Hunched over a twisted pine cane, eighty-year-old Togtokhbayar radiates a forceful energy from the smiling eyes of her sprite frame. More than three decades as a park ranger south of Mongolia’s capital Ulaanbaatar and still she has the vitality that enabled her to open a café in retirement that she ran from 2008 until last year.
The reason for closing? Togtokhbayar and a few members of her extended family – 16 children and 88 grand- and great-grandchildren – are waiting to be moved, since their homes are within an area slated for the construction of Ulaanbaatar’s fifth coal-burning power station.
“Otherwise I’d still be working,” she rues.
The coal project in question is CHP-5, one of several that the country has planned to meet its growing demand for power. Though economic growth in Mongolia has slowed in recent years as commodity prices have slumped, the demand from the capital and Mongolia’s ever-expanding mining industry for a constant and reliable source of power has not.
Mongolia has approached international lenders including the Asian Development Bank, the European Bank for Reconstruction and Development and Japan’s Nippon Export and Investment Insurance to finance the CHP-5 project and other coal power stations. The banks have a responsibility to balance economic development while protecting environmental and social standards.
But for Togtokhbayar and others living in the shadows of the planned projects – including communities in the Gobi desert to the south, where massive mines require increasing amounts of energy to extract coal, copper and a wealth of other minerals – the pressures on land and livelihoods are an ever present threat.
Mongolia is overwhelmingly dependent on coal to fuel the country and its economy. As of 2015, 90 per cent of Mongolia’s capacity to generate power and 79 per cent of its electricity was produced by eight coal stations scattered across the country.
One of the reasons that Mongolia relies so heavily on coal is that it has the black stuff in abundance. The Tavan Tolgoi mine in the Gobi desert, with an estimated 6 billion tonnes of brown and coking coal, is the largest coal mine in the world. From here, 15 million tonnes of coking coal – an integral part of the steel production process – are exported annually, mostly to China. Along with other gigantic extraction projects in the Gobi, like the multibillion dollar Oyu Tolgoi copper mine, Tavan Tolgoi, the Tsagaan Suvragaand mine and other heavy industries are in part driving Mongolia’s increasing power needs.
The Mongolian government is now planning to build a coal plant at the site of the Tavan Tolgoi mine, primarily to send electricity back to Oyu Tolgoi. Currently Oyu Tolgoi imports energy from abroad via China’s Inner Mongolia power corporation, but it is contractually obliged to start sourcing power domestically beginning in 2017.
There are questions though about how the country plans to do so. Oyu Tolgoi should have studied a variety of options for supplying itself with power, but the option that it has been forced to support as per its investment agreement, the coal plant at Tavan Tolgoi, is based on a dated analysis when commodity prices were high, which would have exaggerated demand projections and made it the most attractive option. In an August 2016 meeting Oyu Tolgoi has said it will continue to support the government in its deliberations about future sources power, including whether renewables can enter the mix.
A decision about the power station at Tavan Tolgoi remains in flux however, and a fickle political climate is part of the reason. The back and forth between the government and private investors has hindered Mongolia from implementing other projects and policies it has prioritised for its development, be it for coal power or other sources of energy.
The mining and burning of coal, the most climate-damaging fossil fuel, is stifling the quality of life for Mongolia’s citizens. The majority of the coal plants operate in the central region of the country and blanket Ulaanbaatar in a choking haze. In addition to the power stations, household stoves in the traditional ger districts that have mushroomed in recent years and which are not connected to the central heating system, coupled with exhaust from the ever-present gridlock, make the capital one of the most polluted in the world. City dwellers, though, aren’t the only ones bearing the brunt.
At her desk in Khanbogd, the town where Oyu Tolgoi is located, Otgonjargal, vice governor of the region, reflects on how work at the mine has altered the town’s landscape. Paved roads bisect the vast desert and host a steady stream of lorries where once only animals migrated. Khanbogd and Tsogttsetsii, the town located next to the Tavan Tolgoi mine, have mushroomed with an influx of people searching for work at the mines.
But as Otgonjargal continues, the more things change, the more they stay the same. “The issue that keeps coming up is water – this is a conflict that will never end.” Since construction began in 2010, Oyu Tolgoi has received a number of complaints from locals living near the mine who allege that the company is unsustainably drawing on local water resources to fuel its operations. As of 2016, three official complaints were lodged at the World Bank and EBRD, asking the financiers of Oyu Tolgoi to rectify the situation.
Concerns about water use are only expected to increase. Coal power is a water-intensive form of energy production, and the pressures on the deep aquifers are already significant because of the urbanisation and industrial developments that have come with mining. Though both proposed plants at CHP5 and Tavan Tolgoi would rely on dry-cooling systems – meaning less water would be used for cooling – this implies that each would be much less efficient and so would need to burn more coal to produce the same amount of energy.
Many in Khanbogd and Tsogttsetsii also know little about the proposed project. Of nearly 80 people interviewed in the streets of Khanbogd and Tsogttsetsii in August 20116, only a handful had ever even heard about the coal project, and if they had, the news came via the media, rather than any formal public discussion, as would be required for a project of this stature. Leaving communities in the dark about local decision-making has been a recipe for disaster.
70 kilometres south of Ulaanbaatar is the Salkhit wind farm, where 31 turbines provide as much as 50 megawatts of energy to the central energy grid. Constructed in 2013, the USD 110 million project is the first of its kind and Mongolia, having benefitted from a USD 47.5 million loan from the EBRD. The country’s potential for power from wind is vast. According to Myagmardorj Enkhmend, executive director of Mongolian Wind Energy Association, Mongolia has the potential to produce 50 per cent of annual demand in China for wind power.
At the moment however around three per cent of electricity in Mongolia is from renewable sources, mostly hydropower, a very small percentage compared to the country’s renewable energy potential. With a policy goal of between 20 and 25 per cent of electricity from renewable sources by 2020, Mongolia will need to make some significant policy decisions to avoid and steer investments away from a coal-based economy. For a start, Enkhmend explains, tariffs on wind and solar power should not be kept so high, and the government must eliminate subsidies on coal power and fully account for its costs.
Projects like the Salkhit should be celebrated, but international financiers like the EBRD remain tied to projects of the past: its portfolio in Mongolia is skewered towards mining and other unsustainable industries.
If the country is to pursue a truly sustainable energy future, it will require a combination of political and smart investment decisions. Otherwise, for people like Togtokhbayar, the winds of change will never be at their back.