Renewable results: Using open space to generate wind and solar power

With much of Mongolia’s current electricity and heating needs being met by coal, energy planners have in recent times been looking much more closely at diversifying the mix. A front-runner for future generating capacity is renewable energy (RE), with solar and wind power both likely to be major providers. Indeed, the country’s first new power generation project in 30 years, now under way, is a 50-MW wind farm.

RATIONALES AND FRAMEWORKS: The reasoning behind Mongolia’s push for RE is evident not only in the degree of pollution caused by coal burning, but in the geography, culture and climatology of the country itself. Covering an area of 1.56m sq km, with a population of 2.7m, Mongolia is the most sparsely populated country in the world. Traditionally, and still today, a large part of the population live in small, isolated communities in rural areas, pursuing a semi-nomadic existence as herders. The land these people inhabit varies from desert to high mountains, with most of the country consisting of steppe. While often bitterly cold, Mongolia also enjoys one of the highest numbers of hours of sunshine of any country on earth, with an average of 257 cloudless days a year.

FERTILE TERRITORY: It was this profile that first attracted the attention of RE specialists. Organisations such as the Renewable Energy Corporation of Mongolia, which dates to the end of the Soviet era and later transformed into the Institute of Renewable Energy, alongside internationals such as the UN Development Project and the International Finance Corporation, first began looking at ways to use wind, solar, biomass and mini-hydro projects to provide electricity to these isolated herder communities. A long way off-grid, these groups could use RE instead, with cheap small wind turbines and photovoltaic (PV) cell systems providing the small amounts of power they need.

Yet the amounts of potential RE capacity in these isolated areas are far from small. Wind and solar are estimated to each have a potential minimum of one terawatt of generating potential, if fully harnessed. While much of this is in the Gobi desert, other areas also have possibilities – as anyone who has experienced the wind and sun of Ulaanbaatar can testify.

Large parts of the country lie on the North Asian Wind Channel. A wind atlas of the country completed by the US National Renewable Energy Laboratory shows around 40% of the country’s area, mainly in the south-east, has good conditions for rural wind power generation and moderate conditions for utility operations, with average speeds from 5.6-6.4 metres per second. Furthermore, some 10% of the land surface – some 160,000 sq km – is considered “windy land” and ideal for generation purposes.

Investors have caught on to this opportunity. The US giant General Electric (GE) is an investor in the $100m wind-farm project outside Ulaanbaatar and has been selected to provide 31 wind turbines. Salkhit Wind Farm, as it is known, is expected to be unveiled in late 2012 and will be operated by Clean Energy LLC, a subsidiary of Newcom Group, GE’s local partner.

Given the sparse distribution of population, there are large areas available for wind farms and solar arrays that are out of sight of population areas and thus do not present the same sort of concerns about noise pollution and eyesores that they can in more densely populated developed countries. Another key advantage for Mongolia’s RE sector is that it is located right next door to China, the world’s leading manufacturer of wind turbines and solar panels.

A NEW AGENDA: Seeing the potential for taking RE to a much higher level than supplying small communities, in 2005 the government put together its National RE Programme (NREP), set to run to 2020, followed by the RE Law introduced in 2007.

The NREP has two phases of development, the first from 2005 to 2010, the second from 2011 to 2020. For the first period, a target of 3-5% of total installed capacity coming from RE was set, rising to 20-25% by the end of the second phase. The programme also aimed to finish a “100,000 solar gers (tent)” target by 2010, installing solar power electricity to 100,000 family gers, moving on to supply every rural family with RE-based power by 2020. This ger project was a programme begun in 2002 with Chinese government and Japanese International Cooperation Agency aid.

TARIFFS: Achieving these ambitious targets required an equally ambitious legal framework, and thus the 2007 law came into play. Key to the law, and private sector interest, is its provision of a tariff range through which a private company can negotiate a power purchase agreement with the regional grid companies. This was set at $0.08-0.095/KWh for grid-connected wind and $0.10-0.15/KWh for stand-alone wind, and $0.15-0.18/KWh for grid-connected solar and $0. 20-0.30/KWh for stand-alone solar. The tariff for hydropower was set at $0.04-0.10/KWh. These rates are also guaranteed for a period of not less than 10 years after the law came into effect – at least to 2017.

The variation in the bands exists because the law allows for negotiation on tariffs between the power producer and the regional electricity authority. Mongolia has three such authorities, the Central, Eastern and Western. These are not connected, however (see overview). Thus, the law made way for the negotiation of power purchase agreements (PPAs) between the authorities and private companies, with the first of these to be signed between Newcom Group and the Central Regional Electricity Transmission Network.

WIND FARM: This was for a 50-MW wind farm on Mount Salkhit, some 78 km south of Ulaanbaatar. Construction began in 2011, with financing for the $100m project supplied through a joint venture with the European Bank for Reconstruction and Development. The wind farm is being run by Newcom Group’s Clean Energy. Commissioning is expected to take place in November 2012, with Clean Energy also building its own transmission lines to connect the wind farm to the grid and its own substation to manage supply.

The hope is that this will be only the first in a series of large wind-power projects across Mongolia. Indeed, Newcom has already secured a further 200,000-ha site in South Gobi, which has the potential to accommodate a wind farm with a capacity of at least 1 GW. RE projects can also gain considerable benefits – such as Customs and value-added tax exemptions on equipment, with small and medium-sized enterprises active in the business standing to gain the most from these.

ENCOURAGING PRODUCTION: This may also spur further development of solar power in the future. Currently both the private and public sectors are doing some research, with many small projects under way. Next door in Chinese Inner Mongolia, which enjoys similar climatic conditions, solar power is significantly more advanced – Canadian Solar, for example, is developing a 500-MW solar plant at Baotou, with its first 100-MW phase set to come on-stream in December 2011. Yet business conditions are not always what they seem, as the US’s First Solar found out when its agreement to build a 2000 MW solar plant – the world’s largest – near the Inner Mongolian city of Ordos encountered unexpected delays. Mongolian authorities argue that their independent country next door offers a much better business environment.

The country also offers a wide range of sites. A 2009 Asian Development Bank study showed that the highest potential area is the Gobi, which runs in a broad band across the south of the country, although other areas further north also get good year-round sunshine. In terms of KWh/sq metre, there are essentially three regions to the country – the southern Gobi band, with around 1600 KWh/sq metre per year; a central 1400 KWh/sq metre band; and a small northern band at around 1200 KWh/sq metre per year.

DESERT SUN: In the Gobi, around 40% of the terrain is suitable for large-scale PV plants, with this composed of around 25% desert, 10% inferior steppe and the rest superior steppe. The study also concluded that there was a strong case for both large-scale PV and concentrated solar power (CSP) plants in the Gobi.

In terms of progress so far, a joint Japanese-Mongolian feasibility study into PV has been carried out in Sainshand, which is due to finish with a 1-GW capacity plant that will be in operation by 2020. This will feed into the central grid, while also having an eye to export power across the border to China. Sainshand is also due to be the major new industrial centre for the country, with demand for power expected to increase exponentially in the years to come.

For now, while these remain early days for RE in terms of output – perhaps 2% of the country’s installed capacity currently comes from this source, less than the NREP target – the basic research is there and the interest is growing. While the domestic market may be small, and the logistical issues challenging, the potential is there in terms of three future trends, namely the global drive toward renewable energy with Mongolia’s vast resources positioning it as a powerhouse; the expansion of Mongolia’s domestic demand for electricity – and particularly for clean electricity, given the current levels of pollution – and the demand that is likely to be found over the border in China.

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The Report: Mongolia 2012

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