ADB specialist urges Mongolia to be ambitious in renewable energy

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During the recent Ministerial Dialogue and Energy Investment Forum of the Central Asia Regional Economic Cooperation (CAREC) held in Uzbekistan, The UB Post interviewed Ashok Bhargava, director of the Energy Division in the Central and West Asia Department of the Asian Development Bank (ADB), to assess energy-related challenges and opportunities in Mongolia.

Let’s start the interview with the declaration that was signed at the first CAREC Ministerial Dialogue on September 20. How significant is this declaration for CAREC member states, especially for Mongolia?

I think the declaration came out of the new energy strategy which we made for the CAREC region. It talks about doing more power exchange between countries because if they do, they will be better in terms of addressing the energy security, and making it low cost. We also recognize that not much is happening for energy efficiency and renewable energy generally over the region, except from China. Countries have policies, desire, strategy, and intent for it but it’s not happening. The declarations ask them to commit to a goal. It gives them a vision which can drive in investment and direction. It’s about doing more renewable energy, treating energy efficiency as the fuel of first choice, talking more about regional integration, and taking more reforms became the whole sector is generally and financially very fragile throughout the region.

Unless we address that, it will impact the overall economy because if it is subsidized, money has to come from somewhere. The idea is to improve the financial strength and sustainability of the sector. We believe that if this happens, private investment can come in. We wanted the countries to have that commitment to private investment and more reforms.

The last thing is my personal favorite. So, women are less represented in the energy sector and this is not just in this region but even in other regions. This sector particularly has difficulty in attracting women to come in but new technology and more IT solutions are coming in and I don’t see a reason why there shouldn’t be more women in this sector. This declaration has a commitment to promote gender equity in this sector by 2030. Following the principles of equality, equal pay and equal leadership for women in this sector, I’m really pleased and glad that ministers actually signed up for it.

For Mongolia's perspective, I think that Mongolia has similar challenges. You want energy infrastructure like the rest of Central Asia. From this side, (the declaration) is applicable to Mongolia.

Nine out of 11 countries signed the declaration. Why didn’t these two countries join?

China didn’t sign because the challenges apply to only a part of the country. To ask China to sign on behalf of that part has always been a challenge. So to answer your question, China decided not to sign it at this stage. The other country that did not sign is Turkmenistan but I had a discussion with them on September 20 and they said that they thought only the energy minister could sign the declaration. Their energy minister who was supposed to come here didn’t come so they were unable to sign it. Now, we’re making arrangements for them to also sign in their own capital by their energy minister. They’re supportive of it from what I heard from them. So, I think this will be resolved.

That’s very good to hear.

I’d also like to know what kinds of projects are being carried out in Mongolia as part of CAREC program. Have you reached any notable progress?

It is a little challenging for Mongolia in terms of CAREC program because it is on the far end of this region geographically. I will not downplay that. ADB has done quite a bit in terms of China-Mongolia cooperation, particularly in roads and train and other things. Getting it access to the right market is what ADB has been working on. But we did a really big regional system and it is still going on. We call it the Northeast Asia Power System Interconnection. The idea was that we can unlock Mongolia's renewable sources – I’m talking about solar and wind in the Gobi Desert -- and if the system is connected to that, the country can actually resolve the problem of meeting energy needs faced by Korea and Japan. These countries are dependent on energy import so providing a clean solution can make it work. It’s a big visionary initiative and, of course, it will take a long period of time as there are many things that need to be developed before the target is reached.

We call this regional integration as the “super power super grid”. It is ongoing and all countries are participating so there is a very good first-level reaction and response on that initiative. We will continue to build on that and show some progress there. Eventually, we can think about linking them more in terms of power.

Let’s not just talk about physical connections. As I said, Mongolia is a lot similar to Central Asian countries than to countries in other region. Knowledge transfer and learning from each other is equally as important. I think this is where we’re very pleased to see Mongolia being very active as a member of CAREC. It can get knowledge and learn from other countries. I personally visited the first wind farm, which was a private investment development in Mongolia. I was truly surprised by the way they captured the whole development of this project and I keep telling people in this region that if they want to learn how to start from zero, they should go and see this plant in Mongolia.

So for us, regional cooperation is not about physical integration or financing but bringing people together and helping them cooperate. That’s where I see Mongolia as a strong linkage to CAREC.

What exactly surprised you at the Mongolian wind farm?

Normally when people do a project, the focus is on how to get it done quickly. But (Mongolia) had captured the transportation, foundation and every development in such a professional way. I have visited China many times and I have seen a lot of plants and I can’t think of any better learning than this particular video which I saw in Mongolia. To me, it was the real value because you captured every single element a new developer would like to know.

Also, I thought that Mongolia has many progressive policies to prevent the curtailment of wind power in the country. This is something I would like other countries to learn. This type of cross-learning is very important for the region.

Overall, how would you assess Mongolia's potential in the development of energy industry, particularly renewable energy sector?

First of all, I would like to commend the government of Mongolia for creating very progressive policies on renewable energy development and if I understand it correctly, I think that nowadays renewable energy generation has reached 16 percent and the government has a target to make it 20 percent by next year and 30 percent by 2030. These are very strong marginal signals and we have seen investment happening. We have seen private sector moving in there. But as they go forward, we have to recognize that this is a small grid and getting more power would require the grid to be flexible, resilient and smart. You can’t use new technologies with the old grid. The grid has to upgrade in terms of technology advancement. The government is aware of it and we’re working with them. I think ADB is doing a large battery storage project in Mongolia – well in all of our member countries. This is another huge project in Mongolia and this will be another big learning for everybody in the region because this is the same question I always get asked about here – how do we integrate more in the renewable grid? I think Mongolia is on the right track.

Considering its close proximity to markets like China, Japan and Korea, Mongolia can supply/ export a lot of power if things go very well. One of Mongolia's best resources is 250 days of sunlight every year. It has a lot of land in the Gobi Desert and very little population. So, there are many enabling factors but it needs financing, investment and collaboration with neighboring countries. You have to go outside of the country and export.

I always tell people that we have become more ambitious in Mongolia. Let’s not get scared just because this is big and difficult. If we have the right ambition, we can then work to achieve it. So that would be my suggestion going forward for renewable energy in Mongolia.

Would you say the main challenges are finding financing and starting collaboration with neighboring countries?

The main challenge is that Mongolia doesn’t have enough domestic market. By design, you should be looking at the export market. To be frank, electricity is exported globally but somehow, electricity export is not a very thriving business. It is not easy to export electricity but if Mongolia can build the right building blocks, it can do it. However, this requires a few steps to be crossed. To answer your question, if I want to finance a really big renewable energy project in Mongolia, I would look at who they are going to sell energy to and have they sig­ned the agreement. If everything is in place, then your project becomes ban­kable. Bringing that bankability requires huge effort, money and analysis. What ADB is doing is providing sup­port, helping in that analytical work and getting this convening power to bring places together so that they can share the same vision. Once Mongolia is driven, everybody will benefit so figuring out how to turn this into a win-win situation is what we’re working on.

Mongolia is currently making big strides to diversify its mining-dependent economy. Do you think energy exportation can become as big as mineral exportation?

Yes. They go hand in hand. As we all know, Mongolia is blessed with huge mineral reserves. But you do need energy. Mineral exporting will also help the development of the energy sector. You can simply take out the minerals and export it to foreign markets or you can add more value to it in the country through industry. This is a vision that requires more effort to be put in place but Mongolia does have advantages as it has the resources and nearby markets.

As for renewable energy, I think that it can help the country create more employment.

What should Mongolia do to better attract investment to the energy sector?

The private sector wants predictability, transparency and respect of contracting arrangements. If you do that, you will of course get more private sector participation. I think it is important to give this comfort to the private sector. Renewable energy is attracting private investment, which means that there is a good set of policy in place and comfort for outside investors. Generally, I think this is where the government should do more. Not just attract but retain private investment. This is an important issue faced by not only Mongolia but everywhere in the region.

During the first session of the Energy Investment Forum, ministers were asked whether an integrated energy system is possible. Do you think this is possible?

I think Central Asia was operating as one system during Soviet time. I don’t see a reason why Central Asian countries cannot connect. Now there is serious effort going on to at least connect Tajikistan to Uzbekistan, and ADB is working on both sides. We’re confident that this will happen reasonably quickly – next year or so. The other country remaining outside is Turkmenistan.

Turkmenistan has expressed interests to reconnect but there are certain technical analyses and other things to be done. I understand their minister is working on developing a working group in charge of these details. But in the last two years, I have noticed that there is a renewed interest to reconnect and integrate the Central Asia regional power system so I’m reasonably confident that it will work. My only request is that not just to reconnect but to reconnect and operate on market principle rather than having government to government arrangement. I think this is where ADB and other development partners are working on. It’s good to reconnect but it’s also equally important to go to a market-oriented arrangement.

My next question is related to Russia’s transit gas pipeline project to China through Mongolia. I’m not sure if you’re familiar with this topic but I’d like to ask your opinion about it, and if it works out, do you think it will be beneficial for Mongolia?

Honestly, I don’t know much of the details but being in the energy domain, I have heard about it. I’ll make a general statement without talking about the details. I have seen Azerbaijan and Georgia and Europe’s BTC oil pipeline being constructed. It was purely done by the private sector. If the transit passage is attractive even if there is no gas benefit, you do get some incentives out of this and you can factor that into it. This was done once before on this BTC oil pipeline and there are many similar pipelines. Taking advantage of your geographical location to benefit from transit route is something that has been going on for many years in different ways and I don’t see why it should not be done. But it has to be to Mongolia's satisfaction whatever the transit terms are. I don’t know the details but a transit country should also consider that even if it is not getting the resource, it will get significant revenue from transit fee. Ideally the country would get some resource but it might not be economically viable.

Lastly, what does ADB plan to do in Mongolia through its new Strategy 2030?

I might not be the right person to answer this question because I’m not directly involved in Mongolia operations. I was before but not now. So I don’t know the specific details but I know about some energy projects like the battery storage one. I’m really fasci­nated by such a large battery storage project ADB is doing. I think ADB is focu­­sed more on making renewable integ­­­­­­rated grid. Also, Mongolia has some heating issues. There may be a new tec­h­­­­­­nological solution for heating.

Dulguun Bayarsaikhan