As the world moves toward phasing out fossil fuels and embracing clean energy in the next decade, Mongolia faces a challenge to transition from its heavy reliance on coal.
Mongolia's commitment to cut its greenhouse gas emissions is complicated by Russia's closer energy cooperation with China in the regional market, which could increase Mongolia's dependence on its two giant neighbors.
Although the Power of Siberia 2 project, a new Russian-Chinese gas pipeline that could run through Mongolia's territory, was not mentioned in the recent Xi-Putin summit announcement in Moscow, it is likely that the project is still on the table and could offer Mongolia some benefits from its energy transition away from coal.
However, Mongolia's clean energy market also offers a promising alternative to meet its energy demand and lower its GHG emissions, while reducing its reliance on Russian energy imports and avoiding the uncertainty of a distant gas pipeline.
Mongolia can achieve energy independence and reduce carbon emissions by revising its Renewable Energy Law, introducing market-based feed-in-tariffs for renewable energy projects, and upgrading its transmission grid and interconnections to integrate renewable energy sources.
IRENA estimates that renewable energy sources made up about 15% of Mongolia’s total power generation capacity, or around 467 MW, in 2020. Mongolia has abundant potential for wind, solar, and hydro power, with capacities of 1.1 TW, 0.8 TW, and 0.2 TW respectively. Under a high-renewable scenario, this could increase the share of renewable energy sources to over 40% by 2030, with wind and solar power leading the way.
Wind power, solar power, and energy efficiency are the highest growth segments of the clean energy market in Mongolia. The country has one of the world's largest wind power potentials, estimated at 1,100 GW, with only few operational wind farms and several more projects under development.
According to a Solargis study, Mongolia has abundant solar radiation, with an average annual solar irradiance of 4.8 kilowatt-hours per square meter per day, which is higher than many other countries in Asia and Europe. As of 2020, more than 100 MW of solar photovoltaic capacity has been installed, mainly in rural areas with limited or unreliable grid access.
Investors in Mongolia’s clean energy sector can also benefit from carbon credits or green certificates that can be traded internationally or used to meet corporate sustainability goals by multinationals.
This gives Mongolia a unique opportunity to become an active player in the global clean energy market and to boost its independence.
Various development partners, including United Nations agencies, are already supporting Mongolia's commitment to reducing GHG emissions. The Asian Development Bank (ADB) is also actively supporting clean energy projects in Mongolia, including the development of a battery energy storage system.
Energy efficiency measures help reduce energy consumption and costs, increasing competitiveness and productivity, and lowering GHG emissions.
For instance, the ADB is supporting a project to enhance the energy efficiency of industrial electric motors and lighting systems in Mongolia, while another project aims to introduce climate-smart arable farming practices that can save water and irrigation costs while boosting crop yields.
Mongolia’s clean energy market has tremendous potential, but it also faces challenges such as geo-economic isolation, aging infrastructure and climate change impacts.
Mongolia’s transition to clean energy will need significant investments, policy reforms, technological innovations, and multinational cooperation, while also ensuring the country’s independence.
Amar Adiya is Editor-in-Chief of Mongolia Weekly, an English newsletter for investors and businesses.