Forecasting Mongolia’s energy demands and the green energy systems to meet them

By Daniel Muñoz-Smith, GGGI Communications Specialist 

Mongolia is well known as a couUlannbaatar cityscapentry of temperature extremes; scorching highs of 40 degrees Celsius in the Gobi desert, and frigid minus 40 degrees Celsius lows during the long winter months. Such extremes, however, are not limited to weather, as recent developments have demonstrated that the steppe nation is also prone to significant swings on the economic pendulum.

With an economy primarily rooted in mining and agriculture, Mongolia is vulnerable to the volatility inherent in global mineral prices and the particularly harsh winters noted above. This relatively undiversified economy leaves the country susceptible to destabilizing boom-bust cycles.

Mongolia’s most recent boom period saw the landlocked country average 5.8% growth from 2000 to 2009; In 2011, Mongolia set an incredible growth rate of 17.5%. This exceptional growth came as a result of strong global energy prices, and Mongolia’s emergence as an energy provider, largely in the form of coal to China and other Northeast Asian countries.

These halcyon days now, however, appear to be over as 2014 saw the Mongolian economy slump. A number of factors contributed to this downturn including a sharp drop in the price of global energy commodities, and a plunge in foreign investment, which declined by 82% during the first three quarters of 2014, as foreign firms raised concerns about the lack of progress in a number of large mining projects.

This skepticism from the foreign investment sector, coupled with falling commodities prices has caused political repercussions and has underscored Mongolia’s reliance on mineral wealth and energy production to fuel the economy and forward national development.

Greening Mongolia’s Energy Systems
The Mongolian government, of course, is keenly aware of this over-reliance and the problems it creates for economic growth and the country’s environmental sustainability. While the energy sector is the target of most foreign investment, its by-products are also the primary source of Mongolia’s greenhouse gas (GHG) emissions. Mongolia is, therefore, striving to reduce the economic susceptibility and environmental impact of its energy production-based economy.

In 2013, Mongolia partnered with the Global Green Growth Institute to launch the Strategies for Development of Green Energy Systems in Mongolia project. Carried-out in collaboration with the Stockholm Environment Institute – U.S. Center, the project prepared a report that posits plausible Mongolian green energy systems that would reduce GHG emissions, improve air quality, and facilitate other socio-economic benefits.

“The substantive recommendations drawn from this report are designed to support policymaker efforts to enhance the county’s development through green and sustainable frameworks that increase energy efficiency and reduce GHG emissions within critical sectors of the Mongolian economy,” said Jennifer Butz, Director for North and Central Asia in GGGI’s Green Growth Planning and Implementation Division.

The recommendations are based on an analysis of 4 different scenarios forecasting Mongolia’s energy supply and demand within the industry, transport, buildings, and agriculture sectors.

Reference ScenarioExpanded green energy scenario_electricity generation

The reference scenario forecasts a Mongolia that continues to rely on mineral extraction for its primary source of energy, both for export and domestic consumption. This scenario sees total energy demand more than doubling in Mongolia between 2010 and 2035, with demand for electricity and petroleum products growing especially fast. Coal-fired plants continue to be the primary source of energy to meet this demand, with renewable energy contributing less than 5% to the production of electricity. In the reference scenario, overall GHG emissions rise to approximately 56 million tons of carbon dioxide by 2035 from a benchmark of just over 15 million tons in 2010.

Recent Plans Scenario

This scenario describes the potential impact to energy supply and demand in Mongolia as a result of the successful implementation of renewable energy and increased energy efficiency plans recently adopted by the Ministry of Energy and Ministry of Environment and Green Development. Such plans include the retrofitting of apartment buildings to reduce energy demands by 6%, and the expansion of hydroelectricity, and wind power, to increase the contribution of renewable energy to total electricity production by 15%. The recent plans scenario would see total GHG emissions rise to about 46 million tons of carbon dioxide by 2035.

Expanded Green Energy Scenario

In this scenario, Mongolia makes a stronger transition to renewable energy and implements extensive energy efficiency measures across its economy. These initiatives help reduce energy demand by 32% when compared to the reference scenario, while the realization of multiple hydro, solar PV and wind power projects, increase the contribution of renewable energy to electricity production to more than 40%. Reductions in energy demands coupled with increases in renewable energy production provides Mongolia with the option to phase out aging coal-fired power plants, and possibly avoid new plants altogether. As a result, GHG emissions would be half, or 28 million tons, of those forecast in the reference scenario.

Shifts in Energy Export Scenario

The shifts in energy export scenario realizes the same reduction in energy demand as the expanded green energy scenario, and differs only in that Mongolia has divested itself from mineral-based energy exports, in favor of renewable energy exports. Rapidly investing in and developing its solar PV and wind resources, would allow Mongolia to install almost 12 GW of renewables by 2031, which could displace a large fraction – perhaps even all – of the value of expected coal exports noted in the reference scenario. The shift scenario would increase Mongolia’s “low-carbon competitiveness” within a global market where demand for fossil fuels has declined due to increasing concerns over climate change.

Supporting Mongolia’s Green Energy Future
Moving toward the expanded green energy scenario detailed in the report would provide Mongolia with the best opportunity to reduce its energy demands and reliance on mineral resources, halve projected GHG emissions, and significantly increase the capacity and output of renewable energy. This would in turn allow Mongolia to develop a significant source of “green growth” through a shift in the makeup of its energy exports, and position the country as a regional provider of renewable energy.

“If Mongolia’s energy systems are well developed and supported by international energy efficiency standards, modern technology and other innovations, the nation stands to save energy, reduce greenhouse gas emissions and conserve resources”, said Yvo de Boer, Director-General of GGGI. “A greater use of renewables and cleaner energy sources will also have a direct impact on the natural environment, hum10월_Mongoliaan health and support economic growth goals.”

Achievement of this optimal green growth environment could be facilitated by the implementation of the report’s highlighted policy initiatives highlighted, which look to: strengthen existing energy laws and develop new legislation to bridge existing gaps; reform the systems that provide subsides to coal production and encourage inefficient energy use; develop and enforce stronger energy efficiency standards for buildings and vehicles; and enhance guidelines for urban planning, with particular emphasis on land use and transportation.

The resources and steps needed to further develop and implement these policy initiatives are outlined in the report and include additional research, pilot programs, technical and financial support from the international community, and of course leadership on the part of Mongolia’s politically elected officials.

Clearly understanding the importance of political support to move forward with policy initiatives, GGGI engaged partners from the Ministry of Energy and other Mongolian institutions throughout the development of the report.

“The participation of Mongolian stakeholders in this process delivers a degree of buy-in that will help ensure that this report serves as a valuable resource for policymakers making key decisions about the future of Mongolia’s green energy systems,” said Jon Lyons, GGGI’s Mongolia Country Representative.

The report, while not formally endorsing any one of the 4 scenarios, has demonstrated that continued reliance on a mineral resource-based economy need not be the only option for Mongolia; a green, sustainable economy that meets Mongolia’s growing energy needs and achieves socio-economic development is possible.

Read the full report here.