Solar Photovoltaic (PV) Distribution and Decentralized Electricity Generation
Solar Photovoltaic (PV) Distribution and Decentralized Electricity Generation
Business Model Description
Invest in B2B/B2C businesses that distribute and install rooftop solar photovoltaic panels for households and commercial units. Examples of companies active in this space are:
Sopoko LLC, founded in 2011, is a solar PV panel distributing company in Mongolia. Sopoko LLC established the first-ever solar PV panel manufacturing plant with a capacity of 10MW and operated it between 2011 and 2016. Their main market is herding community and households in rural areas of Mongolia.
Malchin LLC was founded in 1994 to provide wind and solar power to herders and people in rural areas and to improve their living conditions and lifestyle. It cooperates with many foreign and domestic companies that deal with renewable energy and has set up its branches in Russia in 2010 and in Thailand in 2012 and is successfully operating its business in the Southeast Asian market.
Expected Impact
Providing clean energy solutions, contributing to energy security, and allowing people to have cost-saving options for their electricity usage.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
Disclaimer
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Country & Regions
- Mongolia: Ulaanbaatar
- Mongolia: Bayan-Ulgii
- Mongolia: Uvs
- Mongolia: Darkhan-Uul
- Mongolia: Orkhon
- Mongolia: Umnugobi
Sector Classification
Renewable Resources and Alternative Energy
Development need
Although progress has been made in SDG 7 for Mongolia, many rural settlements still have limited access to electricity. The majority of provincial centers still have limited access to heating services, and use outdated and inefficient firing stoves. Mongolia has very high greenhouse gas per capita emissions nearly 2.7 times greater than the global average. (1)
Policy priority
Vision 2050 states that Mongolia will aim to produce its 30 percent of the energy from renewable resources by 2030. (2) New Recovery Policy states that new energy sources and transmission and distribution networks shall be established, their existing capacity shall be enhanced and the reliability of energy production and supply shall be improved. (3)
Gender inequalities and marginalization issues
The western region of Mongolia imported 75.1percent of its electricity from Russia and China in 2021. (4) As of 2020, 18.4 percent of total households were not connected to the power grid system and had limited access to electricity in the rural community. (5)
Investment opportunities introduction
Mongolia has a huge potential of renewable energy sources. The combined wind and solar power potential is around 2600 gigawatts, which can supply the total demand of Northeast Asia. (6)
Key bottlenecks introduction
Mongolia has an issue of low tariff levels which do not cover the costs of electricity production from renewable resources and the difference is subsidized by the government. (7) Being sparsely populated, it makes it difficult to provide electricity access to each household within the national grid system.
Alternative Energy
Development need
The energy sector is heavily dependent on coal, generating 2/3 of the total greenhouse gas emission of Mongolia. This has caused severe air pollution in the country as well as serious health problems (6) Mongolia produced 90% of its total power generation from coal-fired combined heat and power plants while importing 19% of its total electricity consumption. (4)
Policy priority
In Vision 2050, the State will support and develop domestic industries that produce green and energy-efficient products. Also, residential heating and energy sources are to be provided with renewable energy. (2)
Gender inequalities and marginalization issues
About 20% of the population in the Central Energy System is categorized poor or extreme poor and is more vulnerable to power outages than other segments of the population. (8)
Women are more concerned with power outages because they impact women directly in their primary role for daily household care activities by increasing the household care workload, particularly for cooking, water boiling, and washing clothes. (9)
Investment opportunities introduction
With average annual sunny days of 270 - 300 days, Mongolia has the potential to generate 1500 gigawatts of solar energy which would provide 15 percent of global electricity demand, (10) implying huge potential for rooftop mounted solar PV panels for households and commercial properties.
Key bottlenecks introduction
Incentive mechanisms and policies mostly target large-scale energy projects, while support is required for small-scale renewable energy projects. Solar PV panels could be expensive for financially vulnerable households due to high-interest rates in the country.
Solar Technology and Project Developers
Pipeline Opportunity
Solar Photovoltaic (PV) Distribution and Decentralized Electricity Generation
Invest in B2B/B2C businesses that distribute and install rooftop solar photovoltaic panels for households and commercial units. Examples of companies active in this space are:
Sopoko LLC, founded in 2011, is a solar PV panel distributing company in Mongolia. Sopoko LLC established the first-ever solar PV panel manufacturing plant with a capacity of 10MW and operated it between 2011 and 2016. Their main market is herding community and households in rural areas of Mongolia.
Malchin LLC was founded in 1994 to provide wind and solar power to herders and people in rural areas and to improve their living conditions and lifestyle. It cooperates with many foreign and domestic companies that deal with renewable energy and has set up its branches in Russia in 2010 and in Thailand in 2012 and is successfully operating its business in the Southeast Asian market.
Business Case
Market Size and Environment
The country’s combined wind and solar power potential is estimated to be equivalent to 2,600 gigawatts (GW) of installed capacity or 5,457 terawatt-hours of clean electricity generation per year.
As of 2020, roughly 165,000 households (18.4 percent) lack access to power grid system in Mongolia. (11)
WorldBank project REAP delivered 67,000 solar home systems to nomadic herders, fulfilling the government's goal of electrifying 100,000 nomadic households which covered two-third of the nomadic population and one-sixth of Mongolia's total population. (12)
Mongolia has approved construction licenses for 924 MW of renewable energy sources, of which 247 MW are for solar. (10)
Over 210,000 households are living in off-grid areas in Ulaanbaatar. (13) These households are the potential users of solar systems.
Mongolia's wind and solar energy potential is enough to meet the country’s energy demand (around 1.2GW as of 2018), and can meet northeast Asia’s regional energy demand with a suitable transmission infrastructure.
Indicative Return
15% - 20%
As per expert consultations, the average IRR is estimated to be around 20 percent Year on Year.
Investment Timeframe
Short Term (0–5 years)
As per expert consultations, investment timeframe is estimated to be around 3 years.
It takes up to a few days to complete the installation for households and a few weeks for commercial businesses, depending on their scale. Thus, solar PV panels can generate quick returns.
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - Requires Subsidy
Capital - Limited Investor Interest
Capital - Limited Investor Interest
Impact Case
Sustainable Development Need
Mongolia produces domestically about 80 percent of its energy demand and imports 20 percent from Russia and China. About 10 percent of domestic energy production is from renewable resources. (13) Increased use of solar energy would contribute to domestic energy production and its share of renewable energy.
The welfare costs of air pollution in Mongolia are estimated at USD 486 mn annually, the costs of lost productivity at USD 58 mn, with a combined cost equal to 5.6 percent of Mongolia’s gross domestic product. (15) Reduced air pollution in relation to solar energy systems would contribute to SDG 11.
As Mongolia's energy system is highly dependent on coal, per capita GHG emission (almost 27 tons per person) is the highest in the world. (16) Increased use of solar energy systems would contribute to GHG emission reduction and overall air pollution; thus would contribute to SDG 3.
Gender & Marginalisation
There are 10 soums (an administrative unit within the province) that still import electricity from China and Russia. (13) Improved access to solar energy systems would allow these soums to become self-sufficient.
Ulaanbaatar has one of the worst air pollution in the world due to intense coal burning in the peri-urban area. Children and pregnant women are the most vulnerable with a high risk of respiratory diseases. (17) Increased solar power would lead to improved overall health for the above.
Expected Development Outcome
More solar PV panels mean more clean energy for households and businesses, and less electricity from burning coal (GHG reduction), contributing to the SDG 7 and SDG 13 targets.
Improved access to electricity as the rural areas in Mongolia still lack reliable sources of electricity. In fact, almost 2 percent of the total population still has no sources of electricity in Mongolia. (18)
Increased solar power is expected to bring a much-needed and desirable change to ease the high-carbon strains due to coal burning in the capital Ulaanbaatar, thus offering health benefits to its citizens and contributing to SDG3. (14)
Gender & Marginalisation
Providing solar power systems for households in rural areas would reduce electricity accesibility issues for last-mile households; thus reducing the level of inqequality in the country.
Poor communities who use coal for heating during winter season in peri-urban areas would have access to heating solutions powered by solar energy.
Primary SDGs addressed
3.9.1 Mortality rate attributed to household and ambient air pollution
132 deaths per 100 000 people per year. (19)
Data is not available. The target is to significantly reduce the death attributed to household and ambient air pollution.
7.1.1 Proportion of population with access to electricity
7.2.1 Renewable energy share in the total final energy consumption
7.1.1: As of 2020, 98.1 percent of the population has access to electricity. (18)
7.2.1: About 10 percent of the total energy. (4)
7.1.1: By 2030, ensure universal access to affordable, reliable and modern energy services. (2)
7.2.1: By 2030, the target is to reach 30 percent. (2)
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
If not recycled, solar PV panels waste would adversely affect the environment as the materials could be hazardous.
The fact that the Government heavily subsidizes coal-generated power and processes briquettes for heating, makes it challenging for opting for solar PV panels.
Poor quality solar panels could stop working and cause financial burdens for the owners.
Gender inequality and/or marginalization risk: Solar panels are expensive and unaffordable for financially vulnerable communities and disadvantaged households.
Impact Risks
As solar energy is only produced during day-time in areas with adequate sunlight, users would have to rely on non-renewable energy sources in the absence of adequate energy storage systems.
Without incentives in place, people may not comprehend the environmental benefits of solar energy and opt for cheaper energy solutions.
It would be impossible to use solar energy in areas which lack adequate sunlight.
Gender inequality and/or marginalization risk: Without affordable home solar power systems, last-mile households which already lack access to electricity will continue to struggle.
Impact Classification
What
Solar PV based electricity generation to ensure improved access to reliable and clean energy sources.
Risk
As solar panels are imported into Mongolia, border closure could limit the supply. Improper waste management could damage the environment.
Contribution
100,000 nomadic households installed solar home system. (12) and more people installing solar PV panels would contribute to the goal of achieving 100 percent access to reliable energy by 2030.
Impact Thesis
Providing clean energy solutions, contributing to energy security, and allowing people to have cost-saving options for their electricity usage.
Enabling Environment
Policy Environment
In Vision 2050, clause 4.2.37: Mongolia will aim to increase the installed capacity of renewable resources to 30%. Clause 4.2.38: Advanced technology of renewable energy will be used for local supply. Clause 6.4.7: Develop renewable energy sources to meet the goals of NDC of Mongolia. (2)
Mongolia's nationally determined contribution to the UN Framework Convention on Climate change states that target is to mitigate its GHG emissions by 22.7 percent by 2030, (20) to which increased use of solar energy systems contribute positively.
Financial Environment
Financial incentives: EBRD and GCF provided a financial package of USD 25 mn to XacBank of Mongolia to promote green loans with an annual interest rate of 3 percent for individuals and businesses adopting climate change mitigation. (23)
Fiscal incentives: Solar PV panels are exempt from a customs tax of 5.5 percent.
Other incentives: As per the Personal Income Tax Law, the purchase of environmentally friendly equipment for household use and private apartments that are built or purchased for residential purposes for the first time are tax-exempt.
Regulatory Environment
Law on Renewable Energy regulates all matters including tariff for renewable energy. The tariff for electricity generated from solar sources is USD 0.12 for 1KW. (21)
For solar PV panels testing, the following standard is applied. MNS IEC 61730-2 : 2020 in order to prevent adverse environmental effects such as electric shock, fire hazard, and mechanical damage. (22)
Marketplace Participants
Private Sector
Corporates: Sopoko LLC, Malchin Group, Global Group, Narnii Buman Gerel LLC Investors: Solar Power international LLC, XacBank, Green Climate Fund.
Government
Government: Ministry of Energy, Energy Regulatory Commission, National Renewable Energy Center.
Multilaterals
United Nations Development Program, United Nations Environment Program, Global Green Growth Institute, European Bank for Reconstruction and Development, Green Climate Fund, Asian Development Bank, WorldBank, International Renewable Energy Agency, GIZ
Non-Profit
Mongolian Renewables industries Association (MRIA)
Public-Private Partnership
Batsumber Solar Power plant is the example of public-private partnership as XacBank and Ministry of Environment and Tourism cooperated on building the solar power plant with the funding of Green Climate Fund and private investors. (14)
Target Locations
Mongolia: Ulaanbaatar
Mongolia: Bayan-Ulgii
Mongolia: Uvs
Mongolia: Darkhan-Uul
Mongolia: Orkhon
Mongolia: Umnugobi
References
- (1) Government of Mongolia 2019. Mongolia Voluntary National Review Report 2019: Implementation of the Sustainable Development Goals. Ulaanbaatar
- (2) Government of Mongolia, (2020). Vision 2050
- (3) Government of Mongolia, (2021). New Recovery Policy
- (4) Energy Regulatory Commission of Mongolia. (2022). Statistics on Energy Performance 2021. Retrieved October 23, 2022, from https://erc.gov.mn/web/mn/statistic
- (5) Education during the pandemic: Dimensions of the digital divide in Mongolia. (n.d.). Retrieved October 25, 2022, from https://asia.fes.de/news/mongolia-digital-divide
- (6) Asian Development Bank, “Unlocking Mongolia's Rich Renewable Energy Potential” (Asian Development BankJuly 24, 2020) <https://www.adb.org/news/features/unlocking-mongolias-rich-renewable-energy-potential>accessed October 19, 2022
- (7) Mongolia Energy Situation - Energypedia. Retrieved October 23, 2022, from https://energypedia.info/wiki/Mongolia_Energy_Situation
- (8) Asian Development Bank (2020). First Utility-Scale Energy Storage Project: Report and Recommendation of the President. https://www.adb.org/sites/default/files/project-documents/53249-001/53249-001-rrp-en.pdf
- (9) Asian Development Bank (2020). First Utility-Scale Energy Storage Project: Gender Action Plan. https://www.adb.org/sites/default/files/project-documents/53249/53249-001-gap-en.pdf
- (10) Kitchell, L. (n.d.). A Ray of Hope: Mongolia’s Burgeoning Solar Power Industry. Retrieved October 24, 2022, from https://blog.mongolia-properties.com/a-ray-of-hope-mongolia-burgeoning-solar-power-industry
- (11) Integrated statistical database of Mongolia. Number of households connected to power sources. https://www.1212.mn/tables.aspx?tbl_id=DT_NSO_3500_001V1&13999001_select_all=0&13999001SingleSelect=_T5_T3_T1_T4_T2&SOUM_select_all=0&SOUMSingleSelect=_0_511&YearF_select_all=0&YearFSingleSelect=_2020_2010&viewtype=table
- (12) WorldBank Group Pubblications, 2014. Development Impacts of Solar-Powered Electricity Services in Mongolia. https://issuu.com/world.bank.publications/docs/development_impacts_of_solar-powere
- (13) Global Green Growth Institute. (2020). Development of Green Energy Systems and Energy Efficiency in Mongolia. https://gggi.org/wp-content/uploads/2021/02/gggi_eng2.pdf
- (14) Partnership on Transparency in the Paris Agreement: MONGOLIA’S PRIVATE SECTOR LED RENEWABLE ENERGY PROGRAMME. 2019. https://transparency-partnership.net/system/files/document/200114_GPD_Mongolia_RZ.pdf
- (15) Mongolia’s Ulaanbaatar Breathes Easier After Cleanup of Air Quality. (2022, June 9). Asian Development Bank. Retrieved October 24, 2022, from https://www.adb.org/results/mongolias-ulaanbaatar-breathes-easier-after-cleanup-air-quality
- (16) Williams, J. (2022) Why does mongolia have such a high carbon footprint?, The Earthbound Report. Available at: https://earthbound.report/2022/10/06/why-does-mongolia-have-such-a-high-carbon-footprint/(Accessed: January 31, 2023).
- (17) United Nations & Asian Development Bank, UN-ADB Joint Mission Report: SDGs Mainstreaming, Acceleration and Policy Support. in , Ulaanbaatar, 2018.
- (18) World Bank Global Electrification Database from "Tracking SDG 7: The Energy Progress Report" led jointly by the custodian agencies: the International Energy Agency ( IEA ), the International Renewable Energy Agency ( IRENA ), the United Nations Statistics Division ( UNSD ), the World Bank and the World Health Organization ( WHO ).
- (19) World Health Organization issues recommendations to tackle health impacts of air pollution in Mongolia (2018) World Health Organization. Available at: https://www.who.int/mongolia/news/detail/28-02-2018-world-health-organization-issues-recommendations-to-tackle-health-impacts-of-air-pollution-in-mongolia#:~:text=More%20than%20half%20of%20child,deaths%20per%20100%20000%20people.
- (20) Mongolia's Updated Nationally Determined Contribution (NDC). (2020). https://unfccc.int/sites/default/files/NDC/2022-06/First%20Submission%20of%20Mongolia%27s%20NDC.pdf
- (21) Government of Mongolia. Law on renewable energy. (2007). https://legalinfo.mn/mn/detail/465
- (22) Mongolian Standard, Photovoltaic (PV) module safety qualification – Part 2: Requirements for testing. MNS IEC 61730-2 : 2020
- (23) EBRD and GCF support green lending in Mongolia. (n.d.). EBRD.Com. Retrieved October 26, 2022, from https://www.ebrd.com/news/2022/ebrd-press-release-ebrd-and-gcf-support-green-lending-in-mongolia-.html
- (24) Alexander Harrucksteiner, Jagruti Thakur, Katja Franke, Frank Sensfuß, A geospatial assessment of the techno-economic wind and solar potential of Mongolia, Sustainable Energy Technologies and Assessments, Volume 55, 2023, 102889, ISSN 2213-1388, https://doi.org/10.1016/j.seta.2022.102889."