The Japan Fund for Poverty Reduction, financed by Japan and administered by ADB, is providing a $2.4 million grant for the demonstration project to improve electricity services to low-income communities in rural areas.
Mongolia, with around 2.6 million people spread over 1.6 million square kilometers, has one of the lowest population densities in the world. Its remote, rural communities also struggle with high levels of poverty, and typically have to make do with diesel-generated power, which is expensive and only available 4 to 5 hours a day.
“The lack of reliable electricity for extending periods is preventing these communities from developing,' said Teruhisa Oi, Energy Specialist in ADB’s East Asia Department. 'A steady supply of power will assist in the delivery of key social services and improve the environment for small business, giving a boost to incomes and promoting rural economic growth.”
The project will build transmission and distribution lines in nine selected bag centers (small communities of between 5 to 20 families), using the single-wire earth return system. This technology is widely used in developed countries to provide electricity to sparsely populated communities, and the capital and maintenance costs are significantly lower than more commonly used power supply systems. A policy brief, outlining the benefits of broader application of the technology, will also be submitted to the government.
Once the government is satisfied the single-wire system can deliver low-cost, reliable power, funds are expected to be released to replicate and scale up the scheme across the country. To ensure the system is financially sustainable, consumers will be charged for power based on a tariff that fully recovers the cost of electricity used.
The project, which will run from December 2009 to February 2011, will cost a total of $2.6 million with the Government of Mongolia making an in-kind contribution of $200,000. The executing agency is the Ministry of Mineral Resources and Energy.