Future of Ulaanbaatar: Pitch dark and freezing cold?

May 29, 2013
Ulaanbaatar is likely to become a dark, frozen city in the next winter or two. It can be triggered by many factors such as an accident at power plant or sudden drop in temperature. However, no one knows what countermeasures or emergency plans will be utilized when that happens and the entire population, as well as businesses, faces serious risks.
Even the government, which is preparing to lay the foundation of the 5th thermal power plant (Combined Heat and Power/CHP-5) in Ulaanbaatar for the eighth time, has no idea. It looks like Ulaanbaatar residents, who have seen three successive governments full of talk and paperwork instead of actions, are only left with the choice of entrusting their faith in shamans.


It has been many years since the supply of power and heat could not meet the city’s demand. The CHP-4 alone, supplies one fourth of the central power system and three fifths of the heat.
The total capacity of the combined heat and power plants in Ulaanbaatar, including CHP-2 and CHP-3 (both of which are too old and out of date) is 1,585 Gcal/h (gegacalories per hour). Nevertheless, the demand for heat reached 1,555 Gcal/h in 2010 and exceeded production capacity. Peak power pressure in the central region reached 875 megawatts in 2013, which also exceeded capacity. Therefore, 160-170 megawatts of power were imported from Russia, and residents paid huge costs to deal with winter.
According to 2011 statistics from the Energy Regulatory Commission, the central region’s power usage increased by seven percent on average in the last three years. In order to keep up with the extra demand, several new power plants were required. Therefore, the “Ulaanbaatar CHP-5” project is being implemented in two stages: 450 megawatts followed by 370 megawatts (a total of 820 megawatts to be produced by initial calculations).

Setting a world record by laying the foundation seven times

On May 7, 2008, the Government of Mongolia made a decision to build a new combined heat and power plant with a capacity of 300 megawatts of power and 700 Gcal/h of heat, by raising capital from investors. Not long after, an international open tender was announced and it was evaluated on January 15, 2009. Although a total of 26 companies expressed their intention to participate in the tender, only one company, China Datang Corporation, from the People’s Republic of China, sent their proposal. The evaluation committee decided that the proposal did not meet requirements and, thus, cancelled it.
The committee said that they could not fully evaluate the risks to be borne by the participants due to bad preparation of tender materials and their incomprehensibility. Furthermore, there was a lack of experience with implementing a project under the “build-operate-transfer” principle and the required legal environment, including the concession law, was not formed.
Also, the power sector was still being provided with subsidies from the government. Therefore, it was unclear what financial guarantees would be given to participants selected for the tender.
The working group to make the necessary preparations for the “Ulaanbaatar CHP-5” project was established by decree no.29 of the Prime Minister on April 1, 2009. The cabinet meeting that took place on May 27, 2009, resulted in the decision to re-announce the international tender, and ordered the relevant ministries to make environmental assessments on the project site.
The Ministry of Mineral Resources and Energy requested irreversible funding from the Asian Development Bank for the technical assessments of the project. Then, the concession law of Mongolia was passed in early 2010.
The Asian Development Bank chose H&J from the United States as project consultant and established an agreement on August 12, 2010. They selected Mon Energy Consult LLC from Mongolia, and their team developed a feasibility study for the project and collected feedback from relevant Mongolian organizations and experts.
They came up with three options: to build CHP-5 in Uliastai (to the east of Ulaanbaatar), next to the Baganuur mine, or to build beside CHP-3. The above-mentioned two private companies developed all calculations and assessments regarding geological condition, selection of technology, source of water supply, railroad conditions, power transmission requirements, potential benefits of power, environmental protection, land acquisition, resettlement, construction work, total investment and operational costs.

New government, new decisions

The new government formed after the 2012 elections, nullified the previous decisions made by the former government and decided to build the plant elsewhere.
They put forward a proposal to build CHP-5 in the Chuluut Pass of Bogd Mountain, free 42 hectares of land from the specially protected area, and make amendments to the law. However, the new government found no success in these pursuits.
In December, 2012, the Government of Mongolia issued the 191st resolution to change the location for the CHP-5, free up the land, restart the relevant discussions, make the required assessments, and assign those tasks to the relevant ministers.
E.Bat-Uul, the mayor of Ulaanbaatar, issued the A/406 decree on land ownership rights on April 18, 2013, and granted land ownership rights to the Ministry of Energy for 15 years to build the CHP-5 on the 43 hectares of land in the territory of Bayanzurkh district, inbetween the motorway to the south of the Urgah Naran district and the railroad. This land is also known as the Khuliin River Valley. It is unclear why they issued land ownership rights for 15 only years, despite the fact that the power plant will be used for 100 years at least.

Actual reason behind the absence of progress

What is the underlying reason for the new government to violate our right to live with reliable heat and power supply, and risk our safety by postponing the implementation of the Ulaanbaatar CHP-5 project – changing its location and trying to introduce a new player?
The reason is likely to be associated with conflicts of interest at higher levels. The invalidation of the previous decisions made by the former government harmed the reputation of Mongolia and delayed the project.
It shows us that the quality of public governance is in decline, the difference between legislative and executive branches are fading, the decision-making process is mixed up and government planning is crashing.
Are they trying to fill the gap in their knowledge with information acquired by announcing an incomplete, fake tender which dismisses the trust and hard work of many companies and experts, both foreign and national?
It is hard to devise a long-term policy if the government constantly changes their projections for the future. It is suspected that there are too many individuals who are more interested in fulfilling their personal agendas than fixing the system.
There is nothing being done except mere discussions about removing the concurrent coal transportation system for the power plant, building it next to the mine, resolving the heat supply locally first, and then taking care of the heat issue using the power. Decision makers are missing the fact that, if they build the power plant in the center of the city, it will be very expensive to dispose of the uranium-containing ash.
The government is not even following the decision made by parliament to let the price of power be regulated by the principles of free market principles by 2014.
Are we going to build the 5th thermal power plant when Ulaanbaatar becomes a dark, frozen city?

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Posted by on Jun 4 2013. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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