Construction of Eg hydropower plant stalled for 31 years

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The Eg Hydropower Plant Project has been discussed for the past 30 years, but has repeatedly delayed to date. Although many years and large sums of money have been spent on the construction of this plant expected to reduce the country’s energy dependence on others and significantly increase renewable energy resources, not a single building or facility has been built so far.

The Ministry of Energy clarified, “It is not possible to speak at this time,” and the Ministry of Environment and Tourism did not provide information on the project. Meanwhile, a specialist of the Eg Hydropower Project Unit shared Russia’s position on the project. Russia reportedly ‘condemns’ Mongolia for the construction of a hydroelectric power plant on Eg River, saying it would negatively impact Lake Baikal’s ecosystem. The Russian government asked for a strategic assessment of cumulative impacts in the transboundary basin. Lake Baikal is listed as a world heritage site by UNESCO.

“In connection with this, we have selected a third party, a French company, to prove that the plant will not harm the lake’s ecosystem. Its results have not been released due to the COVID-19 pandemic and will be available in October. The Russians have built four hydropower plants with a capacity of 13,000 MW on Angara River, which gets its source from Lake Baikal. I hope that the results will be made in our favor. The Eg Hydropower Project Unit has three employees. The plant will be located in Khutag-Undur soum of Bulgan Province. Almost no work has been done in this area,” he said.

According to the premier’s statement at the parliamentary session last December, it seems that the government intends to intensify the implementation of renewable energy projects. However, it is unclear what policy Mongolia is pursuing to carry out hydropower projects and whether it will be able to do so independently in the future. Mongolia currently has two permanent hydropower plants and five seasonal plants, all of which have a low capacity (26 MW). There are fears that in 30 years, there will be no other hydropower plants.

Even the minister of energy acknowledged that the current situation in the energy sector is difficult. There is a high risk that the sector will lose its reliability and security, and that it will not be able to meet its growing electricity needs. Experts regularly reminded that power plants and power transmission lines are outdated. However, no significant investment has been made in the sector.

Since the government’s energy policy was approved in 2015, energy investment accounted for only 8.8 percent of the required funding, according to a report released last month by the Mongolian National Audit Office. Today, Mongolia supplies about 80 percent of its energy domestically, but it has spent an average of more than 20 million USD annually over the past decade to import electricity from Russia. In other words, it has not achieved its goal of meeting 85 percent of its energy needs from domestic sources by 2020.

Efforts to build the Eg hydropower plant were made four times in 1991, 2006, 2013, and 2017, but 31 years have passed in vain due to conflicts between Mongolians and the resistance from Russia and UNESCO.

The construction of a 315 MW hydropower plant, a 73-kilometer-long transmission line, and a 72-kilometer-long road in Khutag-Undur soum is expected to reduce energy costs by more than 70 percent per year, but this is still a “dream”. The installed energy capacity of Mongolia is 1,543 MW. The construction of the hydropower plant, with a capacity of about one-fifth of this, is crucial to provide coordination and configuration of the central power grid.

Historically, in 1964, experts concluded that a hydropower plant could be built on Eg River. Local scientists and researchers have been cooperating with Soviet experts on water resources and use in Mongolia since the mid-1950s. Within this framework, it was agreed that hydropower plants could be built on several rivers, including Eg, Taishir, Erdeneburen, Chono Khairaikh and Delgermurun rivers. The Eg River Basin was originally planned to have a 220 MW hydropower plant, but in 1996, the government estimated that it would cost 350 million USD to build a 300 to 600 MW hydropower plant. It decided to build a 450 MW hydropower plant in three years with funding from the Malaysian government and have it handed over to Mongolia 18 years later. However, it was stopped as some lawmakers viewed it better to raise funds from the Czech Republic, not Malaysia.

Dr. B.Ochirjav, who worked as an engineer of the Eg Hydropower Plant Project Unit from 1991 to 1995, said, “International experience proves that hydropower plants are not harmful to the environment. It has the advantage of creating reservoirs and improving the surrounding ecosystem. Creating an artificial lake with freshwater from Eg River will generate new water resources. It will also be a model development for the economic and tourism sectors. Our country’s rivers have the potential to generate 65 billion kWh of electricity per year. In the future, we need to pay more attention to the use of river water, ensure the water continues to flow, and build artificial lakes and dams. The main reason for the delay in the Eg Hydropower Plant Project is simply political influence. In short, Russia wants to keep us energy-dependent.”

In 1991 

The Eg Hydropower Project Unit was established under the then Ministry of Fuel and Energy.

From 1992 to 1995

Funded by the Asian Development Bank (ADB), companies from Switzerland, Italy and Mongolia conducted a detailed environmental assessment of the plant.

On June 9, 2006

Then Prime Minister M.Enkhbold attended the groundbreaking ceremony for the Eg hydropower plant.

From November 22 to 27, 2006

During M.Enkhbold’s official visit to China, the Chinese government agreed to provide a grant of 50 million CNY and a soft loan of 300 million USD for the construction of the plant. However, the soft loan’s spending is unclear.

In October 2013

The project unit was re-established and the feasibility study was developed. The feasibility study stated that the plant’s capacity would be 315 MW and the government set a goal to build a modern facility with ecofriendly and advanced technology.

From May to October 2015

Representatives of Khutag-Undur soum got acquainted with the operation of Taishir and Durgun hydropower plants. They announced the launch of a study of fish in Eg River and released a report on the protection of historical and cultural artifacts. The general plan of the new location of Khantai bag of Khutag-Undur soum was also discussed by residents.

On April 14, 2016

During his meeting with Russian Foreign Minister Sergei Lavrov, then Prime Minister Ch.Saikhanbileg briefed on the Eg hydropower project.

On May 18, 2016

Director of Eg Hydropower Project Unit D.Odkhuu (from 2014 to 2016):
The Mongolian side decided to take a loan from the Export-Import Bank of China. So far, we have completed 97 to 98 percent of the work. The construction and transfer agreement was prepared in Mongolian and English. With a Chinese loan, the work will be done by a Chinese company and the selection will be done by Mongolians.

We updated the feasibility study for the project and completed a lot of work. It is a misconception that the construction of this power plant will have a negative impact on the ecosystem of Lake Baikal. Eg River is located 600 kilometers from Lake Baikal. A study on the impact of the construction of the plant on Selenge River and Lake Baikal was conducted in 2014 by a French engineering company and its report was sent to Russia. The study estimated the environmental impact of the plant on Lake Baikal at 0.023 percent, which is practically no impact. A cross-border water agreement was signed between Mongolia and Russia in 1995. Eg River is not covered by the transboundary water agreement. From 2014 to 2016, more than 7 million USD was spent on the plant’s feasibility study, environmental assessment, relocation, equipment and vehicle procurement. The equipment and vehicles purchased at that time were reportedly sold. Whether to build the Eg hydropower plant is an internal issue of our country. It does not concern UNESCO or Russia.

From May 23 to 24, 2016

A meeting was held in Ulaanbaatar to provide information to the Russian side on hydropower projects planned to be implemented in Mongolia. The sides signed a joint protocol, which states, “Russia respects Mongolia’s right to independently decide on the protection and use of water resources in its territory, and Russia has accepted Mongolia’s statement to continue the implementation of the Eg Hydropower Plant Project and the preliminary infrastructure concession.”

Fall of 2016

The Chinese team that came to build a bridge over Eg River abruptly stopped its work and refused to continue. They explained, “Without permission from Russia, we will not be able to continue financing or participate in this construction work.”

On April 12, 2017

The government established a state-owned company, Eg Hydropower Plant, and appointed B.Otgonsukh as its director. At that time, they reported, “The Eg Hydropower Plant Project Unit, which updated the feasibility study and completed detailed environmental assessments along with other studies on energy markets, earthquakes, seismic surveys, archeology, rescue operations, fish and aquatic life studies, and detailed infrastructure drawings, was disbanded and a state-owned company was set up to take over the work.”

On April 20, 2017

Head of Engineering and Technical Department of state-owned Eg Hydropower Plant Company D.Budkhuu:
The project was scheduled to begin in 2006 with a soft loan from China, but its work was stopped after a new Mongolian government was formed. Mongolian and Russian scientists will meet in the first half of this year to discuss the plant’s impact on the hydrogeology of Lake Baikal. We are trying to prove that this work has little effect on Lake Baikal. The Russians are saying that Lake Baikal will dry up. Their love for Lake Baikal sparks again only when we talk about building a hydropower plant on Eg River.

In May 2017

The World Heritage Committee of UNESCO warned Mongolia that the project would have a negative impact on the ecosystem of Lake Baikal, which has a unique natural structure and makes up more than 10 percent of the world’s freshwater resources. The government of Mongolia was asked to comment on the project aimed to build a hydropower plant on Eg River in the Selenge River Basin, the largest tributary of Lake Baikal.

In 2019

A French company was selected to determine the impact of the construction of the Eg hydropower plant on Selenge River and Lake Baikal. However, the work was halted due to COVID-19 and border closure.

On November 29, 2021

Deputy Prime Minister S.Amarsaikhan:
Mongolia pursues a policy of mutually beneficial economic cooperation with other countries. In this context, the Eg hydropower plant and other energy projects were widely discussed. The Russian side has not clearly stated whether it would participate in the project in fear it could have a negative impact on the environment. Therefore, we are in a position to jointly study how this project will affect the environment and protect border rivers. There are no misunderstandings or serious problems. There was no talk of stopping the project.

Energy Minister N.Tavinbekh:
A request has been made to conduct a study on the impact of the construction of the hydropower plant on other rivers flowing to and from Lake Baikal. To do this, an open international tender was announced and a French company was selected in 2019. Work has been delayed due to the pandemic, but research is ongoing. We plan to release an evaluation report next year. It will be delivered to Russia and the World Heritage Fund. After that, we will discuss the matter again.

On December 30, 2021

Prime Minister L.Oyun-Erdene:
The government’s policy on the construction of nuclear and hydrogen power sources needs to be determined without delay. Let’s make renewable energy a priority, complete the construction of the Erdeneburen hydropower plant and do our best to start the Eg Hydropower Plant Project.

Project funds and expenses

• In 1992, ADB provided 1.4 million USD in technical assistance.

• From 1992 to 1995, an environmental assessment and the first feasibility study were developed. A total of 5.2 million USD was spent on this work, with a 3.8 million USD soft loan from ADB and 1.4 million USD grant.

• According to Development Bank of Mongolia’s 2014 report, 5.1 million USD was provided for consulting services, research, and project unit operating costs. The construction of the plant was scheduled to begin in 2015 and be completed between 2019 and 2020. On September 26, 2017, a 10.6 million USD loan was provided for the project, but it was classified as a non-performing loan.

• In November 2015, the government of Mongolia and the Export-Import Bank of China signed a 1 billion USD master loan agreement. At that time, the government explained that of this loan, 703.5 million USD would be spent on the Eg hydropower plant project, but it is not clear how much has been spent. Currently, the necessary expenses for the project are covered by the energy minister’s portfolio allocated from the state budget.

• According to the website, Eg Hydropower Plant SOEC announced four tenders between August and November 2018 and in January 2019. In particular, the cost of each tender for consulting services was 1.5 billion MNT.

Eg hydropower plant's sketch

Misheel Lkhasuren