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Economy

Mongolia's green power pioneers keep Asian Super Grid dream alive

The 50MW Salkhit wind farm, Mongolia's first, came onstream last June. As the country turns from coal to renewables, turbines and solar panels will continue cropping up on its vast open landscapes.

ULAN BATOR -- There is another name for Mongolia: Land of the Eternal Blue Sky. Take the country's many hours of sunshine and add its wild, windswept steppes, and you would think it is a renewable energy paradise.

     In reality, 95% of Mongolia's power supply comes from coal-fired plants -- a source of the serious pollution in the capital Ulan Bator. But at last the first renewable energy pioneers seem ready to challenge the rule of king coal, and international investors smell opportunity.

     The most ambitious proposal is to have Mongolia play a crucial role in the Asian Super Grid -- a grand vision endorsed by the Japan Renewable Energy Foundation, an organization created by SoftBank Chairman and CEO Masayoshi Son soon after the Fukushima Daiichi nuclear disaster in 2011. The aim is to move Northeast Asia away from its dependence on fossil fuels and nuclear reactors. The grids of Japan, South Korea, China, Mongolia and Russia would be connected with transmission lines delivering electricity from renewable sources. Linking the region's population centers this way would balance the inevitable fluctuations in green power output.

     Resource-rich Mongolia often hits the headlines for its world-class mineral deposits, such as the Tavan Tolgoi coal basin and the gold and copper reserves at Oyu Tolgoi. What can be collected above ground may just be as valuable. Those pioneers have a long way to go, but they can look right next door for inspiration.

Evolving landscape

The Chinese have been creating forests of wind turbines just across the border, said Oyunbat Dandar, president of wind power developer Qleantech. Provinces on the other side of the demarcation have been at the forefront of a renewable energy revolution that has turned China into the world's leader for wind power. China's installed capacity produced from wind reached 75 gigawatts in 2012, according to the Global Wind Energy Council.

     On the Mongolian side, the nascent green power sector promises to expand the nation's rudimentary electric infrastructure. Today, Mongolia's power plants have only 800 megawatts in available capacity -- barely sufficient for its population of 3 million and its fast-growing mining industry. By 2020, the government wants renewable sources to account for 20% of power production.

     Local conglomerate Newcom brought Salkhit, Mongolia's first 50MW wind farm, online in June 2013. Dandar said Qleantech is going to start building a $200 million, 102MW wind farm a few miles away from the Oyu Tolgoi mine, aiming to get it up and running in the first quarter of 2015. This project is backed by Happy Wind, a Swedish investment company.

     Further north, Germany's Ferrostaal is building a $120 million wind facility in Sainshand, near Tavan Tolgoi. And Aydiner of Turkey is planning a $94 million wind farm in the city of Choir next year, according to Erdenebaatar Altai, an engineer with the company.

     The U.S. National Renewable Energy Laboratory estimates Mongolia's geography could support over 1.1 million MW, or 1.1 terawatts, of installed capacity -- and potentially deliver over 2,550 terawatt-hours per year. That is almost half of the 5,245twh China consumed in 2013.

     Mongolia has plenty of potential for solar power, too. This was highlighted in a 2013 paper by Christopher Cooper and Benjamin Sovacool of Vermont Law School's Institute for Energy and the Environment in the U.S. "Southern Mongolia's Gobi Desert arguably is the planet's single best location for solar power generation," they wrote.

     Mongolia's first solar farm, a 30MW, $76 million project in Sainshand, has just been approved. South Korean energy group Daesung Industrial is carrying out a couple of solar pilot projects in the country. And SoftBank has set up a joint venture with Newcom to develop solar and wind plants there, independent of the Asian Super Grid idea.

     Japan's Sankou-Seiki in 2011 set up an export-oriented factory for solar photovoltaic panels in Ulan Bator. Now the company is hoping to tap the growing domestic demand, said Uemaa Gantulga, supply manager at the plant.

Financing doubts

The rise of renewable energy is not going to solve Mongolia's power shortage on its own. Soviet-era coal power plants need to be replaced with new, so-called base load power plants. Investors say they worry about the government's ability to pay wind and solar farms for their power. A renewable energy fund established by the government reportedly lacks cash, as noted in a 2013 report by the Asian Development Bank.

     Finance is also the reason Cooper and Sovacool think the Asian Super Grid may be a mirage.

     At the heart of the Super Grid initiative is Gobitec, a large-scale clean energy development in the Gobi Desert. It would have 100,000MW of wind and solar capacity destined for export. Its name is inspired by the Desertec project in the Sahara Desert, which is trying to provide solar power for Europe. 

     A number of governmental and nongovernmental organizations from Europe and Asia have conducted feasibility studies, including Son's Japan Renewable Energy Foundation. These organizations estimate Gobitec's total cost will approach $300 billion.

     "The financing associated with the magnitude of the capital costs Gobitec would likely accrue may prove too much for private investors," Cooper and Sovacool wrote, adding that "it is unclear whether governments will be willing to underwrite these costs."

     Son remains the only high-profile investor who publicly supports the Asian Super Grid. At the same time, no official negotiating timetable exists between the countries involved, and there is no question of Mongolia bearing the costs alone. The project will require investments worth 23 times the current size of the nation's entire economy. Then there are the significant technical, economic, environmental and geopolitical hurdles.

     It took over 20 years for Desertec to gain enough public and private backing -- the project was first conceptualized in 1986 after the Chernobyl nuclear disaster. In Mongolia, the first step is to see whether the first wave of wind and solar investments work out. If they do, the coal haze that hangs over the country's cities may one day blow away, and the Asian Super Grid may become something more than a desert fantasy.

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