Mongolia is on the brink of living in complete darkness and freezing cold. Lebanon’s Beirut is a recent example of what happens when the city suffers from a blackout when traffic lights don’t function, elevators and refrigerators don’t work. Lebanon’s two primary power plants, which supply 80% of the country’s grid, have run out of fuel, resorted to power cuts, and eventually ran out of electricity. In addition, their economy is in a complete crisis due to controlled low electricity prices, lack of capital, inability to increase capacity, and a corrupt government.
Mongolia is about to follow Lebanon’s example. The energy sector has been losing its power, nearing bankruptcy. I wrote an elaborate article on the matter precisely two years ago. The situation is much worse now. The pandemic has affected the sector immensely. The state passed a law that made a state-owned company pay electricity and heating bills for individuals and businesses. Since December 2020, 826 billion tugriks were spent on this payment. Otherwise, the energy sector would not have recovered.
The recent five-day blackout in the western aimags and the 5-hour electricity disruption in Ulaanbaatar in August are stark reminders of how the energy sector’s collapse is detrimental to the people and benefits the politicians who only seek to get re-elected.
The reality
Today, Mongolia’s energy supply is unreliable and short of energy. The main reason is that domestic production is not growing when consumption increases every year, and electricity is bought from abroad at high prices.
Mongolia’s electricity consumption is increasing year by year. It will reach 9.9 billion kWh in 2021 (expected performance), an increase of 12% from the previous year. The heating usage will rise by 6% to 11 million gcal. Eighty percent of electricity will be produced domestically, while 20% will be imported from the two neighbors. The energy sector is exhausting all its internal resources to prevent a blackout and is overloading its aged stoves. In 2020, the peak load of the central region’s power system reached 1,309 MW, of which 831 MW was in Ulaanbaatar.
The government is investing in the energy sector and working to increase its energy production capacity. A concession agreement has been signed to build a 400 MW thermal power plant in Baganuur by 2024. A 450 MW power plant is to be built at Tavan Tolgoi, and the first phase will be completed in 2025. Moreover, the construction of the Erdeneburen 92 MW hydropower plant is supposed to begin next spring. But the story of the 5th thermal power plant, having been discussed for two decades and having had its foundation built ten times, tells us how big projects in Mongolia are always hindered, not even commissioned on time, or even stopped.
Currently, energy logistics companies are debt-ridden, making the sector lose 88 billion tugriks in 2020 alone. Experts in the field also linked it to various increasing prices such as coal – 9%, transportation – 20%, currency rates – 7%, consumer prices index – 9.6% , manufacturer’s price index – 10.1%, overseas producer’s price index – 3.4% , as well as a 14.5% increase in industrial water, electricity, heating cost, social insurance premiums, depreciation of fixed assets and interest payments. Moreover, the volume of electricity imported from Russia increased by 21.8%, with 15.9% higher prices, adding 41.2% to the expenditure on imported electricity.
Mongolia’s energy sources, transmission, and distribution networks are 30-62 years old, and 40% of our networks will be out of date soon. In ger areas within the seven districts of Ulaanbaatar, 13,681 homes lack access to standard electricity. During periods of peak load in winter, the running at full capacity with occasional power cuts leads to system-wide accidents and power outages across the country.
What to do now?
Ulaanbaatar’s mayor Sumiyabazar said that 3.5 trillion tugriks are needed to expand and renovate the energy and heating system to satisfy the growing needs of Ulaanbaatar city alone. However, the sector not only lacks that amount of money but even struggles to pay its debt. The joint-stock company Thermal Plant #4 (state-owned) is unable to pay back its 90 billion tugriks loan to the Development Bank. Mongolia, like many other countries, limits and regulates energy prices. But how bad can the regulations be to set the stage for a power blackout and push the industry to the edge of bankruptcy?
This winter, for example, energy expenditure will rise by 25.6 billion tugriks due to the price increase in the coal mines to prevent losses. An extra 5.6 billion tugriks will be required due to the monopolist Ulaanbaatar Railway’s 23.4% increase in coal transportation fees. Moreover, the 100 companies permitted to produce, transmit, distribute, and supply energy need 128.8 billion tugriks to repair and renovate in preparation for winter. Renewable energy sources need 28.9 billion tugriks, and 4.7 billion is needed to cover the increase in the price of electricity purchased from Russia. Therefore, a total of 159.6 billion tugriks is urgently required for companies operating in coal mining, railways, energy generation, transmission, distribution, and supply.
There was no choice but to increase the prices by 20-30%, if not higher, to source the funds. Authorities from the price control agency estimate that the current 1 kWh electricity fee will be increased by 36% and the thermal energy fee by 20%. However, taking into account the level of consumption of the population, the utility fees of households consuming less than 150 kWh per month will not be increased until the end of this winter.
An average household’s monthly energy bill accounts for 5.5% of its total expenses. According to a survey of the National Statistics Office, a family of four uses an average of 220 kWh of electricity per month and pays 36,220 tugriks, or 1,200 tugriks per day and 300 tugriks per person. A one-time bus fare is 500 tugriks, and the mobile phone fee is 820 tugriks per day. The price of 1 kWh of electricity in Mongolia is 6.2-6.3 cents, which is half the price of that in our two neighboring countries and 3-5 times cheaper than in developed countries. This figure reveals how underrated electricity is in our country despite being vital.
It is time to increase the price of electricity gradually at first, and at least recoup the losses in the near future, as well as to implement policies encouraging energy saving, heat loss reduction, and promoting the use of alternative energy sources.
In the long run, global warming and Mongolia’s commitments will demand the reduction of carbon emissions through the construction of nuclear power plants and the use of hydrogen energy.
The citizens still hope that our government will manage to prevent a blackout in Ulaanbaatar, unlike Beirut.
2021.10.18
Trans. by Riya.T and Munkh-Erdene.D
Mongolia is on the brink of living in complete darkness and freezing cold. Lebanon’s Beirut is a recent example of what happens when the city suffers from a blackout when traffic lights don’t function, elevators and refrigerators don’t work. Lebanon’s two primary power plants, which supply 80% of the country’s grid, have run out of fuel, resorted to power cuts, and eventually ran out of electricity. In addition, their economy is in a complete crisis due to controlled low electricity prices, lack of capital, inability to increase capacity, and a corrupt government.
Mongolia is about to follow Lebanon’s example. The energy sector has been losing its power, nearing bankruptcy. I wrote an elaborate article on the matter precisely two years ago. The situation is much worse now. The pandemic has affected the sector immensely. The state passed a law that made a state-owned company pay electricity and heating bills for individuals and businesses. Since December 2020, 826 billion tugriks were spent on this payment. Otherwise, the energy sector would not have recovered.
The recent five-day blackout in the western aimags and the 5-hour electricity disruption in Ulaanbaatar in August are stark reminders of how the energy sector’s collapse is detrimental to the people and benefits the politicians who only seek to get re-elected.
The reality
Today, Mongolia’s energy supply is unreliable and short of energy. The main reason is that domestic production is not growing when consumption increases every year, and electricity is bought from abroad at high prices.
Mongolia’s electricity consumption is increasing year by year. It will reach 9.9 billion kWh in 2021 (expected performance), an increase of 12% from the previous year. The heating usage will rise by 6% to 11 million gcal. Eighty percent of electricity will be produced domestically, while 20% will be imported from the two neighbors. The energy sector is exhausting all its internal resources to prevent a blackout and is overloading its aged stoves. In 2020, the peak load of the central region’s power system reached 1,309 MW, of which 831 MW was in Ulaanbaatar.
The government is investing in the energy sector and working to increase its energy production capacity. A concession agreement has been signed to build a 400 MW thermal power plant in Baganuur by 2024. A 450 MW power plant is to be built at Tavan Tolgoi, and the first phase will be completed in 2025. Moreover, the construction of the Erdeneburen 92 MW hydropower plant is supposed to begin next spring. But the story of the 5th thermal power plant, having been discussed for two decades and having had its foundation built ten times, tells us how big projects in Mongolia are always hindered, not even commissioned on time, or even stopped.
Currently, energy logistics companies are debt-ridden, making the sector lose 88 billion tugriks in 2020 alone. Experts in the field also linked it to various increasing prices such as coal – 9%, transportation – 20%, currency rates – 7%, consumer prices index – 9.6% , manufacturer’s price index – 10.1%, overseas producer’s price index – 3.4% , as well as a 14.5% increase in industrial water, electricity, heating cost, social insurance premiums, depreciation of fixed assets and interest payments. Moreover, the volume of electricity imported from Russia increased by 21.8%, with 15.9% higher prices, adding 41.2% to the expenditure on imported electricity.
Mongolia’s energy sources, transmission, and distribution networks are 30-62 years old, and 40% of our networks will be out of date soon. In ger areas within the seven districts of Ulaanbaatar, 13,681 homes lack access to standard electricity. During periods of peak load in winter, the running at full capacity with occasional power cuts leads to system-wide accidents and power outages across the country.
What to do now?
Ulaanbaatar’s mayor Sumiyabazar said that 3.5 trillion tugriks are needed to expand and renovate the energy and heating system to satisfy the growing needs of Ulaanbaatar city alone. However, the sector not only lacks that amount of money but even struggles to pay its debt. The joint-stock company Thermal Plant #4 (state-owned) is unable to pay back its 90 billion tugriks loan to the Development Bank. Mongolia, like many other countries, limits and regulates energy prices. But how bad can the regulations be to set the stage for a power blackout and push the industry to the edge of bankruptcy?
This winter, for example, energy expenditure will rise by 25.6 billion tugriks due to the price increase in the coal mines to prevent losses. An extra 5.6 billion tugriks will be required due to the monopolist Ulaanbaatar Railway’s 23.4% increase in coal transportation fees. Moreover, the 100 companies permitted to produce, transmit, distribute, and supply energy need 128.8 billion tugriks to repair and renovate in preparation for winter. Renewable energy sources need 28.9 billion tugriks, and 4.7 billion is needed to cover the increase in the price of electricity purchased from Russia. Therefore, a total of 159.6 billion tugriks is urgently required for companies operating in coal mining, railways, energy generation, transmission, distribution, and supply.
There was no choice but to increase the prices by 20-30%, if not higher, to source the funds. Authorities from the price control agency estimate that the current 1 kWh electricity fee will be increased by 36% and the thermal energy fee by 20%. However, taking into account the level of consumption of the population, the utility fees of households consuming less than 150 kWh per month will not be increased until the end of this winter.
An average household’s monthly energy bill accounts for 5.5% of its total expenses. According to a survey of the National Statistics Office, a family of four uses an average of 220 kWh of electricity per month and pays 36,220 tugriks, or 1,200 tugriks per day and 300 tugriks per person. A one-time bus fare is 500 tugriks, and the mobile phone fee is 820 tugriks per day. The price of 1 kWh of electricity in Mongolia is 6.2-6.3 cents, which is half the price of that in our two neighboring countries and 3-5 times cheaper than in developed countries. This figure reveals how underrated electricity is in our country despite being vital.
It is time to increase the price of electricity gradually at first, and at least recoup the losses in the near future, as well as to implement policies encouraging energy saving, heat loss reduction, and promoting the use of alternative energy sources.
In the long run, global warming and Mongolia’s commitments will demand the reduction of carbon emissions through the construction of nuclear power plants and the use of hydrogen energy.
The citizens still hope that our government will manage to prevent a blackout in Ulaanbaatar, unlike Beirut.
2021.10.18
Trans. by Riya.T and Munkh-Erdene.D