Context
Over 90% of Mongolia’s electricity and thermal energy came from coal-fired plants, with nearly 90% of distributed thermal energy used for space heating in buildings. Mongolia’s updated Nationally Determined Contribution (NDC) committed to cutting energy sector GHG emissions by 32% by 2030 through renewables and improved heat supply. However, the clean heating transition faced challenges: high upfront costs, high interest rates, short-term loans, limited experience with Renewable Energy Sources (RES), and skepticism about cost and reliability. Urbanisation was increasing heat demand, while much of the heating infrastructure neared the end of its lifespan. Coal-based heating remained heavily subsidized, reinforcing reliance on familiar and politically supported fossil fuel solutions.
Goals and approach to transformational change
The project intended to address the technical, financial, and regulatory barriers hindering clean heating investments in Mongolia. It focused on transitioning away from coal-based heating by piloting and scaling renewable energy options and creating enabling conditions for investment into locally innovative technology – Solar District Heating (SDH). The project intended to demonstrate scalable SDH, including an 11.4 MW pilot facility in Sainshand and three 10 MW scale-up facilities.
Components and support mechanisms
As part of Technical Cooperation (TC) component, a Clean Heating Policy and investment plan intended to be developed, outlining regulatory changes, technologies, costs, and deployment timelines for SDH. Awareness and capacity building efforts were foreseen for national, provincial, and local stakeholders.
The Financial Cooperation (TC) component consisted of grant and guarantee mechanisms aimed at mobilising EUR 10 million of public and EUR 10 million of private funds respectively.
Long-term impact
The project intended to directly mitigate least 212,000 tCO2e during its duration. Reduction of 4.4 MtCO2e was expected as part of the long-term indirect mitigation potential. The project presented a cost-efficiency of 20 EUR/tCO2e.
