Energy Insight's E. Misheel interviewed B. Dulguun, the Executive Director of the New Recovery Policy Accelerator Center, discusses Mongolia's energy sector's current situation and its challenges.

Mongolia has established an international objective to fulfill 30 percent of electricity consumption through renewable energy by 2030. Can this goal be attained?

Mongolia has set an international target of achieving 30 percent renewable energy. Presently, a more immediate priority confronts us. Addressing today's challenges takes precedence before advancing towards future objectives. The peak load growth in Mongolia s tands at 6-7 percent for households and 8-10 percent for enterprises or industrial consumption. Given the scarcity, it is imperative to maximize the addition of new sources. Since the implementation of the "New Recovery Policy," no new sources have been integrated into the power grid in the Central region, barring the expansion of the Amgalan thermal power plant.

 What is your organization's proposed solution to address this issue?

Based on our study, by 2030, given the risk and safety considerations within the power grid of the Central region, it is imperative to augment the installed capacity by an additional 1,200 MW when the capacity exceeds 90%. The significance of energy as the primary focus in the initial phase of the six recovery outlined in the "New Recovery Policy" is rooted in the understanding that without a corresponding increase in energy capacity, the realization of our country's true economic potential becomes untenable.

Were there any other findings derived from the s tudy?

Examining the broader perspective of the energy sector, the study reveals the concept of the "triad of energy impossibility." This concept entails the challenge of simultaneously supplying energy consistently, ensuring the stability of the energy sector, and achieving energy independence. The term "impossibility" is attributed to the fact that, in the medium term, Mongolia can opt for one or two of these three objectives but cannot feasibly achieve all three concurrently due to current resource limitations. Consequently, it is deemed suitable to prioritize long-term electricity independence, while simultaneously addressing financial independence and ensuring energy stability in the medium and short term.

What challenges do energy projects encounter within the framework of the New Recovery Policy?

Several challenges confront energy projects within the scope of the "New Recovery Policy," encompassing f inancing, implementation, governance, and pricing mechanisms. The majority of projects associated with the action program of the policy involve coal f ired or thermal power plants. With global warming concerns and diminishing foreign investment in coal based plants, reliance on domestic sources becomes inevitable. Furthermore, future electricity producers should restructure their systems to compete, opening avenues for project initiation with self-investment through competitive processes. Conversely, integrating renewable energy projects into the central region's grid necessitates decisions based on ensuring reliable supply during peak hours and facilitating mode configuration. This approach indicates that the industry is poised to align with the principles of the free market.

What is the current status regarding energy exports? 

The study has determined that developing the export market involves segregating it from the domestic market. As part of the initial phase's action program for implementing the "New Recovery Policy," preliminary s tudies were conducted on the potential export of renewable energy generated from solar and wind sources. Specifically, research explored the feasibility of exporting energy to certain regions in China. Simultaneously, observing international trends indicates the initiation of an energy transition, necessitating our country to align itself in parallel with these developments.

To foster economic growth, it is imperative to advance the industrial sector. A study conducted last year indicated that the industrial sector accounted for 37 percent of the world's electricity consumption. How does our country compare in this regard?

Analyzing the breakdown of total electricity consumption in our country, agriculture constitutes more than 0.8 percent, while the industrial sector accounts for 39 percent, and the construction, transportation, and other service sectors collectively contribute around 20 percent to domestic energy usage. The industrial sector can be further classified into mining and processing. Regarding mining, local enterprises operate in areas without connections to the eastern, western, and southern region networks. Mining companies in these unconnected areas resort to diesel generators to meet their energy needs, resulting in energy costs that are 5-6 times higher. By December 2023, you are likely aware of the state of affairs in the energy sector without me elaborating.

Are there any drawbacks or disadvantages associated with renewable energy in general?

Consider a coal-fired power plant capable of providing a continuous 300 MW output throughout the day, a capability distinct from a 60 MW solar and wind farm. The challenge lies in managing fluctuations due to changes in sun and wind conditions on a given day. Renewable energy, while offering advantages such as generating electricity and heat without fuel on windy days, comes with its own set of drawbacks. Nonetheless, the global shift towards renewable energy is irreversible.

The significant challenge is how we can integrate and adapt innovative technologies and accomplishments from the global energy sector into Mongolia. For instance, during my visit to Finland and exploration of "Polar Night Energy" activities, I learned about their innovative approach to addressing the heat problem by utilizing sand to store electricity by heating. Additionally, in a recent discussion with the manager of a project s tarting in Spain, they plan to employ a specific type of salt for storing electricity and heat energy.

When and how will these reforms be carried out?

The discussion around reform implies the execution of established policies. In our economic development, we often refer to the policy trio, emphasizing three crucial factors for policy success. Firstly, any policy or project should effectively target and address the underlying problem rather than merely presenting a solution that leaves the issue unresolved. Secondly, securing political support is vital, as it enables the allocation of funding and other necessary resources. The third factor underscores the importance of the implementing organization's capacity to execute the policy successfully, considering varying levels of difficulty in implementation.

The success of a project or program hinges on the organization's capabilities surpassing the difficulty level associated with the project or policy. Worldwide, instances abound where well-designed policies falter due to a lack of political support, often linked to organizational capacity. Among these factors, political support emerges as the most critical element for instigating change and reform in the energy sector. This ensures that long-term reforms can be effectively carried out.

Does the energy sector face challenges not only related to electricity but also regarding thermal energy?

In Ulaanbaatar city, the evident challenge lies more in the deficiency of heat supply than electricity. Consequently, the Thermal IV Power Plant is adjusting its production by reducing electricity output and augmenting heat production. The cost of delivering heat to consumers is 2-4 times lower than the actual cost, leading to the sector's loss being offset through cross subsidization or absorption in the electricity tariff. In simpler terms, substantial subsidies are directed towards heat. While there is a need for energy price reform, concerns arise about its impact on people's lives. To address these concerns, a study was conducted to assess how an increase in tariffs to reflect the actual cost would affect household consumption, livelihoods, and poverty levels. Currently, the electricity bill constitutes 2.2 percent of a household's income. Based on the findings of these s tudies, it was determined that raising the tariff to the actual cost level will not burden households and will not have an adverse impact on poverty.

 Thank you for the interview.