EARTH, WIND, AND SOLAR: MAKING RENEWABLES HAPPEN IN

UNCLAS ULAANBAATAR 000112


BANKGOK FOR REO HAL HOWARD

E.O. 12958: N/A
TAGS: ENRG ECON PGOV SENV PREL EAID MG
SUBJECT: EARTH, WIND, AND SOLAR: MAKING RENEWABLES HAPPEN IN
MONGOLIA


1. (U) SUMMARY: Mongolia's abundant animal, solar, wind, and hydro
resources offer tremendous opportunities for the government and
private investors to establish a vibrant renewable energy sector.
The government openly encourages development of these resources, but
apart from intermittent successes among a range of small projects,
widespread, successful, sustained use of renewables continues to
prove elusive. Lack of institutional capacity to assess the precise
nature of renewable energy sources and to develop and execute
projects and programs remain the key impediments to advancing
renewable energy use in Mongolia. END SUMMARY.

MONGOLIA: HOME TO VAST RENEWABLE POSSIBILITIES
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2. (U) Animal waste, sun, wind, and water are Mongolia's most
abundant renewable energy resources, but the country has not yet
developed a comprehensive strategy to harness their power. To date,
no complete study on the viability of these resources has been
conducted. Informed observers, however, believe that Mongolia's
rural population might benefit most from a comprehensive renewable
energy strategy. Sixty percent of Mongolia's population (roughly
1.5 million people) lives in rural areas, which is also home to more
than 40 million head of livestock. Many rural dwellers live outside
of aimag (provincial capital) or soum (county) centers, and have no
access to the central electric grids that link their respective
provinces to the national power. For those who do reside in rural
towns, power outages from the central grid are a regular feature of
daily life.


3. (U) In addition, the five westernmost aimags have no connection
to the central grid at all, and must rely on expensive imported
power from Russia or costly diesel generators. Moreover, reliance
on Russian power gives Russia a continuing hold over Mongolia. In
short, the average rural dweller has at worst no power, and at best
unreliable, expensive power. For these consumers, untapped
renewable resources present economically viable, appropriate, and
achievable alternatives.


4. (U) Use of renewables is not a new concept in Mongolia's
countryside. Currently, almost every herder family collects and
saves animal waste, especially dung, which is used for fires for
cooking and heating in lieu of coal and timber. With 40 million
plus livestock, Mongolia's rural population remains among the
world's best recyclers. They need no lesson in the value of these
fuels, although long-time observers note that more efficient stoves,
combining heat retention and ease of transport, would be a plus.

INITIAL POLICY STEPS
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5. (U) The Parliament of Mongolia has produced two main policy
documents on renewable energy. The first, the 2005-2020 National
Renewable Energy Program (NREP) was released in June 2005, followed
by passage of the Renewable Energy Law of Mongolia in January 2007.
Mongolia, like many other countries, considers expansion of
renewable energy, energy efficiency, and greenhouse gas abatement
technologies as national priorities. Although the legal framework
is now in place, Mongolia needs to increase the institutional
capacity of both its government agencies and energy companies in
order to proceed with the structural reforms that would allow the
implementation of such technologies.


6. (U) To this end, Mongolia is seeking to develop its capacity to
design, install, and operate demonstration projects on renewable
energy, such as small hydropower, wind power, and photovoltaic solar
projects. Organizations such as the Mongolian Academy of Sciences
(MAS) and private renewable energy companies are looking to expand
their respective technical bases in order to develop renewable
energy projects. For example, MAS and Mongolian university experts,
scientists, and technicians are actively engaged in studies in these
areas.

SOLAR: BUILDING ON RECENT SUCCESSES
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7. (U) Since Mongolia enjoys nearly 300 sunny days a year, many
observers believe that solar energy is a highly suitable source for
lighting and electrification in rural areas. (Note: Heating,
cooking, and other needs require other energy sources. End Note.)
Some small solar projects have already been successfully implemented
in Mongolia. For example, the Mongolian Post and Telecommunication
Authority in 1998 built a plant to manufacture photovoltaic (PV)
modules with total capacity of 500 KW (a series of 12, 24, and 50
watt PV modules). The plant purchased its basic equipment from the
U.S.-based Spire Corporation. Assembled modules were installed at
more than 360 country-side soum and aimag telecommunication and
post-office facilities. As a result, essentially every rural phone
and mail station has an independent, PV-based power source to
sustain operations.


8. (U) PV panels are also being used by nomadic herder families,
since they tend to be the least expensive power source in remote
areas. In 2001, the government inaugurated the "100,000 Solar Ger
Program." Now managed by the Ministry of Mineral Resources and
Energy (MMRE),the program, in coordination with other private
resources, has already furnished more than 80,000 herder families
and rural town dwellers with PV systems.


9. (U) While large PV systems did not make economical sense for
urban users, small, portable PV applications were the logical option
for remote users over gas and diesel powered generators, or even
wind powered generators. PV panels are durable, easily
transportable, and can be easily linked to car batteries to power
lights and small appliances for rural households and gers. The
government underwrote the program by covering part of the cost of
the PV systems, with the herder providing a share, usually through
cheap financing for the solar equipment underwritten through
collaboration between MMRE and Mongolian commercial banks.


10. (U) The next phase of the plan is implementing larger scale
solar developments in rural Mongolia. The New Energy and Industrial
Technology Development Organization of Japan demonstrated the
potential of dispersed PV power generation systems, installing a 200
KW system to supply the center of Noyon soum, Umnugovi aimag. This
PV power generation system consists of series of dispersed PV units,
which are connected through bus lines. Dispersed PV systems are
installed at the soum's hospital (40 KW),school (40 KW),telecom
office (10 KW),and soum administration center (10 KW). Three
diesel generators with a capacity of 60 KW each were also installed
and work in parallel with the PV system.

CAN WIND POWER CATCH ON?
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11. (U) According to a 2001 USAID-U.S. Department of Energy National
Renewable Energy Laboratory (NREL) report, 160,000 square km of
Mongolia, or 10 percent of its territory, has good-to-excellent wind
potential for utility-scale wind power applications. Using
conservative assumptions about power potentials, NREL estimated that
Mongolia could reliably generate about seven megawatts (MW) per
square km, or 1.1 GW, and over 2.5 trillion kilowatt-hours (kWh) per
year. More than 25 percent of that potential, 300,000 MW, lies in
the Gobi's massive Umnugovi province. These data show that wind
could play an important role both rurally and in small urban
centers.


12. (U) Studies show that the maximum wind potential in Mongolia is
found in lower elevation regions, especially in the Gobi Desert
zones near the Mongolia-China border. Fortuitously, this is also
close to the most likely market for wind-power output, China.
Mongolia's winds, however, are demonstrably seasonable. Maximum
wind resource potential is from March through June, with April and
May being the windiest months. The wind resource decreases rapidly
after this period, resulting in the lower elevation areas having a
wind resource minimum in July and August. The wind resource
distribution for the period from October through February is more
complex. Some locations show a secondary wind resource maximum in
October and November and a decrease in the resource from December
through February before the primary resource maximum in the spring.
A few lower elevation locations have a winter (December through
February) or autumn (October and November) wind resource maximum.
These seasonal variations in windfall present challenges to tapping
the resource effectively. Still, among renewable energy
technologies, wind energy technology applied in areas with abundant
wind energy resources has proven to be the most competitive in terms
of cost for the bulk power market internationally.


13. (U) Mongolia has very little experience with wind energy.
According to MMRE's Renewable Energy Officer, wind energy use
remains low in Mongolia. The officer attributed this to lack of
technical capacity, funding, and information. There is also a need
to conduct a wind velocity survey to determine the technical and
financial feasibility of this option in Mongolia.

HYDRO POWER ADVANCEMENT CAUGHT UP IN THE RAPIDS
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14. (U) According to Mongolian government and international reports,
Mongolia has an estimated 3,800 small rivers with a total length of
65 thousand kilometers and an estimated hydro energy potential of
6.2 GW. Although hydropower resources of Mongolia have also not
been fully investigated, a number of promising hydropower sites have
been identified. These sites together offer more than one GW of
potential hydropower, with plans in development to build plants with
a combined capacity of 250 MW. In practice, however, large scale
hydro power plants have proven controversial. First, regional
politics complicate tapping water resources. Mongolia has few
rivers deep and large enough for damming. Suitable rivers, such as
ones that are part of the Lake Baikal watershed, raise concerns over
how the Russians would react to Mongolia's inhibiting the flow of
Baikal's prime feeder stream, the Selenge River. Second, many
rivers freeze over during the winter and cannot provide sufficient
flows to generate year-round electricity.


15. (U) In western Mongolia, the desire to free the five western
provinces from dependence on Russian power sources has led to the
construction of two dams connected to hydro power stations. The
economic basis for both projects has been questioned by the World
Bank, the Asian Development Bank, USAID, and the foreign experts
advising the Chinese contractors who built them. Specifically, the
projects' economic rates of return have been considered too low
given the high costs of operation. In addition, in both cases
estimates as to when the reservoirs will be sufficiently filled to
reliably generate power have proven too optimistic.


16. (U) Having borrowed money to construct dams several years behind
scheduled operation, MMRE officials have soured on hydro-power and
have suspended or cancelled future projects. However these same
officials are willing to consider mini-hydropower plants of up to
one MW capacity, which could be used to supply soum centers with
electricity, as an alternative to diesel plants. These are more in
the vein of water mills that would generate electricity in the
spring, summer, and fall months. (Note: Post has also alerted the
MMRE of run of river hydro technologies which could be installed in
river bottoms and not require impeding the flows of Mongolia's best
hydropower sources in the Baikal watershed. We and the Department
of Commerce plan to promote these possibilities at the annual
U.S.-Mongolia Business Forum in Washington in June 2009. This
year's theme is energy production goods and services. End note.)

COMMENT
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17. (U) Mongolia has rich renewable energy potential, and over the
past few years has sought to develop these resources as rapidly as
possible. Renewable energy is highly attractive for rural
electrification in Mongolia. Enterprises of small-sized solar
energy systems for nomadic families are well established, but large
scale projects continue to remain beyond Mongolia's reach. The
available skills, competence and managerial ability of local
experts, technicians, and institutions remain insufficient to
assess, select, develop, and implement projects. There is a need
for capacity building through training, and for the transfer of
renewable energy technologies as well as models and software for
conducing economic-financial analyses and environmental impact
assessments of projects.

HILL