The Second Energy Sector Project, approved today by the World Bank’s Board of Executive Directors, will contribute $54.4 million in financing to help the government of Mongolia address key bottlenecks in select electricity distribution companies by upgrading aging assets and expanding distribution capacity. The project will also support the development of solar power.

“More reliable access to electricity will improve the lives of families and help businesses thrive. The World Bank is committed to continuing our partnership with Mongolia to strengthen the power sector and explore options for renewable energy to help the country pursue sustainable development,” said James Anderson, World Bank Country Manager for Mongolia.

Obsolete and inefficient distribution networks have led to significant distribution losses, which are as much as 25 percent in many networks. The regional distribution systems have reached their capacity limit and are in critical need of renovation and expansion.

The project will finance investments to upgrade and expand the capacity of power distribution infrastructure in the Baganuur-Southeast and the Erdenet-Bulgan distribution networks, which supply electricity to nine of Mongolia’s 21 provinces.

It will also help scale up production of renewable energy in remote rural areas by designing and building the first large-scale solar photovoltaic 10 MW power plant in Mongolia outside the Central Energy System. The plant will supply affordable and clean energy to the country’s western region, which currently imports 70 percent of its power supply.

“We are encouraged by the government’s target to increase the share of renewables to 30 percent by 2030,” – said Peter Johansen, Senior Energy Specialist of the World Bank. “With its abundant solar and wind power resources, the country is now considering to more effectively and efficiently incentivize renewable energy investment to fully use its potential.” 

The project will be funded by a $42 million loan on concessional terms from the World Bank’s International Development Association and a $12.4 million grant from the Scaling-Up Renewable Energy Program under the Strategic Climate Fund.