Mongolia: Filling energy deficit
Plans for a large power plant near Ulaanbaatar underline how Mongolia’s surging growth in resource revenues can be used to meet looming energy shortfalls in urban areas. However, more innovative sources are needed to supply power to the rural expanses of the country’s steppes.
In September, a group of foreign energy firms revealed plans to invest $1.3bn in a power plant near the capital. France-based GDF Suez, South Korea-based Posco Energy, Japan-based Sojitz and local firm Newcom developed the deal with the government under a 25-year power purchase agreement.
The facility, which is expected to be complete by 2016, will become the country’s fifth thermal power plant (TPP) and supply roughly half of Ulaanbaatar’s energy needs.
The coal-fired, combined heat and power plant will have an electricity capacity of 415 MW and a steam output for heating of 587 MW. The plant will have three circulating fluidised bed boilers that use efficient pollutant control measures. Construction is expected to begin in 2013, according to Sojitz officials.
The news is timely for the city: in October the Ministry of Energy warned the capital’s citizens of an impending electricity shortage that may require the electricity to be stopped in certain areas of the city in December. To make matters more difficult, the country’s freezing winters increase demand on the heating system by up to 18%, adding stress to the current supply.
The new power plant follows the Mongolian government’s granting a licence for a new 600-MW TPP in November 2011 to Canada-based Prophecy Coal, which plans to use coal from the Chandgana Tal deposit, located some 60 km from Underkhann city. The plant will be operated by Prophecy Coal’s Mongolian subsidiary, East Energy Development.
“There is an understanding among all stakeholders that Mongolia, being one of world’s fastest-growing economies, needs additional power. With the IMF projecting a deficit of over 600 MW by 2016, this need has become critically urgent and can no longer be delayed,” said John Lee, the chairman and CEO of Prophecy Coal, in November 2011.
As of 2011, the current installed power capacity for coal-fired power plants in Mongolia was 814 MW, but only 646 MW was available due to ageing power plants, with most being over 30 years old. At present, just 67% of the population has access to power and 35% to water.
Other power projects are also under development, including a 60-MW power plant for the Mogoin Gol coal deposit, a 12-MW power plant for the Khushuut coal deposit, an 800-MW power plant for the Sainshand industrial cluster, and two 50-MW wind farms, including the Salkhit wind farm.
Thermal coal dominates the energy mix at 79.1%, and remaining reserves are estimated to be 2.5bn metric tonnes. Much of this, however, has been slated for export: some 20m tonnes were exported to China in 2011.
Critics say it is infrastructure deficits that have the biggest implications, pointing to the irony of domestic power shortages in a country that boasts a potential coal-product output of 55m tonnes per year. The lack of additional electricity capacity has also hampered the development of many mines, which are viewed as crucial to economic growth in Mongolia.
For example, Rio Tinto, the UK-based mining firm, revealed in October that it was close to finalising a power agreement with China to begin commercial copper and gold production at the Oyu Tolgoi project in the first half of 2013. Delays will cost the Rio Tinto $8.4m each day in delayed revenues.
While the planned power plants will ease pressure on some mines and the capital, the country’s size and widely dispersed population make it challenging to reach Mongolians who are off the grid.
To reach the more rural parts of the country, the government has created the Renewable Energy and Rural Electricity Access Programme, a new effort to supply portable off-grid solar home systems. Over 500,000 men, women and children now have access to electricity for lights, televisions, radios, mobile phone charging and small appliances.
In further advances for renewable energy, in October two of the 31 wind turbines planned for the Salkhit wind farm were raised. It has been estimated that Mongolia has the potential to generate 2.6 TW of renewable energy per year.
The array of energy projects the government has planned highlights its commitment to ensuring the country’s vast resources are used to build a modern and sustainable energy network. However, unless more investments are made in energy infrastructure, the initiatives may prove insufficient.