Auctions for Contracts Are Being Introduced to the Draft Amendment of the Renewable Energy Law
An amendment to the Renewable Energy Law has been drafted by the Energy Regulatory Commission of Mongolia and is being planned to be submitted to the Parliament discussions. Please see below a summary of the main changes to the Renewable Energy Law.
Auctions for Contracts
Among the changes to the Renewable Energy Law, the notable one is the introduction of the auction-based approach for renewable energy contracts. The auction scheme will be adopted in addition to the “Feed-in-Tariff”. The government will announce the location and capacity of a specific renewable energy project and will select the contractor based on the lowest bidding price for the electricity to be delivered to the grid.
The authority in charge of adopting the detailed auction rules and organizing the auction will be the Ministry of Energy, according to the draft amendment.
Sale of Electricity to Distribution Networks from User’s Renewable Energy Sources
Another concept introduced in the draft amendment is the ability to sell electricity to the electricity distribution networks by users with a renewable energy source. Such ability will allow the users to install small capacity renewable sources, such as rooftop solar panels, at their premises and sell energy to the nearby users using the distribution network in the area.
The tariff for the electricity sold by the end-user renewable energy generators to the distribution networks will be determined by the Energy Regulatory Commission and to be reviewed on annual basis. Detailed regulations are currently being drafted.
Feed-in-Tariff Changes
Feed-in-Tariffs (“FIT”) of renewable energy sources selling electricity to the grid is being changed under the draft amendment. Please see below respective changes in FIT per kWh.
| Source | Old FIT | New FIT |
| Wind Sources | 8.00 – 9.50 US Cents | Up to 8.00 US Cents |
| Solar Sources | 15.00 – 18.00 US Cents | Up to 12.00 US Cents |
Proposed FITs are approximately 15-30% lower than the current maximum FITs and eliminate the minimum limit of FIT as opposed to the current FIT in the law. The draft amendment currently does not provide whether such changes in the FIT will retroactively apply to current renewables projects with FITs approved by the Energy Regulatory Commission.
Miscellaneous
Another change proposed in the draft amendment law is that the sellers under the Power Purchase Agreements to submit a project implementation guarantee (in the form of a bank guarantee or deposit) for guaranteeing the performance of the seller’s obligations under the Power Purchase Agreement. The amount of the guarantee is currently being proposed by US$ 50.00 per kW.
