Challenges and Governance of Hydropower Sector in Mongolia


This paper is about challenges and governance issues for building a hydropower station in Mongolia. Even though Mongolia is attempting to build a hydropower station for a long time, it has been not successful because of several reasons including extreme climate, conflicting interest between politicians and ineffective state-centered policies. Thus, this paper tried to analyze these issues and to introduce some solutions to solve.


In any country, sectors of energy and water are significantly influential, and issues related to those sectors should be considered and solved carefully. An issue linked to those two sectors simultaneously is the hydropower sector. Today, throughout the world, every nation is aiming for sustainable development, and for this purpose, the tendency to use renewable energy resources is becoming common. Hydropower is the largest renewable energy resource. Thus, in this paper, I will discuss challenges and governance of the hydropower sector in Mongolia.

Providing energy has been one of the biggest issues in Mongolia. It is a landlocked country between China and Russia. Although Mongolia’s population is only 3 million, it is one of the most sparsely populated countries in the world. Its landmass is quite large – 1.6 million square kilometers – and 40 percent of the total population lives in the provinces as nomadic herders. In the past, there has been difficulty in providing energy to the sparsely distributed provinces and even now there are some provinces that do not have access to energy.

According to Radii (2008), 68 percent of the total population in Mongolia has access to electricity, and 90 percent of the counties (sum in Mongolian) have electricity through a grid system. At this time, 15 small counties need energy, which can be supplied by renewable energy (Radii, 2008). These small counties are quite spread out and are not near cities, so it would be costly to bring power to them by a grid system.

In the world, 16 percent of total electricity production comes through hydropower. It can be said that it is the largest renewable energy source (Liu et al., 2011). Hydropower is a technology that uses energy from moving water. This kind of energy has a long history going back to the times of the ancient Greeks. A water wheel in the river worked as a generator and kinetic energy of the river converted it into mechanical energy (National Geographic, 2015). Normal hydropower stations have three main parts: an electric plant, a dam and a reservoir. China, Canada, Brazil, USA and Russia are the top players in this sector. According to the National Geographic (2015), hydropower is considered as the cheapest way to produce electricity and it is also a clean and renewable source. At the same time, there are common perceptions that hydropower stations can cause damage to wildlife, especially fish and river habitats.

Politics and incentives of clean energy technology are the main reasons why renewable energy sector demands are increasing dramatically. “Projection of price increase for primary energy sources, carbon accounting and incentives in clean energy technology are a good stimulus for the renewable energy sector. For example, a study of 50 selected dams with installed power generation capacity of 39,000 MW found that they replaced the equivalent of 51 million tons of fuel in electric energy production annually. This is greater than other renewable energy sources like wind and solar power at present” (Liu et al., 2011).

According to Radii (2008), there are 3,800 various types of rivers with a total length of 65,000 km, and it would take 6,300 MW of energy resources and 56*107 KW.h to produce one in Mongolia. The majority of these resources are located in the western part of Mongolia. Today, there are nine small hydro plants, which are running and their total capacity is 2.0 MW. The Mongolian government tried to build a major hydropower station several times in  order to fill its increasing demand for energy, as there are some rivers which can produce this much needed energy. For example, the Egiin River has a capacity of 220 MW and the Orkhon River has a capacity of 100 MW (Radii, 2008). However, these trials have not been successful because of certain issues. Firstly, due to financial issues there were difficulties, and secondly, because there were conflicts between the interests of some of the politicians in Mongolia and neighboring countries. Even though there are a few small hydropower stations, still they do not have a major hydropower station in Mongolia. Therefore, I would like to examine the various challenges of hydropower stations in Mongolia and about the ethics and issues of governance.

Challenges to Build a Hydropower Station in Mongolia

Mongolia has four seasons, and weather in each of these seasons is exceptionally distinct from the other. Winter in Mongolia is extremely cold, and in some regions goes down to minus 40°C. Summer is also quite hot, and sometimes goes up to plus 40°C. Spring and autumn are quite dry and windy. These distinct weather changes bring an immense increase in the usage of energy. Moreover, Mongolia is located in a transition zone called the ‘ecozone’, which is the most sensitive to global warming, and can influence energy, water and carbon dioxide exchanges (Roberts, 1994). Mongolia has a comparably small amount of water availability and the world’s climate change is affecting the weather in Mongolia significantly. For instance, hot temperatures have increased and it has been raining less as well in the last few decades (Yamanaka et al., 2007). Therefore, many regions of Mongolia have increased desertification, and recourses of water are declining noticeably.

On the one hand, the demand of energy is increasing dramatically in Mongolia. At the moment, the total capacity of the energy sector is 1,100 MW, and Mongolia needs to import 300 MW from Russia during its peak period of usage. According to the experts, by 2020, average demand will reach 1,400 MW and by 2025, it will reach 2,000 MW (Institute of System Energy, 2015). In particular, it is becoming very difficult to meet the demand of energy in Ulaanbaatar, the capital city of Mongolia, because half of the total population lives there and even more people are migrating to the capital city.

As mentioned above, the Mongolian winter is extremely cold, but the heating system in Mongolia has not developed well. Thus, every organization and home needs to solve its heating problem through electricity. Moreover, in the countryside, farmers are building irrigation systems because of Mongolia’s short growing season and weather changes. In the last decade, the Mongolian mining sector has been booming, especially in coal, copper, and gold, which have high water usages (Yamanaka et al., 2007). Therefore, this increasing demand, extreme climate and decreasing water availability has become a big challenge for scholars, politicians and experts (Priess et al., 2010).

On the other hand, water authority organizations and experts have to face building a hydropower station, because it involves the interests and needs of many people. A Mongolian famous economist and columnist, Baabar (2012, p. 1) wrote, “In Mongolia, a hydropower station has a long history. Firstly, it was hard to find investment for it. Later Mongolian government found an investment from Malaysian government to build a station then it stopped for no reason. Few years later, the government tried to build again by loan from Chinese Government but it failed again. Later I found out that Russians involved in it to stop the hydropower stations.” In order to meet its demands, Mongolia imports energy from Russia. As mentioned before, it is around 300 MW, and Mongolia pays $25 million for its energy imports every year (Development Bank of Mongolia, 2015). Thus, it is obvious why Russia wants to keep its energy exports.

There are also many other instances where Russia does not like the idea of Mongolia building a new power plant, especially a hydropower station. One case would be that the Russian government needs to protect Lake Baigali, but the Selenge River is the one, which goes directly into Lake Baigali. For Mongolians, the Selenge River is the most suitable river to build a hydropower station. Thus, there is a conflict of interest. For instance, the director of the Siberian branch of the Russian Science Academy said (Mash ChukhalKhun LLC, p. 1) “We do not like when Mongolian build something near to Selenge River because it is one of the main fountainheads of Baigali Lake.” Also, according to Baabar (2012), there are big hydropower stations near the Mongolian border in Russia. The Selenge River is located near the border of Mongolia and Russia. If Mongolia builds a hydropower station at the Selenge River, there is a risk of a water shortage for Irkutsk’s hydropower station (Sugar-Erdene, 2015). Additionally, there are numerous kinds of non-governmental organizations that are against building a hydropower station. Beckbat (2011) said, heads of non-governmental organizations argue that rivers would evaporate and lose the balance of ecology. After many attempts, the Mongolian government made a decision to build a hydropower station, but the decision has not yet become a reality.

Ethical Issue of Hydropower

I would like to explore some ethical issues of hydropower through following the principles of water ethics from the principles of the sub-commission of COMEST (Liu, 2011). From these principles, solidarity, common good and stewardship are discussed in this paper. At present, one of the main ethical issues related to building a hydropower station would be solidarity. As mentioned earlier, the Selenge River is one of the fountainheads of Lake Baigali. This means that security of Lake Baigali is dependent on the Selenge River, therefore, the Mongolian and Russian governments have to respect and consider one another’s interests and situations in order to reach a consensus.

Through considering the common good, a hydropower station would also bring several advantages to Mongolians. Mr Odkhuu (2015), director of the hydropower station of Egiin River, said that if the Mongolian government builds a big hydropower station, all Mongolians would benefit from it. For instance, sparsely located small counties would have electricity and general customers could use cheaper energy.

In the case of stewardship, renewable energy is considered a good solution in order to keep a sustainable life. Ryu et al., (2014) mentioned that for reducing carbon emission, renewable energy is the only solution. As mentioned in the introduction of this paper, hydropower is the biggest share of renewable energy. In addition, in Mongolia large numbers of homes are using coal to solve the heating problem, which is also becoming the main factor of heavy air pollution, especially in Ulaanbaatar.

From these principles, common good and solidarity are gaining more attention in this case. According to various newspaper articles, attempts to build a hydropower station in Mongolia were ruined mainly because of its powerful neighbors. From the above three conditions, the issue of dependency seems obvious. Thus, if the powerful neighbor, particularly Russia, would consider the interests of Mongolia, the interests and needs of Mongolia’s people would be successfully implemented.

Government Policy on Hydropower

Mongolia has been under the Soviet Union’s influence for about 70 years. Until the end of the Soviet era in 1990, Mongolia was considered one of the Soviet camps’ countries. During the socialist era, water and energy issues have been controlled by the State directly through the same governance as other states of the Soviet Union. Today, Mongolia has a central government and three levels of local governments. In its first democratic constitution, Mongolia has a dual governance system, which allows self- governance of lower administrative units and central government (Parliament of Mongolia, 1992). There used to be a Ministry, which was responsible for the water sector before the democratic revolution. Today, there are around 20 organizations, which have functions according to current law (Livingstone et al., 2009). In general, water related policies are dependent on the Ministry of Nature, Environment and Tourism. In 2000, the National Water Committee was established to manage water-related issues (Horlemann and Dombrowsky, 2011).

In general, the Mongolian government widely acknowledged renewable energy as a top priority in the energy sector. There are numerous papers, which officials have signed to support renewable energy including the Government Action Plan, Millennium Development Goals, Sustainable Development Program of Mongolia for 21st century and Sustainable Energy Development Strategy of Mongolia for 2002–2010 (Radii, 2008). It is clear that the Mongolian government regards this matter of great importance on new sources of energy for households, which are located at greater distances from the cities, because it would be too costly to connect them with central power.

There is a law called the Renewable Energy Law of Mongolia, which regulates sources of renewable energy and its delivery. There is also a program called National Renewable Energy Program for 2005–2020. According to the program, an increased application of renewable energy will help to balance total energy and other issues (Radii, 2008).

Governance Issue and Solutions of Hydropower

As mentioned previously, the issue of hydropower has faced many problems during the last few decades, and the issue of governance has been a major factor for its development.
For managing water resources, it is essential to consider multiple uses of water such as for agricultural, irrigation and energy production purposes and ecosystem requirements (Liu, 2011). According to Harremoes (Liu, 2011), there are two basic models in the water sector regulations, which are supply-driven and demand-driven. As Harremoes suggested, for more advanced water resources management, following instruments and issues should be deliberated carefully.
  • Command and control: laws, directives, standards, norms and codes;
  • Economic instruments: taxes, levies, subsidies;
  • Consensual approach: hearings, consensus conferences, stakeholder participation;
  • Ethical approaches: ethics, morals, attitudes; (Liu, 2011).
    Unfortunately above instruments and issues have not been considered much in the water resources management in Mongolia. Even though, there is a law called the Renewable Energy Law of Mongolia, it has not been successful for influencing the process of building hydropower sector. Since the government is implementing this project, there is less economic interest to its head of projects. If it was a private project, it could have more economic incentive. Additionally, this state-owned project has failed to integrate involvements of non-government organizations, which work for conservation. Although there were several protests from diverse kinds of NGOs, the government was slow to listen to their voices.

The government emphasized the importance of hydropower and renewable energy, but attempts of the government have been not fruitful many times. Thus, people have generally lost hope that the government can carry out these kinds of large-scale projects. In my opinion, it would be better to choose a private sector to build a hydropower station because they have more incentives and responsibility for completion. When the government organizations are responsible for this kind of project, people who are in charge are often changed because of political interests. In order to implement the project successfully, the government of Mongolia could call an open tender for the project. It could be better to invite a foreign multinational corporation to build the hydropower station as there needs to be more transparency during the whole process.

Current power plants are totally state-owned, and they are working with big deficits (Baigalmaa, 2014). This is one sign that new hydropower stations may not work efficiently. According to Baigalmaa (2014), Mongolia is not far from energy crises unless they work efficiently. Current power plants are old, and need to be upgraded in their technology in order to work efficiently in the future. For example, power plants use 20 percent of their produced energy to run themselves (Baigalmaa, 2014). The senior specialist of the Strategy and Planning Department of Ministry of Energy, G. Enkhtaivan, mentioned that the energy sector has always been working at a deficit and it goes from one loan to another loan for its survival. In order to work without a deficit, they need to increase their price accordingly due to inflation and the cost of raw materials (Baigalmaa, 2014). Unfortunately, they cannot increase their price of energy because it is a state- owned company and politicians would not allow it. Therefore, the most realistic solution is privatization of the energy sector in Mongolia to try to avoid another unsuccessful state-owned company in the hydropower sector.


In Mongolia, demand of energy is increasing intensely over the last few decades because of development and increase in population. Many families are migrating to Ulaanbaatar each year, but Ulaanbaatar is facing a trouble providing electricity for the increased inhabitants. Simultaneously, providing energy to the sparsely distributed provinces with very small number of inhabitants is becoming a challenge. Thus, effective energy distribution becomes an urgent issue that should be solved in Mongolia. However, existing electric power stations is not working efficiently to need these demands.

Mongolia is a country that is significantly affected by its changing climate. There is a big chance that building a hydropower station will impact the climate of Mongolia. Thus, policymakers should consider this issue especially and how it would influence the life of normal herders and farmers. I would personally support the building of hydropower stations in Mongolia, even though there may be some risk in damaging wildlife and impacting the climate. It is a renewable energy source, which is least harmful to nature. More importantly, Mongolia is already extremely polluted from the use of coal as its source of energy. Because of this heavily polluted air, many people are suffering. Although the government is investing greatly to solve this issue, there has not been any successful solution up to now.

From its unsuccessful history of building hydropower stations in Mongolia, it is clear that it needs a different solution. Even though Mongolian government has started the proposal of building a hydropower station quite early, it has been failed several times because of conflicting interests of politicians and the neighbor country, Russia. Importantly, since Mongolia is importing energy from the powerful neighbor country, it would be disadvantageous for them to support Mongolia to have own hydropower station.

One of the main reasons that the existing electric power stations are working insufficiently and having lack of qualified technologies and increasing debt is because of direct state-centered management and control. Thus, I argue that privatizing this sector would be more efficient and productive in this matter. If the government does not make a decision quickly in this regard, Mongolia is not far from an energy crisis.

Even though hydropower station can have certain negative influences such as reduction in water resources and damage to wildlife especially river habitats, for considering the Mongolian circumstances, building a hydropower station becomes an essential and urgent situation. As it can be seen, hydropower station is working sufficiently in many countries around the world, so there is also possibility for Mongolians to build it successfully with a fine policy and strategy.

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