Could Mongolia Make The Transition From Coal to Wind?

The increasing mining of Mongolia’s ample mineral resources has driven rapid economic growth in the country. In 2011 its GDP growth reached 17.3 percent. But we should keep in mind that Mongolia`s mineral resources will end someday. On the other hand, renewable energy sources such as the sun, wind and water are limitless. So not only mining, but also renewable energy may be a key part of Mongolia`s development, providing its future energy security.

However, while mining expanses too fast, we are unable to effectively use the renewable energy sources. As today, coal, the fossil fuel that has the highest emissions of greenhouse gases, comprises the bulk of Mongolia’s energy production, generating more than 80 percent of the country’s power and heat.

“All forms of energy are expensive, but as time progresses, renewable energy generally gets cheaper, while fossil fuels generally get more expensive,” says researcher Kh.Batsuuri during his presentation on wind energy. According to the 2011 IEA report, a portfolio of renewable energy technologies is becoming cost-competitive. “Wind power is one of the fastest growing sources of power generation” he added.

With its wide, windswept high plains, Mongolia has large untapped potential for wind energy. It was determined that 10 percent of the total land of Mongolia has sufficient sources to be used for wind power production. “Mongolia has the wind capacity to generate enough electricity to supply all of China’s electric needs,” says B.Byambasaikhan, CEO of Newcom Group`s subsidiary Clean Energy, during the discussion “The Green Solution: Coal or Wind?”, which held on last Friday.

“There is no doubt that most of Mongolia`s energy needs will be supplied by coal,” admits G.Purevdorj, scientist at Mongolian Academy of Sciences. But with mounting environmental problems in Mongolia, it is vital to take full advantage of its renewable resources, as renewable energy could help mitigate the increased greenhouse gas emissions, he added. In other words, there is an urgent need to look to cleaner energy solutions than coal.

The government signed the United Nations Framework Convention on Climate Change (UNFCCC) on 1992 and ratified the Kyoto Protocol on 1999. But how can we stave off the potentially calamitous effects of climate change? It is encouraging that the government claims to support and promote actions and initiatives towards green energy sources. In 2005, Mongolia’s parliament approved the National Renewable Energy Program, which aims to increase the country’s renewable energy share to 20 to 25 percent by 2020. And in 2007, a Law on Renewable Energy has been adopted. Within this framework, hydro power plants have been built at Durguun and Taishir and the national program 100,000 Sun Lights has been implemented. As a result, now it is common to see in countryside a nomad’s ger fitted with solar panels powering satellite receivers.  But despite this progress, renewable energy still only generates a tiny fraction of the country’s electricity. The government needs to reconsider the fact that no concrete results of massive investments can be seen in the country`s green energy sector.

However, on the private sector large scale activities have been initiated towards the development of the Mongolia`s first wind energy park. Newcom Group is working to put into operation a wind farm in Tuv aimag`s Salkhit Mountain with the capacity of 50 MW. According to Byambasaikhan, Salkhit wind farm would supply almost 5 percent of the country’s electricity when it starts operating in November of 2012.

If Newcom completes its wind power plant project successful, it shall lead many other projects for renewable energy. However, experts warn that there might be more barriers to the private sector than opportunities. Lack of infrastructure and uncertainty in the regulations remain major problems.

General Electric signed a deal with Newcom to supply 31 huge turbines to its wind farm project. But it’s not just a matter of making the necessary equipments it’s also a question of transporting them. “Wind fans and turbines are very big. Transporting them by dirt road is extremely difficult, as the road from Zamiin Uud to Choir is not completed yet” says B.Byambasaikhan. Just imagine, each wind turbine weighs 240 tons and its basement weighs 1000 tons.

The fact that government regulates energy prices also scares investors. “State monopoly, strong regulation and fixed price hinder the private sector initiatives” explained Ch.Otgochuluu, a director of Economic Policy and Competitiveness Research Center.

Newcom has already signed a power-purchase agreement with the government for the proposed wind power plant project. Each year it would produce 160 million kWh of electricity that would supply the energy demands of 70,000 households, reduce the emission of greenhouse gases by 150,000 tons and save 1.2 million tons of clean water.  

The project costs USD 115 million or MNT 165 billion and within the law emits purchase cost at 9.5 cents per kWh, it requires 11 years to justify the investment. “The cost had been set at 9.5 cents when the Law on Renewable Energy has adopted in 2007 and likely to remain another 5 years. Since inflation has been rising in these years, it is important to amend the law and increase the power purchase cost in order to create favourable conditions for investments” pointed Purevdorj.

“Of course, it would be more attractive for investors if the cost be set, for example, at 15 cents,” says B.Byambasaikhan, “But we are not looking at short term goals. It`s not going to be easy, but we need to get building”.