The power sector in Mongolia supplies 95% of the total demand in central part of Mongolia, which includes three main cities, Ulaanbaatar, Darkhan and Erdenet.
Mongolia began recently oil explorations and started to export crude oil to China, and for the development of oil industry there is a need for investment to oil sector and related infrastructure. At this moment all petroleum products imported from Russia and China.
Liquefied Petroleum Gas (LPG) use is increasing very rapidly, and the Government gives an importance to the development of LPG network and LPG use as a new and relatively “clean” fuel mix.
One third of population in Mongolia has nomadic lifestyle herding 28 million of livestock. Because of the nomadic style of living, it is difficult to develop appropriate electricity access for them. The Government is encouraging the development of renewable energy, such as small hydro, solar and wind energy. There are ongoing projects to develop small hydro power plants (HPP), to promote the use of solar and wind energy.
From the policy view major priorities for the Government is to create necessary institutional framework for private sector participation (PSP), to improve efficiency of energy sector, to facilitative the development of renewable energy, to accelerate commercialization of energy companies and gradually privatize them. The Government believes that the strong legal, institutional and regulatory framework, which reduces investors’ risk and encourages investors’ long term commitment (concessions, independent power producers (IPP), power purchasing agreements (PPA)), is necessary to bring the private sector in building new capacities, in developing power links, introducing energy efficient technologies, and promoting the use of renewable energy sources etc.
In 2002 the Great Khural (Parliament) adopted the “Mongolia Integrated Power System” (MIPS) program, and the program will contribute to energy access development and will help to reduce operational expenses, to create favorable socio economic conditions for regional development, and create reliable electricity supply. The ultimate goal of “Mongolia Integrated Power System” (MIPS) program is create a unified power grid connecting Central Energy System (CES) of Mongolia with the Western and Eastern Systems thus creating a network, which will improve the reliability and cost effectiveness.
The Government of Mongolia approved in 2002 the “Mongolia Sustainable Energy Sector Development Strategy Plan (2002-2010)”, and it reflects goals reinforced in the Poverty Reduction Growth Facility (PRGF) program, which is endorsed by international and donor community. The main objective of the Energy Sector Strategy of Mongolia is to create a financially sustainable energy sector that will provide cost-effective energy access, thereby enabling poverty reduction and greater private sector and civil society participation. Mongolia’s energy sector will be developed within a regional energy context, while at the same time taking advantage of new technologies and sources of energy that might further promote economic efficiency and environmental sustainability.

According the results of geological expeditions and surveys conducted in Mongolia, currently there is coal reserve of 150 millions tons at more than 240 deposits and finds. Geological research was conducted for 35% of the total estimated coal reserve and concluded that there are 22.6 million tons of coal production reserve, of which, 10 million tons are brown coals.
The coal reserves identified in Mongolia are mostly concentrated in deposits such as “Tavan tolgoi”, “Baga nuur”, “Shivee-Ovoo”, “Uvdug khudag”, “Tegshiin gobi”, “Tsaidam nuur”, “Buuruljuutiin” basin, “Nalaikh”, “Huurst khotgor” and “Ulaan-Ovoo”.
Presently, the coal mining of Baga nuur, Shariin gol and Shivee-Oboo are supplying the fuel needs of Ulaanbaatar, Erdenet and Darkhan and producing majority of national coal production volume.

By the geological survey some deposits were identified with possibility to explore oil in Mongolia and Mongolia has experience of extracting some small amount of crude oil up the year 1965. Mongolia has large resource of bitumen and shale, and 3 deposits of bitumen reserve have been located and others are under research. Most of the shale deposits are located in central and western regions of Mongolia.

Energy resources that will play important role for the energy balance of Mongolia are solar, wind, hydro, geothermic and biomass types. Presently, the resources have not yet been included fully in the energy resource balance. Some studies are in progress to use these resources for energy production purposes.

Solar Energy Resources

Table 1

Wind Energy Resources

The US National Renewable Energy Laboratory (NREL) developed a wind energy resource map for Mongolia in cooperation with REC and National Institute of Meteorology. This map was done in six categories considering the wind power density regions.

Hydro Energy Resources

It is estimated that the average flow of our country’s 3800 big and small rivers with a total of 65000 km in length, average annual flow is 3,46·1010 m3, energy resource 6300 MW and producible energy is 56·107 KW.h. The majority of hydro energy resources belong to the mountainous areas in western and northern part of Mongolia.
In recent years, numbers of feasibility studies were conducted for the construction of hydro power plants with capacity of 220MW at “Egiin” river, 100 MW at “Orkhon” river, 11 MW at “Zavkhan” river, 12 MW at “Durgun” river and many sites were identified for the possible construction of hydro power stations to supply the energy needs of the soums centers. For example, the initial study for the construction of a hydro power station with a capacity of 150 kW at the “Mungash” river situated in the territory of Ulaan-Uul soum of Khuvsgul aimag has been included in this project report.

Geothermal Energy Resources

Presently, there are 43 hot springs in use in Mongolia, but they are not studied thoroughly. They are only known and exposed parts of Mongolian energy resource hidden in depth of the earth. The resources of hot springs are mostly located in mountainous areas of “Altai”, “Khangai” and “Khentii” mountain ridges, where the infrastructure is not developed. The priority use hot springs is the non-medicine health treatment for the people. Relevant research and studies should be conducted for the possibility to use the hot springs to provide heating for those sanatoriums established nearby the springs, establish greenhouses operated with solar and hot spring energy, and to build geothermic power stations. It is safe to note that almost any research works have not yet been undertaken for this purpose.
Conducting hydrogeology surveys in hot spring basins aimed detail the actual reserve could discover enormous energy resources.
According the comments made by the specialists worked on the possibility of utilizing the hot springs, the heat of hot springs can be used for heating purpose without harming the nature and environment.

Biomass – the natural resources that can produce energy by burning the wood, animal droppings, plants, vegetations etc. and they are the accumulated and converted forms of energy derived by the sun and one of the renewable energy sources.

Resources of agricultural waste and livestock dung Mongolia has a form of renewable energy resource, biomass originated from livestock (dried cow dung, pellets, horse-dung, hardened dung and urine of sheep and goats) and other types of biomass such as straw, woods, shrubs, biomass waste of urban settlements.
Mongolians have longtime tradition of herding livestock and using the biomass, an accumulated and converted form of energy, such as dried cow dung, hardened dung and urine of sheep and goats as the source of fuel and this tradition continues today. The dried cow dung is cheap fuel that can be collected easily during anytime of the year in all regions of Mongolia. Dried cow dung, and hardened dung and urine of sheep and goats have been the key source of fuel for herders, especially in regions with limited forest reserve or any forest reserve at all.

The Western Energy System imports electricity from Russia with capacity of 11 MW while the Central Energy System imports electricity with capacity of 120 MW.
The lowest and peak load of the Central Energy System in 2004 has reached to 240 MW and 560 MW, respectively.
The growth of electricity demand was 1% from 2003 to 2004, and 5% from 2004 to 2005, at the nationwide.
Estimation of current actual electricity demand for aimag centers, soums and bags, where there are no connection to the centralized grid was difficult to identify because the electricity has provided in these places with limitation due to high costs of diesel fuel. Some soums, having diesels, provide the customers by the electricity only for 4-6 hours per a day, during of national program of TV from 18.00 PM to 23.00 PM.

Heat Demand, Structure and Future Trends

At national level Structure and future trend of heat demand of Mongolia are shown in Table 4 below in accordance to the national statistic data of 2000-2004.

Heat Balance, (thousands, Gcal)

Local heating system Families living in ger use stoves for cooking food and heating home. The main sources of fuel are coal, wood, animal dung and some wood plants such as bushes.
There are in total 170 soums in Mongolia that have not connected to the centralized electricity system. Among them 35 soums have local heating system, 86 soums use stoves in order to heat their offices and unites, and 45 soums use own heating system but their standards not identified.
Estimated heat load per system is 0.8-2.1 MW. The stoves with types of NR-54, NR-27, NR-13.5 and BZUI-100 produced in Mongolia and also stoves with types of CN and RGJ produced in China are popularly used in Mongolia. One heating station uses 1000-1500 ton coals per year at average. The specific coal consumption is fluctuated between 140-155 kg/GJ.

COAL CONSUMPTION, STRUCTURE AND FUTURE TREND

Mongolian coal consumption structure and growth in 2000-2003 in according to national statistical data are in table 6. Power stations are the largest consumers of exploited coals in order to produce energy and heat.

Coal Balance (thousands tons)

Table 6

Liquefied petroleum gas (LPG). LPG in Mongolia is used for household cooking, public cafetering, gluing roof of the building, heating bitumen, metallurgy, pharmacy, car repairing etc... Recent years, the usage of LPG is increasing in the production and services sectors and also for household needs. This is because of tax reduction that has taken in the framework of implementation of programme on liquefied fuel. In 2004, the consumption of LPG was about 2000 ton.

Investment forecast of fuel and energy sector