Mongolia The Preparatory Survey Report for Hurmen Wind Power Project in Mongolia (PPP Infrastructure Project) (Public Version) November 2015 Japan International Cooperation Agency (JICA) SB Energy, Mizuho Bank, Mizuho Research Institute and Mitsubishi Hitachi Power Systems Engineering OS JR(先) 15-103 < CONTENTS > 1. NEED FOR THE PROJECT AND BACKGROUND ............................................................ 1 1.1 ECONOMIC AND SOCIAL BACKGROUND IN MONGOLIA ........................................................ 1 1.1.1 Summary ................................................................................................................. 1 1.1.2 Politics ..................................................................................................................... 3 1.1.3 Economic situation ................................................................................................... 6 1.1.4 Social and economic situation in the project area ................................................. 16 1.2 STATUS OF MONGOLIAN POWER SECTOR AND CHALLENGES ............................................ 18 1.2.1 Brief overview ........................................................................................................ 18 1.2.2 Organizations of Mongolian power sector ............................................................. 18 1.2.3 Regional energy system ........................................................................................ 20 1.2.4 Power generation ................................................................................................... 22 1.2.5 Transmission ......................................................................................................... 30 1.2.6 Tariffs and its system ............................................................................................. 31 1.2.7 Problems and Challenges ..................................................................................... 36 1.3 POLICIES AND PLANS BY MONGOLIAN GOVERNMENT ...................................................... 39 1.3.1 Brief overview ........................................................................................................ 39 1.3.2 The Law on Renewable Energies .......................................................................... 40 1.3.3 The Law of Mongolia on Energy ............................................................................ 43 1.3.4 Mongolia Sustainable Energy Sector Development Strategy Plan 2002-2010 ..... 45 1.3.5 National Program on Renewable Energy (2005-2020/2030) ................................ 46 1.3.6 Program on Integrated Power Energy System 2007 (2007-2040) ........................ 46 1.4 LEGISLATIONS / REGULATIONS ....................................................................................... 50 1.4.1 Overview of Investment Climate in Mongolia ........................................................ 50 1.4.2 PPP／BOT Laws and Regulations ........................................................................ 50 1.4.3 Foreign Investment / Financing ............................................................................. 53 1.4.4 Exchange and Transfer of Foreign Currency ........................................................ 61 1.4.5 Land Use ............................................................................................................... 62 1.4.6 Corporate Income Tax / Custom Duty ................................................................... 62 1.4.7 Japan-Mongolia Bilateral Relation ......................................................................... 66 1.5 EXISTING INFRASTRUCTURE DEVELOPMENT THROUGH PPP/BOT ................................... 67 1.6 THE PROJECT IN NATIONAL PLANNING ............................................................................ 70 1.7 BILATERAL / MULTILATERAL AID PROJECTS IN POWER SECTOR IN MONGOLIA .................... 71 1.8 SIMILAR PROJECTS IN MONGOLIA AND THE COMPARISON WITH THIS PROJECT .................. 74 1.8.1 Summary of Similar projects in Mongolia .............................................................. 74 1.8.2 Challenges on and Lessons from the Similar Projects .......................................... 74 1.9 ELECTRICITY PURCHASE BY THE NEIGHBORING COUNTRIES (CHINA) ................................ 76 1.9.1 Feed-in Tariff scheme in China ............................................................................. 76 1.9.2 Regulations and restrictions on electricity export .................................................. 76 1.10 STATUS AND PROSPECTS OF JOINT CREDIT MECHANISM IN MONGOLIA ............................. 77 1.11 THE NEED AND OBJECTIVES OF THE PROJECT ................................................................. 80 2. ELECTRICITY DEMAND AND SUPPLY ........................................................................... 81 2.1 CURRENT SITUATION .................................................................................................... 81 2.2 OUTLOOK OF ELECTRICITY DEMAND AND SUPPLY ............................................................ 81 2.2.1 Demand ................................................................................................................. 81 2.2.2 Supply .................................................................................................................... 83 2.2.3 Gap between demand and supply ......................................................................... 84 2.2.4 Windpower plans which are operating or under development .............................. 85 2.2.5 Hydropower plans which are operating or under development ............................. 86 2.2.6 Solar power plans which are operating or under development ............................. 87 2.2.7 Outlook of operation start ...................................................................................... 87 3. TECHNOLOGY REVIEW ................................................................................................... 90 3.1 OVERVIEW ................................................................................................................... 90 3.2 WIND STUDY ................................................................................................................ 90 3.2.1 Introduction and Methodology ............................................................................... 90 3.2.2 Project Description ................................................................................................. 92 3.2.3 Available Met Masts and Location ......................................................................... 93 3.2.4 Site WTG Classification ......................................................................................... 94 3.2.5 Ambient Conditions ................................................................................................ 96 3.2.6 Preliminary Wind Turbine Technology Reviewed .................................................. 97 3.2.7 Selection of Five (5) WTGs ................................................................................... 98 3.2.8 Wind Farm Layout ................................................................................................. 98 3.3 SITE INFRASTRUCTURE ............................................................................................... 101 3.3.1 Introduction .......................................................................................................... 101 3.3.2 Site Reconnaissance ........................................................................................... 101 3.3.3 General Site Morphology and Geological Background ....................................... 101 3.3.4 Construction ......................................................................................................... 103 3.3.5 Access ................................................................................................................. 103 3.3.6 Electrical Infrastructure ........................................................................................ 105 3.3.7 WTG Transport .................................................................................................... 106 3.4 OUTLINE DESIGN ........................................................................................................ 107 3.4.1 Introduction .......................................................................................................... 107 3.4.2 Outline Design ..................................................................................................... 107 3.4.3 Geotechnical Investigation .................................................................................. 108 3.4.4 Considerations of Infrastructure Design .............................................................. 110 3.5 REVIEW OF PROPOSED TECHNOLOGY ......................................................................... 113 3.5.1 Introduction .......................................................................................................... 113 3.5.2 Key Findings ........................................................................................................ 113 3.6 TRANSMISSION INTERCONNECTION AND SYSTEM IMPACT .............................................. 114 3.6.1 Introduction .......................................................................................................... 114 3.6.2 Overview of Regional Power Supply/Demand .................................................... 115 3.6.3 Grid