G. Iderkhangai spoke with Energy Minister N. Tavinbekh about the current environment around the Mongolian energy sector, and further action plan as well as “green energy”.
The Erdenburen plant is Mongolia’s first-ever large-scale hydro power plant in terms of capacity; it will be the key to manage domestic power supply
Energy sector has been experiencing years of hardship. Of course, Covid-19 has affected the energy sector. It has been a while since the government decided to zero out electricity and heating tariffs in order to boost the economy. This decision had an impact on energy sector load. How is the energy load now?
Mongolian energy consumption grows at about 4-6 percent per annum. In 2020, total electricity and energy consumption was 8,850.50 million kW/h.
Domestic production from power plants, renewable sources and diesel power plant accounted for 80.7 percent and the remaining 19.3 was imported. In 2020, Central Electric System load reached 1308 MW and we expect it to reach 1371 MW during the peak of winter 2021-2022. In order to accommodate the increase in demand construction to increase the capacities of Erdenet Thermal Power plant by 35MW, Darkhan Thermal Power Plant by 35MW and Thermal Power Plant IV by 46MW respectively, has been completed. Despite the Covid-19 worldwide pandemic and difficulties due to the rapid rise in energy demand, we are dedicated to our social responsibilities and took immediate and successful measures.
Ever since your appointment as Energy Minister, your priority was to focus on big scale energy construction projects. Your policies targeted the inclusion of energy projects into the Government Action Plan and focused on Tavan Tolgoi Thermal Power plant, Erdeneburen Hydro power plant. Which ones are successful among the bigger scale energy projects?
We proposed 7 goals in the 2020-2024 Government Action Plan to fully ensure energy reliability, safety and stability. One of those goals is to meet energy demand from domestic production. To implement this policy, based on research and calculations, we are focusing to expand the capacities of existing thermal power plants by 606 MW, construction of Tavan Tolgoi 450 MW and Baganuur 400MW thermal power plants. Also thermal power plants in 10 different provinces, Erdeneburen 90MW Hydro power plant, 200MW Battery storage, 15MW Wind Power plant, 4 35MW Solar power plants, and construction of high voltage transmission lines connecting all regions and substations. We import a maximum 245MW of power from Russia into the Central Energy System (CES) and we are discussing to increase it by 100MW to 345MW before winter peak.
Construction work for the Erdeneburen hydro power plant had been on the table for the past 50 years, and was recently started after an agreement was signed with the general contractor. Chinese companies will construct the 90MW HPP. As an energy minister, what would you emphasize in this project construction?
In Mongolia there are 5 hydro power plants in total operating on a regular basis with 3MW capacity, 11MW Taishir hydro power plant and 12MW Durgun hydro power plant, producing and supplying energy to the system. The key feature of the Erdeneburen hydro power plant construction is the station crossing tunnel of 4835 meter in length and 7.5 meter in diameter through the eastern mountain. Such tunnel construction will enhance the hydro power pressure from 37 meters to 86.5 meters. With this, each unit of investment per capacity decreases and power capacity increases, hence increasing efficiency. Moreover, this is Mongolia’s first ever large-scale hydro power plant in terms of capacity and will further boost our domestic power source.
What information would you share regarding the Tavan Tolgoi thermal power plant project based on the Tavantolgoi mine? After reaching agreement with the Ministry of Mining and Heavy Industry on the Tavantolgoi power plant, it was decided that “Erdenes Tavantolgoi” will fund 30 percent of total investment. What is the status of funding (total required investment of $ 808.2 million)?
It was decided by the 175th Government Resolution of 2020 that 30 percent of “Tavantolgoi thermal power plant,” a state-owned company will be funded by the “Erdenes Tavantolgoi” common stock company through equity ownership. The Ministry of Finance has instructed to resolve the remaining funding through competitive tender.
Since “Erdenes-Tavantolgoi” will be represented as the project sponsor and finance up to 30 percent of total cost, we are planning to announce an international open tender process on October 21, 2021 for tender participants to submit proposals for raising the remaining funding (EPC+F) framework based on government guarantee, and to organize tender selection process for 90 days.
There is a special circumstance for coal based thermal power plants and it takes a long time to align financial and technical proposals from tender participants during the tender selection process. Hence, it is important to organize the tender efficiently within its timeframe. If the tender is successful, construction agreements can be completed with the contractor within the first quarter of 2022 and a new 450MW power plant and 220kW transmission line will be commissioned in 2025.
Energy supply shortage is the number one issue in the energy sector. Today we import about 20 percent of total energy consumption. The way to solve this problem is to commission new sources. Our shortcoming is that a resource structure is absent. What action is the Ministry of Energy planning on this issue?
The Government Action Plan for 2020-2024 included construction of 16 energy sources in 3 areas, high voltage transmission lines that connecting regions and substation, expanding the capacity of currently operating thermal power plants that are fired with solid fuels, construction of thermal and renewable power plants to meet the annually growing consumption demand. For instance, construction to expand the capacity of the Erdenet thermal power plant by 35MW, Darkhan thermal power plant by 35MW and Thermal Power Plant IV by 46MW have been completed and commissioned. Construction for expanding the Choibalsan thermal power plant by 50MW is currently in process. Moreover, commissioning the 400MW Baganuur thermal power plant, 450MW Tavantolgoi power plant and expansion of Thermal Power Plant III capacity by 325MW and Amgalan 50MW thermal power plant for electricity and heating, expanding Thermal Power Plant II to 100MW natural gas power plant, thermal power plants in 10 province centers, Erdeneburen 90MW hydro power plant, 4 solar plants and 2 wind plants will meet the energy consumption demand from domestic sources. In addition, building an energy reserve of no less than 20 percent is essential for the country’s rapid social and economic development.
You mentioned that since our power sources are dependent on mainly coal fired power plants, we need to diversify through peak load control stations, hydropower plants, gas power plant and battery storage. Going forward, in addition to commissioning a coal powered thermal plant near the mine, don’t we need to diversity the other primary energy resources?
In the international context, power sources from hydropower, natural gas, and battery storage, constitute the appropriate proportion and structure to balance the production and consumption of the main structure from solid fuel fired thermal power plant, nuclear power plants and wind and power renewable energy plants. In Mongolia hydropower is insufficient at only 1.7 percent of installed capacity. This should at least be 20 percent in order for the energy system to be reliable and efficient. Hence, we will support commissioning of such structure management frameworks like hydropower plants, hydrogen fuel plants, battery storage and gas-powered plants.
Next issue should be about improving economic efficiency of energy companies and price and tariff schemes. The economy has been shrinking due to the Covid-19 pandemic and decreased energy consumption. Therefore, the price structure has changed.
We targeted to stabilize the price of electricity and heating supplied to consumers, decrease the level of highly priced imported energy, postpone investment and restructuring of energy developers, and cut operational cost by 6.4 percent. We have refrained from decisions that could result in increased costs, cut business plan to combat economic difficulties arising from the Covid-19 emergency. We had overall MNT 92 billion losses in 2020.
Due to lack of funding to prepare for winter and continuing the normal operation of coal mining, railway companies and energy producers, there is no option but to increase the price of electricity and heating?
Yes, unfortunately there is no other option. About 100 companies who are licensed to produce, transmit and deliver energy have notified that MNT 128.8 billion is necessary for maintenance and renovation in preparation for winter. For instance, the Thermal Power Plant IV needs MNT 36.8 billion for the 89MW project loan from Ulaanbaatar Electricity Distribution Network, interest payment and other maintenance and renovation, and MNT 4.7 billion is required to fund the gap from the increased import price of energy from Russia.
Based on Energy Regulatory Commission’s findings, 1kWh electricity tariff needs to increase by 36 percent and heating tariff should increase by 20 percent to fund the MNT 159.6 billion needed for coal mines, railway companies and energy producers, and companies that transmit and deliver energy.
Amendment in the legal environment and policy documentation have been implemented to promote usage of renewable energy in the long and mid-run
It is necessary to promote the development of new technologies and innovation, and power plants that reduce energy emission, and transmission and delivery network control as older technologies are getting outdated. The energy sector must become “smart”. Would you clarify of what is becoming “smart”?
In order to create a smart structure and improve efficiency in our energy system, it is necessary to have in energy production, transmission and delivery. This means technological and commercial innovation, enhanced economic efficiency, and smart metering to enable consumers to manage consumption and save energy. To supply continuously increasing energy consumption demand with limited resources in a stable and environmentally friendly manner, it is time to start increasing renewable energy, and implement measures based on smart technology.
World is running towards “green energy”. Does Mongolia need to adjust its energy policy in line with this? The current government policy is mainly planning to commission coal power plants?
Mongolia has four seasons; we are one of the few countries in the world with a long heating season. As such, the majority of energy consumption has been supplied from thermal power that powers electricity and heating to supply country wide heating with widely available hard fuel. Although we have this long heating season, Mongolia has signed the 2015 Paris Agreement on climate change. So, we are implementing policies and measures with respect to i) promoting renewable energy ii) energy saving and efficiency policies to decrease carbon emission in the energy sector. Amendment in the legal environment and policy documentation have been implemented to promote usage of renewable energy in the long and mid-run.
How does Mongolia’s energy policy need to evolve in order to overcome energy dependence? What can be done in government’s energy policy to improve?
Government energy policy was approved in 2015, the vision of which is to increase domestic energy production to supply consumption demand, and become an energy exporter in the long run. Our mid-term national plan is to commission several sources, and connect high voltage electricity transmission lines.The approved “Vision 2050” has policy targets and goals such as developing both traditional and renewable energy sources, specifically hydropower, development and localization of new energy sources, increasing energy efficiency, and becoming an energy exporter.
Thank you for your time.