Power demand has grown by ~57% since 2003 and is expected to grow 12% annually to 2020 mainly due to soaring demand from mining and industrial projects, most of them are located in South Gobi. A material shortage is highly likely as ~70% of the installed capacity becomes obsolete in the next 5 years.
Thus, UB Power Plant-5 is essential to address the near term supply shortage and fleet decommissioning but requires significant investment. But attracting investment is challenging as the current energy sector is financially inefficient under fully regulated tariff system which is unattractive for investors. Therefore, the Government of Mongolia is in difficult position to make politically unfavorable decision to release current tariff system for power sector which will have significant impact on price of goods further.
In this research, we have estimated the Power Plant-5’s impact on the Mongolian Economy through indirect and direct impact considering two scenarios using Computable General Equilibrium (CGE) modeling. In the first scenario, we have considered without Power Plant-5 in the economy. In the second scenario, we have considered with Power Plant-5 in the economy.