Paving the way to sustainable heating in Mongolia

In Ulaanbaatar (UB), the coldest capital city in the world, and one with the highest recorded levels of air pollution—surpassing even the megacities of Beijing and New Delhi—access to reliable and clean heating services is essential for survival.

Driven by population growth, urbanization, and economic development in UB, the demand for heating has been increasing rapidly. But the current district heating (DH) infrastructure that  serves most urban buildings is insufficient, unreliable and deteriorating due to the lack of funds for investments and maintenance. System losses are high, and more than half of transmission pipelines are in urgent need of repair. To make matters worse, the fragmented institutional structure limits incentives to make the system more efficient and constrains long-term investment planning. Meanwhile, on the demand side, the poor thermal insulation of buildings means significant heat losses, adding to the sector’s struggle to meet the increasing demand.

In urban areas, many people live in old pre-cast panel buildings with insufficient thermal insulation of walls and roofs and poorly sealed windows. Customers must therefore increase their heating use to compensate for high heat losses and to maintain warm room temperatures. What’s more, the heat tariff levels are way below cost-recovery level, customers are billed based on square meters of space for heat, and devices are not installed for customers to control their heat consumption. This inadvertently discourages conservation practices.

In ger districts—informal settlements in the outskirts of UB where nearly half of the city’s population lives—homes are not connected to the DH network. Most of them burn raw coal and/or wood to keep warm in winter. The predominantly lower- to middle-income migrant workers who reside in these unplanned districts burn over a million tons of raw coal per year. This is one of the leading causes of the city’s high levels of air pollution in winter, as well as smog-induced public health problems. On January 30, 2018, one station in UB recorded a reading of 3,320 micrograms per cubic meter — 133 times what the World Health Organization considers safe, and more than six times what it considers hazardous.

The government of Mongolia has long recognized the urgent need for action in the heating sector. As a top priority, the government has set the vision to develop a reliable, adequate, sustainable and self-financed district heating systems in urban areas and to reduce emissions from non-network heating by switching to cleaner alternatives in ger areas.

What needs to be done to realize the government’s vision? Through the Ulaanbaatar Efficient Heating Project supported by the Energy Sector Management Assistance Program (ESMAP), the World Bank has helped the government identify a combination of investment measures and recommendations for institutional and regulatory reforms to improve efficiency and the financial and environmental sustainability of the heating sector to put it on a more sustainable path.

Key recommendations to improve the DH sector include:

• Rehabilitate and expand heat production, transmission, and distribution to improve service quality and supply reliability, and connect new customers in urban and selected ger areas to the network;
• Introduce a joint water management program to identify the location of water leaks, thus creating water balance and targeting leak repairs and water quality improvement;
• Introduce a facilitated transition to consumption-based billing (CBB) so consumers can pay their bills on based on their consumption levels;
• Gradually implement heat tariff reforms to recover costs for sustained system operations and maintenance in the sector and incentivize customers to make energy efficiency improvements;
• Streamline the institutional arrangement of housing companies and improving the contracts between the generation, transmission, distribution companies and their consumers;
• Improve regulatory frameworks to ensure all DH companies along the supply chain comply with strengthened standards for accountability.

The study also provided recommendations for non-network heating solutions in UB’s ger areas:

• Replace polluting solid fuel-fired stoves, low pressure boilers, and heat-only-boilers in households and buildings in ger areas with clean alternatives, which could include clean stoves and boilers, DH systems, and electric heating appliances such as thermal storage heaters and heat pumps when suitable;
• Implement an energy efficiency program for public buildings and residential houses in ger areas;
• Strengthen the regulations and enforcement of standards of clean heating appliances (clean stoves and boilers, electric thermal storage heaters, etc.) and codes of house/building construction; and
• Improve city planning and expand affordable housing in ger areas.

Based on a cost-benefit analysis of a comprehensive list of measures, priority investment plans were developed to include measures that are likely to have the highest economic return or are critically important to DH operations. It estimated that a $50 million investment program could connect 2,000 ger households to the DH network, improve service for 88,000 DH households, achieve 293 GWh fuel energy savings (representing approximately 15% of the heat energy delivered by the transmission company), and reduce 100,000 tons CO₂ per year.

While the investments required to ensure a sustainable heating sector in UB are significant, the impacts for people and the environment are substantial. These investments can be carefully prioritized and financed through both public and private resources. Providing reliable, efficient and clean heating services is critical to building and maintaining a healthy workforce, a well-functioning economy, and improved quality of life for all residents in and around Ulaanbaatar.  

To read more about our recommendations, download our report here.