Efficiency of grid-based energy supply schemes

Project description

Title: Efficiency of grid-based energy supply schemes
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Mongolia
Lead executing agency: Ministry of Energy, Cabinet Secretariat
Overall term: 2014 to 2018

Mongolia. Thermographic image of nursery no. 5 in Khovd. © GIZ


Mongolia has an extreme climate, with short summers and long, extremely cold winters. Due to population growth and the ongoing expansion of the mining industry, the demand for energy is rising by around eight % every year. Coal is covering the majority of this increase, but the outdated electricity and heat supply systems are barely able to meet the higher demand.

During the last two winters, the country has had to import electricity at great expense to cover its power deficit. In addition, heat supply system failures are also becoming more frequent. In particular, inhabitants of rural areas face major challenges owing to the poor heating systems. In public buildings (e.g. schools, nurseries, and hospitals), the low room temperatures during winter are an acute health hazard. An initial priority is to raise the indoor temperatures of these buildings to an acceptable level by using energy efficient technologies and improved building designs.

In terms of power supply, there is potential for saving energy by constructing new, more efficient, power plants and investing in improved networks. However, this can only be realised if barriers to investment are removed by providing cost-effective electricity and heat tariffs for consumers as well as reasonable return on investments in view of the risks involved. Improving the energy efficiency of buildings and changing habits can also unlock considerable potential to save energy among consumers. These issues have not been addressed sufficiently to date.

The Mongolian Government does not yet have a framework or relevant strategy for energy efficiency in place. Large-volume consumers and households have not received (sufficient) information on how to save and use energy more efficiently.


In Mongolia, good governance in the field of energy efficiency is improving. The policy framework needed to support energy efficiency among both suppliers and consumers is in place.


The project is working with its partners to develop an energy efficiency strategy. Decisions on improving operations and investments are currently often made in isolation; the strategy aims at ensuring that the decisions are more systematic and broader-based. One of the bases for this is the creation of an integrated energy resource plan.

An analysis of the entire network for generating and distributing electricity and heat will help to systematically identify efficiency potential. Based on this analysis, recommendations for actions regarding specific optimisation approaches (such as maintenance strategies, operational improvements, and rehabilitation measures) can then be made. In addition, training courses are being provided for experts in the energy sector, as the ambitious plans for upgrading power plants will increase the demand for well-trained staff.

The project is also supporting the establishment of a further training system for energy managers and auditors as a way of realising the potential for improved energy efficiency among consumers.

Specific energy measures in public buildings are at the heart of a cooperation arrangement with the Swiss Agency for Development and Cooperation (SDC). In this arrangement, selected public buildings are being renovated in close cooperation with local governments and the local construction industry. The aim for involving these Mongolian experts is to enable them to construct buildings more energy efficient without assistance in the future. Another aim is to demonstrate how decentralised public funds (local development funds) can be used for urgently needed investments in energy efficiency in public buildings. Public investments in energy efficiency are aimed at mobilising the local population and increasing public participation in budgeting processes for priority investments. This is intended to increase the quality of life, particularly in western Mongolia.

Mongolia. Network operator employees on a visit to a substation. © GIZ

Another approach involves working with the Energy Regulatory Commission of Mongolia (ERC), which is responsible for developing and setting the tariffs along the entire value chain in the energy sector. The tariffs do not currently offer any incentives to save energy nor do they cover the actual costs of generating and distributing power. Appropriate tariffs can offer such incentives and reduce subsidies. Through the project, the authorities are receiving advice on drafting and introducing new tariffs.