herders at discounted price as the Government
subsidy

DECREASING REACH POOR GAP The energy tariff not based on real cost. /The energy tariff setting has a pressure fromGovernment, considering the family income/ Residential consumers payment rate is high due to low energy price and technicalsolution enabling disconnection from system. /More than 110 thousand ger areas
consumer, most of them has low income/ Revenue collection rate was above 100% in last three years for energy sector.

ENVIRONMENTAL OBJECTIVESMITIGATION AIR AND WATER POLLUTION
 Energy sectors CO2 emission rate /portion/ to total emission of Mongolia is too high comparedto the other sectors. /Mongolian power generation sectors CO2 emission (6399g) has highvolume compared to other sectors as follows, industrial and construction sectors CO2 emission is356g, agriculture, commercial and domestic CO2 emission 1181g, transport sectors CO2 emission
1887g according to the report ministry of environment and green development, 2012/
 Over 160 thousand ger areas residents polluting air by firing 200 thousand tons raw coals and
160 thousand m3 woods annually;
Taking measures from government and local government
 Expantion power generators electricity and heat production capacity for enabling thehouseholds to access to central heating system
 Promoting electricity heating system in residential area by discounting energy bill by 50% innight time /but this measure causing much peak demand in energy system/ Raw coal firing stoves using in ger area are replacing by clean stoves by 90% government
subsidy. /Electricity bills also discounted by 50%/

ENERGY SECURITY OBJECTIVES Create conditions for extensive use of coal, a main domestic source of energy, for decreasing
imports and increasing exports
 Develop less expensive energy production with less negative environmental impacts so as tofully supply energy and fuel demands by domestic production through the use of coal andother energy sources Produce energy, heat and clean fuel for public utilities through processing raw coal by heating,gasification and fluidization, evaluate environment impacts so as to introduce advanced
effective production technology
 Implement a mechanism requiring polluters to pay for the harm and damage caused to nature,
restrict the amount of waste at the pollution sites, prohibit equipment and technology
adversely affecting nature and encourage the introduction of advanced technologies thatdecrease waste.

Opportunities and challenges for
future energy policy
1.
2.
3.
4.
5.
6.
7.
8.

Expansion of production capacity
Expansion of transmission, distribution lines and heating pipelines
Promote renewable energy resourses
intensifying the process to transfer the energy sector into themarket oriented economic principle.
attracting foreign and local investments into the energy sector
establish favorable conditions for more private sector
participationincrease the level of privatization of energy enterprises.
Energy conservation to promote efficiency, consumer choice, andenvironmental sustainability;

SOLAR, WIND AND HYDRO POTENTIALWind - South Gobi region has the potential for over
300,000 MW.

Solar - South Gobi region has the potential forover 11,000 MW.

Hydro- The average annual flow of Mongolia’s
3,800 big and small rivers estimated at 3,46*1010
m3, providing a potential energy resource of 6,300
MW .

PRIVITE INVESTMENTS IN POWER SECTOR

 Salkhit Wind Farm 50MW–
COD June, 2013
 Ukhaa Khudag Power
Plant 18MW - inoperation since 2011 Combined Heat andPower Plant 5 450MWCOD 2018

SUBJECTS I WOULD LIKE TO STUDY•••••••To study on technique statistical data collection andforecasting energy demandConcepts identifying policy issues based on current
situation and analyses made on specific issues.
Aspects in policy implementation measurement
liberalization of financial and economical mechanism
in energy sector
To share energy sectors experience of other countries
in policy making level, especially in Japan.
reflect international best practices into Mongolianenergy policy by complying current condition andrequirement
To develop draft policy in energy sector of Mongolia inframe of energy regulation by involvement of trained
staff.

Thank you

Contact : report@tky.ieej.or.jp