Mongolian Clean Energy Investment During an Economic Crisis

Mongolia, with a population of only 2.8 million, has seen massive GDP growth in the past decade by exporting its vast mineral resources to China. However, having an economy so closely linked to commodity prices can cause huge issues during periods of lower demand. Falling mineral demand from China combined with a debt crisis has created a major economic slowdown with GDP now forecasted to stagnate in 2017, down from explosive growth of 17% in 2011.[1]

However, there is some good news. Analysts at IRENA have identified that beyond Mongolia’s massive deposits of coal, copper, and gold; the country is well positioned to one day export huge amounts of renewable energy to its neighbors[2]. The Gobi Desert has excellent wind and solar potential, with total theoretical production being as high as 15,000 terawatt-hours per year with peak production being 2.6 terawatts.[3] Mongolia’s current share of renewable generation capacity is only 7%, but the country has set policy to have 20% of capacity renewable by 2023, and 30% by 2030.[4] This natural potential along with aggressive government support may shape Mongolia from being a net power importer to a regional exporter in the coming decades.

Mongolia’s challenge is to balance its green ambitions with the reality of its current economic slowdown. Ulaanbaatar, the capital and largest city, is infamous for high levels of smog during winter, when many Ger dwelling citizens burn coal and wood in to stay warm.[5] The World Bank is implementing a project aimed at replacing existing Ger stoves with cleaner-burning, efficient systems.[6] The World Bank and the government of Mongolia have recently completed a campaign[7] to provide consumer scale solar power to the over 100,000 nomadic households. Projects such as these immediately change lives.

The newly elected government formed by the Mongolian People’s Party is attempting to address a massive budget deficit (20% of GDP) caused by falling commodity prices. [8] In a severe budgetary crisis, hard decisions need to be made. While investing in renewable energy is important from an economic and environmental perspective, projects that improve near-term quality of life need to take priority. In the current economic environment, the most important factor for boosting Mongolia’s clean energy production is, ironically, the recovery of dirty industries such as coal and copper mining.