Why Renewable Energy is important

Mongolia, the land of eternal blue sky, is blessed with abundant natural resources. Export of minerals, in the raw material form, continues to be the backbone of Mongolia’s economy. However, Mongolia has a huge potential to diversify its economy to benefit both its people and its environment. As the world moves towards a more sustainable future, Mongolia has great prospects to capitalize on its vast potential for renewable energy to ensure the health and prosperity of the future generations. Furthermore, to meet its growing electricity demand, Mongolia is in urgent need of new generation capacity and replacing ageing, inefficient coal-fired power plants.

Wind, solar and hydropower are becoming widespread around the world and for good reason: unlike fossil fuels, renewable energy sources produce little to no local pollution or greenhouse gas emissions, and are instrumental in combating climate change. As Mongolia is one of the countries most impacted by climate change, taking measures to counter the effects of climate change is imperative for the future health of Mongolia. Renewable energy can be used without depleting the earth's precious non-replenishable limited resources.
Renewable energy is increasingly economically competitive and contributes to independence from energy imports.

How Renewable Energy can benefit Mongolia

Mongolia is uniquely positioned to generate renewable energy to provide reliable and affordable electricity for its growing population and beyond. The Gobi Desert for instance, has been identified as having among the highest solar and wind energy potential in the world, with over260 days of bright sunlight and a strong wind corridor.

Furthermore, wind and solar have become the cheapest ways to add new power generation capacity, and therefore unsurprisingly make up the majority of new capacity additions globally. After a decade of incredible cost reductions – driven by technological innovations, economies of scale, stable policy environments and the use of competitive tenders – onshore wind and solar now offer the cheapest form of new generation capacity in almost all jurisdictions. By deploying well-designed auctions, countries around the world have been able to achieve low tariffs. With the right investment climate, Mongolia is well positioned to benefit from low cost renewable energy given its enviable resources.

In addition to being cheap, wind and solar PV will utilise domestic resources, and thus contribute strongly to Mongolia’s energy security and independence.  By increasing the share of energy from renewable sources, Mongolia can significantly reduce greenhouse gas emissions and contribute to global efforts to limit temperature rise. In urban areas, renewable energy can greatly contribute to cleaner air which in turn results in better public health, a decrease of respiratory illnesses and non-communicable diseases and a drop of premature deaths among the population.

A growing renewable energy sector in Mongolia can help create employment in new, growing sectors, and attract foreign direct investment if Mongolia takes advantage of its abundant natural resources, and makes the pivot to invest in renewable energy jobs. In the long term, thermal coal imports of other countries are expected to decline as these countries are in the midst of a climate and energy transition. In this situation, Mongolia could establish itself as a leader in mining and export of natural resources that are used to manufacture batteries and other energy technologies. Strengthening a renewable energy market in Mongolia could help to diversify the economy and open the gates for foreign investment in factories to manufacture and export clean technologies to an ever-growing global market. In addition, the use of renewable energy and increase of energy efficiency can also assist the extractive industries sector to become more resource and cost-efficient and therefore help maintain competitiveness.

We encourage Mongolia to move in the direction of a "balanced energy mix" to ensure energy stability and reliability by creating basic conditions for the development of renewable energy. Though, in the long run it would be prudent to prioritize renewable energy as the primary source to meet Mongolia’s energy needs and utilize fossil fuels as a back up.

Common Concerns

Renewable energy, such as wind, solar and hydropower may require significant upfront investments and infrastructure development, but these costs will be compensated by the long-term benefits. Some procurement strategies, such as procuring renewable energy from the private sector through competitive tenders, may reduce the need for significant upfront public investments while retaining the environmental and financial benefits of renewable energy.

One of the often-repeated concerns about renewable energy technologies such as wind or solar PV relates to their variable power generation. In other words, electricity generated from such sources fluctuates, based on varying wind and sun availability, which requires new grid management technology and approaches. To accommodate a high renewable energy penetration in the power system, it is necessary to increase investments in the power system to make it bigger, stronger, and smarter, particularly the transmission network. One of the key measures that can be taken is to enhance the flexibility of the system by installing battery storage, pumped storage, or in the future, generate green hydrogen. Initial experience shows that Mongolia is ready to overcome this and other barriers. For example, the Asian Development Bank is financing Mongolia’s first utility-scale advanced battery energy storage system near Ulaanbaatar. In addition, Japan is supporting the installation of a battery energy storage system at the electric power substation in Darkhan. These facilities can supply clean power at peak demand times and helps to integrate additional renewable energy capacity in the power system. Initiatives such as these can provide the necessary demonstration effect to address the perceived risks associated with a renewable energy integration, and ultimately provide the basis for replication at scale.

From the financial point of view, foreign direct investment is key to developing renewable energy in Mongolia. However, foreign investors hesitate to further invest in Mongolia unless Mongolian authorities restore investors’ confidence by fully resolving the outstanding issue of energy tariffs under the power purchasing agreements with the renewable energy producers.

Examples from Other Countries

The good news is that these challenges are manageable and many countries around the world are already operating power systems with high penetrations of variable generation capacity. Ireland is a good example, which already produces over 35% of its power from onshore wind. Like Mongolia, Ireland has very few interconnections with other countries and therefore largely has to balance its grid alone.

Mongolia’s regional neighbours in Central Asia, such as Uzbekistan, are rapidly moving ahead in the development of wind and solar PV capacity. Uzbekistan has established a renewable energy auctions programmes and successfully contracted new capacity at very competitive tariffs. Uzbekistan is aiming to develop 7 GW of solar and 5 GW of wind capacity by 2030, with the goal of meeting 25% of its electricity needs through renewable energy sources by that time.

Australia, which like Mongolia faces the challenges of large distances between the renewable energy source and the grid and a heavy reliance on coal-fired power, is on the path to transition to the goal of 82% of electricity needs from renewables by 2030. Today, renewables account for an estimated 36% of Australia’s total electricity generation compared with just 17% in 2017.

Conclusion

Mongolia is now at a crossroads, where it has the opportunity to embrace renewable energy and become an active promoter of sustainable development. Mongolia has ratified international conventions, such as the Paris Agreement, a legally binding international instrument on climate change, and has pledged ambitious goals to reduce its greenhouse gas emissions by 22.7% by 2030. Creating a favourable legal and regulatory framework for investing in renewable energy is a key part of fulfilling these commitments.

All countries are facing the challenge of transitioning to carbon neutrality as a long-term imperative. A transition like this of course does not happen overnight. Coal may remain an essential energy source for Mongolia but has a limited horizon, whereas renewable energy is the future. Embracing renewable energy aligns with Mongolia's traditional values of respect for nature. Mongolia has a unique opportunity to lead the way in sustainable development, attract investments and become a model for other countries in the region to combine respect for nature and combating climate change with investing in the promotion of human prosperity and health.

In conclusion, investing in renewable energy for Mongolia is beneficial from multiple angles. It would provide benefits for the environment and the people of Mongolia, but also for the economy, energy security and independence. The potential is there, but it needs to be harnessed and capitalized on. This is an endeavour in which Mongolia’s development partners stand ready to support, so to ensure a brighter, healthier, and more prosperous future for generations to come.

The undersigned list of partners in Mongolia’s renewable energy transition

• Embassy of Australia
• Embassy of the Czech Republic
• Delegation of the European Union
• Embassy of France
• Embassy of Germany
• Embassy of Hungary
• Embassy of Japan
• Swiss Cooperation Office and Consular Agency
• Embassy of the United Kingdom
• Embassy of the United States
• Asian Development Bank
• European Bank for Reconstruction and Development
• United Nations Development Program
• United Nations Resident Coordinator Office
• World Bank