Foreign Affairs: No deal

The Mongolian authorities continue to insist on the need for HPPs in the Selenga River basin, threatening the unique ecosystem of Lake Baikal. Experts are convinced that Mongolia has taken this approach to win concessions on electricity tariffs from its Russian partners and to attract infrastructure investment.

Foreign Affairs: No deal

<b>Area: </b><br>
1,566,000 sq. km<br>
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<b>Population:</b><br>
3.1 million<br>
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<b>Population density: </b><br>
1.8 people per sq. km<br>
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For several years now, the Mongolian authorities have been seeking to launch the construction of major new HPPs on rivers that are the main source of water for Lake Baikal. At every summit and official gathering where he has been invited to speak, President Tsakhiagiin ELBEGDORJ has stated that his country’s economy is growing at an unprecedented rate and that this growth is under threat from a shortage of electrical power.<br>
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It’s impossible to disagree. Mongolia’s power supply draws on two separate regional grids in the west and central parts of the country, each operating a number of coal-fired CHPPs built to Soviet designs. There are also a handful of smaller HPPs. The equipment is clearly played out, while transmission infrastructure has not been renewed for decades, leading to further losses. At the same time, the authorities insist that development of extractive industries – and Mongolia is exceptionally rich in coal as well as copper, molybdenum, tin, tungsten and gold – pushes up energy consumption at a rate of 17 percent per year.<br>
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Mongolia’s power shortage is currently covered by imports from Russia, supplied by Inter RAO Group. The electricity is delivered from Russia to Mongolia over ten cross-border transmission lines rated between 0.4 and 220 kV. The annual cost to the Mongolian side is around 25 million dollars. The country’s leadership believes that Mongolia can meet its own needs and free itself of the need for imported Russian power by constructing new HPPs in the Selenga River basin. To finance this, some months ago it requested a one billion dollar loan from China.<br>
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However, at a meeting with Tsakhiagiin ELBEGDORJ and PRC President Xi Jinping in Tashkent this past summer, Russian President Vladimir PUTIN stated that the construction of the HPPs in Mongolia would create “serious risks” to the Irkutsk Region water supply and the entire Baikal ecosystem: the lake could grow shallow or simply dry up altogether. This same view is shared by Greenpeace and UNESCO.<br>
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In light of the unresolved environmental issues, China declined to provide a loan. As an alternative solution to the problem of insufficient power, the Russian president suggested expanding exports of electricity from Russia to Mongolia. At the Eastern Economic Forum in early September, Vladimir PUTIN proposed moving ahead on an energy super ring project that would ultimately link Russia, China, South Korea, Japan and (possibly) Mongolia, allowing the countries to trade electricity and permit its transit across their territories.<br>
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For his part, Alexander PASECHNIK, head of analysis at the National Energy Security Fund, is inclined to think that Mongolia is playing games when it talks about an urgent need for major new HPPs in response to runaway economic growth. “The trend these days is clearly towards environmentally-friendly generation, but to actively develop hydropower when the country has enormous coal reserves would only destroy an industry that could act as a foundation for economic development. Since exporting coal is difficult – the country’s neighbors, Russia and China, are themselves major exporters of high-quality coal – that destructive effect could be felt quite quickly. Furthermore, a billion dollar loan is unmanageable and the cost of annual electricity imports doesn’t even compare. In my opinion, by talking about a project that threatens Baikal, our Mongolian partners are trying to win tariff concessions from Russia and attract capital to invest in upgrading outdated grid infrastructure, in exchange for dropping plans to build HPPs. That’s an odd kind of deal and it absolutely is not going to work,” the expert believes.<br>
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04-12-2016 14:30

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