The world’s coldest capital faces electricity cuts as Mongolia tackles energy insecurity

In recent weeks, the state’s main electricity supplier has been in Ulaanbaatar announced a series of potential interruptions, involving insufficient power supply. These disruptions – which were accompanied by a increase in fixed tariff prices on electricity and heating – were not welcome by the average Mongolians as winter peaks in the coldest capital in the world. In 2023, Mongolia produced 77.7 percent of its electricity domestically, mainly (90 percent) through coal-fired thermal power plants, and imported the remaining 22.3 percent of electricity from Russia.

The Ulaanbaatar Electricity Distribution Network (UEDN) notified customers of a possible disruption sometime between 60 and 120 minutes between 4pm and 6pm and urged people to limit unnecessary use during peak hours. According to the UEDN website, the network serves half of the country’s population (1.7 million out of 3.4 million in 2023), including people in Ulaanbaatar and surrounding areas, with rates set by the government. The electricity and heating tariff is heavily subsidized by the government, at the cost of a significant amount debt. According to Energy Statistics, the price has remained the same since 2019 Report 2023.

After the parliamentary elections in June 2024, the new government focused its attention on this reform the electricity and heating sector to achieve greater energy security. This gave impetus to the creation of the Task Force and the Committee on Energy Reform overwhelming amount of support (100 out of 126 MPs) and is expected to prioritize tariff reforms, the transition to green energy and private sector involvement in the energy market.

Recently, the Energy Regulatory Commission advocated a change in rates based on market principles such as supply and demand. The chairman of the committee, Tuvshinchuluun Erdenechuluun, noted business losses and possible disruption in the energy sector if the tariff price for electricity and heat remains lower than the cost of production.

“It is necessary to increase prices. When raising prices, two main issues were taken into account. We intend to bring the price of electricity and heat to the cost of production while imposing the lowest possible financial burden on consumers,” he says said last November.

These tariff changes and the increased emphasis on the energy sector are clear signals that Mongolia is preparing to address its energy insecurity, which deeply intertwined with its economics and geopolitics. According to Deputy Prime Minister Dorjkhand Togmid, the country has not undergone significant reforms in the energy sector since the 1980s. That is going to change: four of the fourteen mega projects that the government is planning in 2024-2028 are in the energy sector.

There are many developments underway in the energy sector, including building a solar power plant and an energy storage system in Gobi-Altai province, Indian interest when buying coking coal, a French agreement in uranium mining, and a $100 million loan of the Asian Development Bank for climate financing, including energy projects. These steps are certainly a sign that Mongolian policymakers are on the right track to tackle energy insecurity in the country. But to see long-term results, average Mongolians may have to weather some disruptions in the energy sector along the way.