The current state of energy sector in Mongolia, development trends

The current state of energy sector:

Having built its foundation since 1924, Mongolian energy sector has seen a rapid development serving all sectors of the country from economy to society whilst growing as a main sector to serve its citizens and households sparsely populated within a wide territory. The energy sector of Mongolia consist of four independent electric power systems: Central Energy System (CES), Western Energy System (WES), Eastern Energy System and Altai-Uliastai energy system in addition to Dalanzadgad combined heat and power plant (CHP) and other diesel fuel and renewable energy sources.
According to the results of the Central, Western and Eastern energy systems of 2010, the total energy production of thermal power plants reached 4,256.1 million kWh, 31 million kWh from hydro-electric stations, 0.6 million kWh from solar and wind power stations and 13.2 million kWh from diesel fuel stations, while 214.1 million kWh of energy were imported, and 20.7 million kWh of energy were exported.  Energy supplied to customers from these networks totaled to 3023,5 million kWh of electricity and 6,474 thousand Gcal of heat. 
About 95% of the country’s energy production capacity comes from thermal power plants, 4.7% from imports and the rest is supplied from diesel generators, small to medium sized hydro power plants and other renewable energy sources. In recent years, increasing energy consumption need of Central region has been met by domestic production.  Electricity imports from Russia are used to meet the energy demands of CES during peak hours and 60-70% of energy consumption in WES.   

The total revenue of big energy companies resulted in MNT 280,5 billion, plus MNT 66,3 billion   for taxation and duties paid to state and local budgets. In 2010, the amount of receivables from consumers and suppliers amounted to MNT25.4 billion, and accounts payable amounted to MNT29.3 billion, showing a decrease of 17.5% and 44.5% from 2009 respectively. Between 2008 and 2010, MNT 105,5 billion were invested into mineral resources and energy sector from the Mongolia Development Fund, majority of which is dedicated for energy sector. 

Between 1990 and 2008, the energy sector received USD575.3 million of grant and loans from foreign countries, international banks and financial institutions, of which USD347.9 million were loans and USD 227.4 million were grant. Through these grants and loans, 67 project programs were successfully implemented, and some are still ongoing.
In December 2010, the State Great Khural (Parliament) adopted a resolution No.72 to improve the financial and economic capacity of energy industries and companies, to index energy tariffs and ultimately to implement a transition into market based commercial system from 2014.  This work is being implemented as part of a work on improving legal and market based mechanisms of energy sector and introducing a contract based market design, and works being undertaken according to the Ministry work plan. As such, energy sector in our country has been working sustainably with continuous and secure energy supply.

Development trends:

Policy and objectives of the sectoral development, and its  implementation phase
The State Great Khural and the Government of Mongolia approved a “Program on Integrated Energy  System of Mongolia”, “the National Program on Renewable Energy” and the 100 000 Solar Ger’s  Program in addition to “the Comprehensive Policy on National Development” and Government programs include concrete short-term and long-term strategies for the development of the energy sector.   
These policies include plans to set up a fully integrated energy system by 2040 by establishing a transmission line between the Central, Western, Eastern, Altai-Uliastai energy systems, Dalanzadgad CHP and energy systems in Gobi region. The sector development and policy documents planned to establish thermal power plants relying upon Tavantolgoi, Shivee Ovoo, Baganuur, Khushuut, Nuurst Khotgor, Aduunchuluun and Mogoin river coal mines as well as to fully meet the increasing energy demand of the country and to have a capacity to export electricity to neighboring countries by producing energy from hydropower plants at Eg, Orkhon, Selenge river, solar and wind power plants to be built in Gobi and central region and nuclear power stations that can be built in Dornod region.  

Implementation of the Program on Integrated Energy System of Mongolia:

Currently, all 21 aimags and 318 soums are supplied by centralized energy source while 15 soums are supplied from renewable sources  and other hybrid systems. The first phase or short-term (from 2007 to 2012) action plan of “the Program on Integrated Energy System of Mongolia” is currently being implemented successfully. 

Implementation of “the 100,000 Sun Lights” and “the National Program on Renewable Energy”:

Currently, use of renewable energy sources for power generation has become a reality as a result of which about 100,000 nomadic families and 15 soums have access to electricity using a renewable energy sources. “100,000 Sun Lights” national program will be completed in 2011 with the final distribution of 20,000 solar home system.
Implementation of the plan on providing independent solar, wind and hydro energy sources to soums isolated from centralized energy system is underway with 11 small scale hydropower plants, 5 solar and wind hybrid electricity stations, 8 solar energy stations, 1 wind power stations working in soum and baga (administrative unit) level.  In addition, Durgun and Taishir hydropower plants went into operation serving as a source of electricity in western provinces. 

If to assess energy sector according to its developmental phases, the period between 2000 and 2008 was a time of electrification where structural changes into the energy sector was made, state policy on providing electricity were implemented, all aimags and soums in the countryside were connected to electricity and nomads were provided with small scale renewable energy sources.
Period from 2008 to 2011 became a time when equipment and technologies were upgraded and renovated and when preparatory works for supplying sources to regional electricity systems went underway.
The period between 2011 and 2016 can be seen as a beginning of new development era in which large scale energy supply networks and main power lines will be built to establish an Integrated Energy System which will meet the country’s ever-growing energy demand. This period is considered to be  a technologically progressive stage to bring up the energy sector development to a new stage  with modern and environmentally friendly technologies.

Short-term strategy and goals:

In the near future, if new energy sources are not built, a great deal of challenges and difficulties are likely to arise due to growing demand in energy demand in Ulaanbaatar city. Meeting the increasing energy demand of big mining and mineral resource projects that will be implemented as part of the Law on Air Pollution Reduction and “the Program of New Reconstruction and Growth” and the need to urgently solve these issues may result in a serious consequences possibly leading to energy capacity deficiency.   Although the issue of developing a new energy sources has been discussed and planned within the sectoral policy systematically, it has been ongoing issue due to lack of finance and other constraints. Now it is of crucial importance for us to settle this issue of developing new energy sources in a complex way.

Moreover, supporting private sector involvement in the energy sector, creating a favorable legal and tariff condition, developing public-private partnerships are issues that should be settled and can be a gateway to the resolution of above mentioned challenges facing the energy sector in Mongolia.

Above issues that should be urgently settled by the Mongolian energy sector in near future incline the need for amending main policy documents of energy sector. Therefore, the Ministry of Mineral Resources and Energy (MMRE) is working to make such amendments within this year on key policy documents like “the Program of Integrated Energy System in Mongolia” and “the Master Plan of Energy Sector”. Research analysis and calculations that will be conducted as part of these program/ plan amendments will make energy consumption growth trend and demand supply policies and plans more specific and detailed resulting in a quality document that follows not only Mongolia’s economic and social development trends, but also follows the international standards. Such a fact based document will also meet the requirement of investors, thereby creating a favorable environment to implement projects planned within the program.
According to numerous studies conducted from government and international organizations on large industrialized and settlement regions and cities (Power consumption prognosis by 2020 based on the General Plan of Ulaanbaatar city Development;  power demand prognosis study of the central energy system of Mongolia and the Gobi mining zone, conducted from Asian