Grant Of $ 7.0 Million To Support Renewable Energy In Rural Mongolia Approved

December 19, 2006

WASHINGTON , December 19, 2006 -- The World Bank has approved a grant of US$ 7.0 million for Mongolia through the International Development Association (IDA) Grant and the Global Environment Facility (GEF) Trust Fund. This will help finance the Renewable Energy for Rural Electricity Access Project (REAP) which will assist the country to provide electricity for herders and rural people who do not have access to the main power grid. The initiative will be co-financed by the Government of Netherlands and the Government of Mongolia, taking the total effort to US$23million.

Since its transition to a market-based economy in 1990, Mongolia has achieved macroeconomic stability and undertaken fundamental structural reforms. Its next development challenge is to reduce poverty by accelerating sustained and equitable economic growth, particularly in the country’s vast rural areas where about 1.1 million people live. Currently, only about 25 percent of rural people, including nomadic herders and residents of sub-provincial centers, have access to electricity.

The project aims to increase access to electricity and improve its reliability and affordability among the herder population and people not connected to the grid in sub-provincial centers. It will also help secure access to electricity for rural private and public institutions such as schools, health centers, communication centers, shops and other business entities.

The World Bank has been a major partner of the Government of Mongolia in the energy sector and has been actively involved in restructuring the sector and improving its performance. The US$ 7.0 million grant through IDA and GEF is a continuation of that commitment.

“The World Bank is committed to supporting the development of rural Mongolia where a third of its population lives,” said Arshad Sayed, Country Manager and Resident Representative, the World Bank in Mongolia. “By improving access to electricity, the welfare of herders and people living in sub-provincial centers will improve. With access to electricity, the economy in rural Mongolia will thrive and children will be able to study at night. All this can be achieved by taking advantage of the country’s vast renewable resources.”

Mongolia ’s National Renewable Energy Program, which was approved by the Parliament in June 2005, carries ambitious goals for broad-based renewable energy development in the country. It aims to increase the share of renewable energy technologies in total energy supply from 0.9% in 2005 to 3-5% by 2010 and to 20-25% by 2020.

“Providing sustainable electricity access to remote rural population is crucial problem of Mongolia ’s development. The significance of the World Bank grant project is to build a base for renewable energy market development in the country and allow rural population to step in same haste with 21 century development”. said B. Erdenebat, the Minister of Fuel and Energy of Mongolia.

“This is a challenging project that supports scaling up existing experience and knowledge on Mongolia ’s rural electrification. It aims to develop a model of rural renewable energy systems and will support capacity building for the sustainable operation.,” said Enebish, Director, National Renewable Energy Center of Mongolia.

The project has three components:

Improving electricity access for herders. This will enhance a rural retail/service network of private solar home systems and small wind turbine systems and will facilitate the acquisition of at least 50,000 systems by herders over 5 years (with an estimated $10 million leveraged investment by herders).

Establishing sub-provincial electricity service centers. This will develop the institutional and technical capacity for efficient sub-provincial center electricity services and invest in mini-grid rehabilitation and renewable-diesel hybrid systems.

Supporting capacity building at the national level. This component will strengthen national renewable energy policy development and support project implementation.

An additional US$10 million will be provided by the Government of Mongolia and another 5 million Euros from the Government of Netherlands to co-finance the project jointly with the IDA (the World Bank’s fund for low income countries) and GEF. Total funding of the project is US$23.0 million.

Mongolia ’s National Renewable Energy Center (NREC) will implement the project. The Ministry of Fuel and Energy (MOFE) is the government counterpart agency for the project. Duration of the project is 5 years from January, 2007 until December 31, 2011.

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