JCM Project Planning Study (PS) 2014 – Final Report

MOEJ/GEC JCM Project Planning Study (PS) 2014

Summary of the Final Report

“10MW-scale Solar Power Generation for Stable Power Supply”

(Implementing Entity: Joint Proposal of SAISAN Co., Ltd and

myclimate Japan Co., Ltd )

1．Overview of the Proposed JCM Project

[Japan]
 Next Energy & Resources Co., Ltd (NE): Support on plant design
 Mitsubishi UFJ Morgan Stanley Securities Co., Ltd (mums): Support
on MRV methodology development
 The TOA Institution: Support on invitation of host country
Study partners
government officials to Japan

[Host country]
 Grand Power LLC (GP): Support on FS report to Ministry of Energy
of Mongolia
(Altai City, Gobi-Altai aimag, Mongolia)
Location of Altai City

Altai City,
Gobi-Altai aimag Ulanbaatar

Project site

Location of Solar
Power Plant,
Substation and
Transmission Line Route

Category of
Renewable energy
project
This project, located in the Western part of the Mongolian Altai City
suburbs, Gobi-Altai Province, is for the construction of a large-scale solar
Description of power plant, to generate power and sell to the local Altai-Uliastai Energy
project System. The project will reduce greenhouse gas emissions by replacing
import power from main central grid (coal-fired power supply) and
electricity generated by diesel power plants.
Japan Saisan Co., Ltd. and myclimate Japan Co., Ltd
Expected project
implementer Joint Venture (JV) established by
Host country
Saisan Co., Ltd. and myclimate Japan Co., Ltd

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 JCM Project Planning Study (PS) 2014 – Final Report
Date of
Initial investment 2,650,000,000 JPY July 2015
groundbreaking
Annual Construction
42,000,000 JPY 1 year 3 months
maintenance cost period
Yes
※Project profitability
Willingness to and risk will be Date of project
October 2016
investment assessed to commencement
determine whether to
invest
Initial cost (equipment cost, construction cost, etc.) is estimated at 2,650
million JPY, and maintenance cost is estimated at 2 million JPY per year.
Total amount of financing for the project is estimated at 3,050 million
Financial plan of
JPY. Financing method is planned as following - 350 million JPY from
project
capital stock, 1,300 million JPY from JCM financial program, 980 million
JPY from loan by Japan Bank for International Cooperation (JBIC), and
the remaining 420 million JPY from loan by private banks.
GHG emission reduction: 12,687 (tCO2/year)
Reference emission: 12,728 (tCO2/year)
GHG emission Volume of generated electricity: 15,579.405 (MWh/year)
reductions Project emission: 41 (tCO2/year)
Project electricity consumption: 49,076 (MWh/year)
Grid emission factor: 0.817 (tCO2/MWh)

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 JCM Project Planning Study (PS) 2014 – Final Report
2. Study Contents
(1) Project Development and Implementation
1) Project Planning
1.1.1 Project Implementation Scheme

Mongolia Japan
Japanese Government
Gobi-Altai Aimag
Government Joint Venture Japanese Banks
Ministry of Energy ・Financing
(SAISAN Co., Ltd,
・Licensing myclimate Japan SAISAN Co., Ltd
・Land Provision Co., Ltd) ・Management Skill Transfer
Altai-Uliastai myclimate Japan Co., Ltd
・Plant Management
Energy System (Utilizing Local Entities) ・JCM Project Application
・Power Purchase
Manufacturers
Local Construction ・Solar Panel Installation
Company
EPC Company
・Plant Construction

Figure 1 Business Implementation Scheme

<Main Entity of the Project>
It is assumed that the main entity of this project will be the joint venture (JV) between SAISAN
Co., Ltd and myclimate Japan Co., Ltd, while management of the solar power generation company
will be entrusted to Unigas LLC, local Mongolian subsidiary of SAISAN Co., Ltd.
<Financing of the Project>
Financing of this project is planned to be carried out by a combination of 3 methods – capital
stock of main entity, loan from Japanese banks, and utilization of JCM financing program.
<Design and Construction Companies>
The large-scale solar power generation plant construction in Gobi-Altai aimag will use a Japanese
EPC operator as the primary contractor, and is planned to proceed in conjunction with local
contractors. Since this project has a planned lifetime of 20 years, in order to provide stable
electricity supply over such a long time, advantage will be taken of the rich design and construction
experience of a Japanese EPC operator.

1.1.2 Project Construction Planning

(1) Selection of Project Site
The project site has been selected in the Altai city suburbs at Latitude N46 ° 23.163, longitude
E96 ° 12.653'. The area is 25ha. Permission for land use has already been obtained from the Altai
prefectural government who has jurisdiction over the land.

Figure 2 Photo of Project Site (facing South)

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 JCM Project Planning Study (PS) 2014 – Final Report
(2) Geological Survey of Project Site
A geological survey has been conducted at the chosen site, and it was confirmed that there are no
obstacles to the construction of solar power generation plant.
(3) Design of Solar Power Generation Plant
Based on the geological survey, project specifications and detailed drawings of the power
generation plant have been created.
(4) Construction Plan Draft
Construction plan for the project has been drafted based on the above results. Construction is
scheduled to start in July 2015 and construction period is estimated to be 1 year and 3 months. The
start of operation is scheduled for October 2016.

1.1.3 Project Management Plan

(1) Management Scheme
A company to manage the solar power generation plant will be established in Ulaanbaatar.
Workers and supervisors will be located at the solar power plant in Gobi-Altai aimag.
Project Manager (1 person, stationed at Ulanbaatar),
Deputy Project Manager (2 persons, stationed at Ulanbaatar)
・ Final check on monitored data
・ Management of staffs at Altai

Electrician (1 person, Security Guard (3 persons,

stationed at Altai City) reside at Altai plant)
・ Safety check and system inspection ・ Plant cleaning
・ Plant security surveillance

Operator (2 persons,
stationed at Altai City)
・ Maintenance of solar panels
・ Management of security guards

Figure 3 Management Scheme

The project will be operated by a personnel of 9 in total. The electricity generation status of the
facility will be remotely monitored by the company in Ulaanbaatar, and if an abnormality is
detected, electricians and other workers stationed in Altai will respond.
Although in many cases large-scale solar power generation are operated as unmanned power
plants in Japan, for 2 reasons, namely the prevention of theft of panels and other equipment, and the
need for regular cleaning of the panels due to the dusty climate, in this project it is planned to have
resident staffs at the power generation plant.
Since operation and maintenance standards for solar power plants is not officially defined in
Mongolia, in this study, Japanese standards have been adopted, as Japan has a broad diffusion of
large-scale solar power generation plants. The Japanese standards are expected to ensure stable
operation of the power generation plant. The operational know-how of SAISAN Co., Ltd,
accumulated through a large-scale solar power generation business track record of 6 projects in
Japan, will be harnessed to achieve stable continuous operation in the project.

(2) Maintenance and Inspection Scheme

For the same reasons above, Japanese standards for maintenance and inspection will be used. The
Japanese safety inspection standard is defined in the “Electricity Business Act second Subsection 2
voluntary safety”. Subsection 2, Article 42 which states that “the power plant’s management
company shall establish a safety system and shall notify the Ministry of Economy, Trade and
Industry”, and Article 43 which states that “a licensed electrician will be selected as the
administrator of the power plant”. Complying with these provisions, in addition to developing
safety regulations for the plant, a technician with the equivalent capability of a Japanese domestic
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 JCM Project Planning Study (PS) 2014 – Final Report
electrical chief engineer will be stationed at the power generation plant.

1.1.4 Management Structure and Experience of Main Entity

The company which is the main entity of this project consists of SAISAN Co., Ltd and myclimate
Japan Co., Ltd. Operation of the company is planned to be entrusted to Unigas LLC. Details of the
management structure will be further defined in the future.
Although the power generation company to be newly established does not have a track record,
SAISAN Co., Ltd already has experience of operating 6 mega-solar projects in Japan. SAISAN Co.,
Ltd currently owns the 6 facilities, and entrusts the maintenance and management to
various EPC operators. Of the domestic track record, NE, one of the outsourcees in this study, acted
as a subcontractor for the Yorii-machi project in Saitama Prefecture, and is advancing discussions
to participate in maintenance and management of this project.

1.1.5 Financial Analysis

(1) Financial Analysis
[Prerequisite 1: Determination of Generation Capacity]
Regarding the generation capacity of the project, outsourcees NE and GP respectively proposed
for 10MW and 8MW, whereas both Mongolian University of Science and Technology (MUST) and
National Dispatching Center (NDC) (government entity under jurisdiction of Ministry of Energy in
charge of electricity distribution as well as balancing of demand and supply) suggested that
5MW-6MW is the most appropriate capacity.
Determination of generation capacity will be made before investment decision held in March 2015.
In this study report, analysis is made based on generation capacity set initially (10MW).

[Prerequisite 2: Status of Discussion with Ministry of Energy of Mongolia on Details of Power

Purchase Agreement (PPA)]
The following details have been agreed through discussions and negotiations with Ministry of
Energy and Energy Regulatory Commission.
1. Electricity price is set at 17US￠, and the purchase of full amount of electricity generated by
the project for at least 20 years is guaranteed.
2. Electricity price during payment transaction from power generation company in Mongolia to
Japan is determined monthly based on latest exchange rate of USD/MNT available, and
payment will be made on 10th of the following month.
3. The following penalty clause is included in PPA;
“Should the PPA counterpart fail to fulfill contractual obligations, the project owner (power
generation company) is to claim for an amount of compensation same as initial investment.”
4. Regardless of change of government or amendments on related laws in Mongolia, all clauses in
the PPA will be guaranteed to continue in effect via adoption of Stability Agreement.
The abovementioned details will be guaranteed to take effect via singing of MoU between
SAISAN Co., Ltd, myclimate Japan Co., Ltd and Ministry of Energy of Mongolia.

[Analysis Results in the Case of 10MW Capacity]

Cost and income in the case of 10MW capacity is estimated as below (based on exchange rate
110JPY/USD).

Initial Investment 2,650,000,000 JPY

Operating Cost 42,000,000 JPY
Annual Electricity Generated 15,579,405 kWh/year

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 JCM Project Planning Study (PS) 2014 – Final Report

In the case of 15US￠: 257,060,183 JPY

Annual income In the case of 17US￠: 291,334,874 JPY
In the case of 18US￠: 308,472,219 JPY

Profitability in the case of 10MW capacity is estimated using internal rate of return (IRR) as an
indicator, based on the assumptions listed below.
Assumption 1: Financing amount is estimated at 3,050 million JPY, among which 1,300 million
JPY is obtained from JCM financial program. The remaining amount will be
obtained from the following sources - 350 million JPY from capital stock, 980
million JPY from loan by JBIC, and 420 million JPY from loan by private banks.
Interest rates of JBIC and private banks are assumed at 0.8% and 1.2%
respectively.
Assumption 2: Purchase period under the Feed-in Tariff scheme adopted in this project is
assumed to be 20 years, same as the project period. Also, full amount of electricity
generated by the project is assumed to be purchased.
Assumption 3: Depreciation period of the project is set at 17 years. Straight-line method (default
rate is 0.059) is adopted in the calculation of depreciation period.

In the case of In the case of In the case of

Electricity Price
15US￠ 17US￠ 18US￠
Equity IRR 14.5% 19.5% 22.0%

[Analysis Results in the Case of 5MW Capacity]

Cost and income in the case of 5MW capacity is estimated as below (based on exchange rate
110JPY/USD).

Initial Investment 1,773,000,000 JPY

Operating Cost 31,000,000 JPY
Annual Electricity Generated 7,789,703 kWh/year
In the case of 15US￠: 128,530,091 JPY
Annual income In the case of 17US￠: 145,667,437 JPY
In the case of 18US￠: 154,236,110 JPY

Profitability in the case of 5MW capacity is estimated similarly using internal rate of return (IRR)
as an indicator, based on the assumptions listed below.
Assumption 1: Financing amount is estimated at 2,000 million JPY, among which half of the
amount (approximately 900 million JPY) is obtained from JCM financial program.
The remaining amount will be obtained from the following sources - 240 million
JPY from capital stock, 700 million JPY from loan by JBIC, and 300 million JPY
from loan by private banks. Interest rates of JBIC and private banks are assumed
at 0.8% and 1.2% respectively.
Assumption 2: Purchase period under the Feed-in Tariff scheme adopted in this project is
assumed to be 20 years, same as the project period. Also, full amount of electricity
generated by the project is assumed to be purchased.
Assumption 3: Depreciation period of the project is set at 17 years. Straight-line method (default
rate is 0.059) is adopted in the calculation of depreciation period.

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 JCM Project Planning Study (PS) 2014 – Final Report
In the case of In the case of In the case of
Electricity Price
15US￠ 17US￠ 18US￠
Equity IRR 4.3% 7.6% 9.3%

Investment decision will be made by March 2015, based on a comprehensive evaluation of

analysis results on 10MW and 5MW capacities above, as well as details of PPA, project risks and
countermeasures (including adoption of insurances).

(2) Financing Method

3 financing methods are planned for this project - first method being utilization of JCM financing
scheme, second being capital stock of the power generation company (joint venture of SAISAN Co.,
Ltd and myclimate Japan Co., Ltd), and third being loan from Japanese banks.
First candidate for loan from Japanese banks is JBIC. Discussions have been made with the bank
and as a result, under the condition that the project is sure to be selected as recipient of JCM
financing program, provision of corporate finance is possible (repayment period is approximately
7-10 years). Interest rate is set by JBIC based on 6-month London Interbank Offered Rate (LIBOR)
and grade of lender. As of currently, the interest rate is assumed to be 0.8%. However, since the
maximum amount of loan from JBIC is limited to 70% of total amount of loan, the rest of the
amount is to be obtained from private banks with business connections with SAISAN Co., Ltd and
myclimate Japan Co., Ltd. The interest rate for private banks are assumed to be 1.2%. The project
participants will proceed with negotiation with JBIC and private banks to prepare for financing of
the project.

(3) Risk Assessment

4 types of risks are identified in this project and respective countermeasures are taken into
consideration.
1. Country Risk and Countermeasure
Risk of discontinuation of the project due to country-specific issues such as political instability
and natural disasters is considered. Countermeasure for this risk is to enroll in trade insurance
with JCM Special Financing Scheme by Nippon Export and Investment Insurance (NEXI),
which is applicable up to 100% of total loss caused by this risk. For this project, NEXI has
confirmed that it is acceptable to adopt trade insurance to deal with this risk.
2. Default Risk and Countermeasure
Risk of discontinuation of the project due to inability of PPA counterpart to fulfill the
contractual obligations is considered. Similar to Country Risk, countermeasure for this risk is to
enroll in trade insurance by NEXI. Since the applicability of trade insurance differs for every
project, the project participants will continue negotiating with NEXI in order to utilize the
insurance.
3. Exchange Risk and Countermeasure
In Mongolia, business transactions are required to be made in MNT (Mongolian Tugriks). For
this project, risk of exchange losses during income transaction from power generation company
in Mongolia to Japan in the case of denomination of electricity price in MNT is considered.
Countermeasure for this risk is to determine electricity price monthly, based on latest exchange
rate of USD/MNT available.
4. Contractual Risk and Countermeasure
Risk of amendments in the PPA due to change of government and amendments on related laws
is considered. Countermeasure to this risk is to ensure the contents of PPA continue in effect
regardless of the circumstances in the country by signing of Stability Agreement. The Ministry
of Energy has agreed to sign the Stability Agreement and currently the contents of the
agreement are being discussed.

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 JCM Project Planning Study (PS) 2014 – Final Report
2) Permits and License for the Project Development and Implementation
As a part of this study, the contents of the licensing and permits required for the project to start
operating and their current statuses have been organized below.

Table 1 Statuses and Future Plans on License Acquisition

License Authority Current Situation
1. Land Use Permit Altai aimag Acquired on 26 September 2014.
government
2. Feasibility Study (FS) Ministry of Energy Study report submitted in January 2015.
3. Environmental Impact Ministry of Study report completed in December 2014.
Assessment (EIA) Environment and
Green Development
4. Power Plant Energy Regulatory Investment decision will be made by March
Construction Permit Commission (ERC) 2015. In the case of investing, license will
be applied in May 2015.
5. Power Purchase Energy Regulatory Scheduled to be signed in June 2015, after
Agreement (PPA) Commission (ERC) acquisition of Power Plant Construction
License.
6. Power Generation Energy Regulatory Scheduled to be applied in June 2015,
Business Permit Commission (ERC) before construction begins.

3) Advantages of Japanese Technology

2 studies were carried out as part of this survey. (1) To select the solar panels, being the major
device of the project, and the inverters, and to try to clarify the functional superiority of Japanese
technology; (2) to clarify other elements required for large-scale solar power generation projects,
and to attempt to verify the superiority of Japanese technology in this field.

(1) Regarding the superiority of Japanese technology of the selected solar panels and inverters
The following equipment are planned to be used in the project.
Solar panels:
Next Energy and Resources Co., Ltd. (Japan), output 255W, conversion efficiency 15.5%
Inverter:
Company A (Japan), output 630kW, conversion efficiency 98.6%
These products were compared with those of China, Germany and Switzerland and the results of
the comparison show that the Japanese products both have performance that can be said to be “top
class”, but it has been confirmed that there is no appreciable difference when compared to foreign
products. This is due to the global progress of solar power technology development, and reflects the
current state of performance, whereby both the difference in price and functionality between
countries has been lost.

(2) Regarding the superiority of Japanese technology in other elements that are required for
large-scale solar power generation business
To generate electricity over a long period for more than 20 years consistently, in order to ensure
profitability, in addition to the individual performance of equipment, the following 3 elements were
identified.
a. To continue to maintain the devices that perform power generation over a long period of time,
and the structure of the warranty system (Structure of the warranty system)
b. Also for long-term operation and to avoid unexpected failures, optimal design and construction
suited to local environmental conditions (optimization of design and construction)
c. For prolonged, stable power generation, suitable structure for monitoring, operation and
maintenance (maintenance and operation structure)

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 JCM Project Planning Study (PS) 2014 – Final Report
With the spread of the solar power generation business, EPC operators offer a comprehensive
service to provide the three elements of design, equipment procurement, and construction. NE
expects it is the case that Japan domestic EPC operators use their achievements in Japan as the
foothold for increasingly looking towards overseas expansion. And the trend in Japan and other
advanced PV countries is that these EPC operators offer the equipment manufacturer's warranty,
and their own EPC warranty, or a warranty system offered in cooperation with an insurance
company, and use the optimal design construction technology which they have developed through
independent research, as a weapon to implement optimized design and construction, and
furthermore add monitoring and control systems as part of a comprehensive package.
It is difficult to compare the technological superiority of such integrated services, but it is
becoming a requirement of eligibility that EPC operators have systems for warranty and
maintenance. By doing this, through the utilization of JCM schemes, the experience gained in Japan
can be used as a weapon to boost overseas expansion of Japanese domestic EPC businesses, and it
is expected that these Japanese technologies propagate.

4) MRV Structure
(1) Draft of MRV Scheme
From the 2 points of view of securing accurate data, and the maintenance of normal operation of
the facility, the monitoring and reporting scheme shown in Figure 2 is proposed.

Project Manager (1 person, stationed at Ulanbaatar),

Deputy Project Manager (2 persons, stationed at Ulanbaatar)
・ Final check on monitored data

Electrician (1 person, stationed at Altai City)

・ Double check on monitored data

Operator (2 persons, stationed at Altai City)

・ Accumulation and recording of

monitored data

Figure 4 Monitoring and reporting scheme of the project

(2) Training Session for Establishment of MRV Scheme

To ensure the accuracy of monitoring data and maintain normal operation of the project, it is
necessary for the main entity to acquire knowledge on monitoring. In addition, since this project is
intended to reduce GHG emissions by connecting to the grid, coordination with the Ministry of
Energy which has jurisdiction over power generation business, as well as relevant licensing
agencies, is essential. In order to continuously and stably reduce GHG throughout the lifetime of the
project, it is extremely important to deepen the understanding of large-scale solar power generation
among Mongolian government officials.
Therefore in this study, the "10MW-scale Solar Power Generation Project Steering Committee"
comprising the main entity and Mongolian government officials has been established, and
discussions aimed at project implementation, sharing of knowledge, monitoring system and the
structure of cooperation with the Mongolian government have been held. In particular, the 2nd
committee meeting was held in late January 2015 to focus on establishment of the
MRV scheme. The main contents of the 2nd committee meeting are as follows.

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 JCM Project Planning Study (PS) 2014 – Final Report
■ Visit to solar power generation plant at Yorii, Saitama Prefecture) (held on 20 January 2015)
Through the facility tour, in addition to introducing mega-solar technology of Japan to the
Mongolian side, training on facility management methods (monitoring of system, maintenance, etc.)
were also carried out.
■ Visit to TEPCO (held on 22 January 2015)
The point of view from Japanese domestic power operators was introduced, such as the mechanism
of balancing supply and demand when renewable energy sources are installed and details of PPA.
■ Visit to Agency for Natural Resources and Energy (held on 22 January 2015)
The propagation of renewable energy in Japan, circumstances that led to the spread of renewables in
Japan, and the mechanism used (feed-in tariffs, renewable energy levy, etc.) were introduced.

(3) Selection of Measuring Equipment

For monitoring the amount of electricity sold and purchased by the project, a watt-hour meter will
be used. The type of watt-hour meter used in Mongolia is specified by the Mongolian Agency for
Standardization and Methodology (MASM) which has jurisdiction over standards and registration
of measuring instruments in Mongolia, and is defined in MNS5660: 2006 (Alternating Current
Static Watt-hour Meters for Active Energy). NE who is responsible for the selection of watt-hour
meter confirmed that the watt-hour meter planned to be used in this project meets the criteria set by
the Mongolian standard.

5) Environmental integrity and Sustainable development in host country

1.5.1 Securing Environmental Integrity, Impacts (Positive and Negative) on the Environment
by the Project and Countermeasures
Impacts of the project on the environment is described below.

[Positive Impacts on the Environment]

 Reduction of GHG
Realization of this project will contribute to reducing GHG emissions of Mongolia, which has seen
rapid economic growth and associated growing energy demand. This project is a beginning, and
further GHG reduction is expected as renewable energy power generation projects in Mongolia
become more widespread.

 Mitigation of Air Pollution

Increasing the power generation rate from renewable energy by the realization of this project,
makes a break from dependency on coal-fired power generation, contributing to air pollution
reduction in Mongolia. If this project creates an opportunity for renewable energy power generation
to further increase as an alternative to fossil fuels in the energy sector of Mongolia, and leads to
efficiency improvements and further promotion of renewable energy, this will lead to further
prevention of air pollution.

[Negative Impacts on the Environment]

 Impact on Residents due to Reflection of the Sun
An environmental impact assessment (general evaluation) was carried out on the implementation of
the present project site, and no adverse effects of this project were found. The project site is located
in a remote location 4.7km from Altai city, there are no residences or facilities other than an airport
in the vicinity. With implementation of the solar power generation business in the vicinity of the
airport there is a possibility that it might affect aviation, but the view of the Altai Prefecture land
development director was sought, and it was confirmed that there is no problem.

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 JCM Project Planning Study (PS) 2014 – Final Report
1.5.2 Contribution to Sustainable Development
Contribution of the project to sustainable development is summarized as below.

[Contribution in Social Aspects]

 Realization of Stable Electricity Supply
If the recent trend continues where supply is limited due to the growing power demand due to
economic growth, it could adversely affect economic development. However, for Mongolia, which
relies on coal for most of its power, if further expansion is based on coal-fired power plants, it is not
easy considering the cost and the time required, and furthermore considering the serious problem of
air pollution, alternative sources of power in place of coal-fired power are needed. Despite the fact
that Mongolia is suitable for large-scale solar power generation with its high level of solar
irradiation and vast land, no large-scale solar plants of more than 1MW have been grid-connected at
the present time. Through our research we found that although solar power plants have been
planned, due to the absence of investors none have been realized. If, through the realization of this
project, large-scale solar power plants can spread in Mongolia, providing a stable supply of power
for the country's economy, the social contribution is large.

[Contribution in Economic and Technical Aspects]

 Promotion of Renewable Energy
Once this project has been realized, it is an opportunity to spread other solar power generation
businesses rapidly. In that case, construction materials starting with solar panels and businesses
such as design and construction may be promoted.

 Industrial Development of Gobi-Altai Aimag

In the Gobi-Altai aimag, in addition to insufficient power supply to meet the existing demand, there
is also no clear path to proving the power that will be needed for future developments starting with
mine developments that are currently being promoted in the prefecture. The realization of this
project will enable sufficient power supply for the existing demand, and by promoting the spread of
large-scale solar power generation businesses in the region in the wake of this project, power for
future demand is ensured, bringing great effect for the industrial development of the region.

 Transfer of Japanese Technology

As mentioned above, if the renewable energy industry is promoted in Mongolia, there is a
possibility for entrance by Japanese companies in this field. If Japanese companies continue to enter
into the Mongolian market, local transfer of superior Japanese technology, can lead to further
development of the country's renewable energy technology.

6) Toward project realization (planned schedule and possible obstacles to be overcome)

1.6.1 Project Realization Schedule

The schedule towards project realization is as follows. Approval of the Feasibility Study report to
be submitted to the Ministry of Energy by the end of this March, and complete the agreement
and MoU for the sale of electricity through consultation with the Mongolian government officials.

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 JCM Project Planning Study (PS) 2014 – Final Report
2015 Jan. Feb. Mar. Apr. May. Jun. Jul.
FS Approval (Science and
Technological Committee)

Consensus on PPA Conditions

via Signing of MoU

Establishment of
Power Generation Company

Application for
JCM Financing Scheme

Acquiring Power Plant

Construction Permit

Signing of PPA

Acquiring Power Plant

Construction Permit

Figure 5 Project Realization Schedule

1.6.2 Challenges and Solutions for the Project

The challenge at the present time for the realization of this project is the investment decision by
SAISAN Co., Ltd and myclimate Japan Co., Ltd. In order to make decisions, details of PPA must
be fixed. Since this project is to obtain revenue by utilizing the Feed-in Tariff defined in the
Renewable Energy Law of Mongolia, negotiations must be held with the Ministry of Energy on the
price, amount and period of sales.
Discussions with the Ministry of Energy regarding the price, amount, and period are already
advancing and it is planned to complete by March 2015. Based on the obtained conditions, business
investment decision will be made. MoU between SAISAN Co., Ltd, myclimate Japan Co., Ltd and
Ministry of Energy is scheduled to be signed based on the discussion results. In the case that the
business investment decision goes ahead, even without the official PPA which is assumed to be
signed around summer 2015, the project participants is expecting to apply for JCM financial
program in spring 2015.

(2) JCM Methodology Development

1) Eligibility Criteria
7 eligibility criteria for the project are set as below.

Criterion 1 The project activity is generation of mega-solar scale power (more than or
equal to 1MW output) in Mongolia.
Criterion 2 The project activity is the installation of a new solar power generation
system at a site where there has been no mega-solar scale power
generation system, or capacity addition to the existing solar power
generation system.
Criterion 3 The electricity generated by the project will be supplied to Altai-Uliastai
Energy System in Mongolia to replace existing electricity generation.
Auxiliary electricity consumption by the project, if there is any, will be
supplied from Altai-Uliastai Energy System.
Criterion 4 The solar power generation system installed in the project measures net
electricity supplied to the grid.
Criterion 5 The solar cells in the system have obtained: (i) a certification of design
qualifications and safety qualification set by the IEC (International
Electrotechnical Commission ), or (ii) have obtained any other national
certifications that conforms to the IEC. The qualifications set by the IEC
referred are as follows:
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 JCM Project Planning Study (PS) 2014 – Final Report
- Design qualification and type approval: IEC 61215 (silicon) , IEC 61646
(thin-film) , and IEC 62108 (CPV)
- Safety qualification: IEC 61730-1 (construction) and IEC 61730-2
(testing)
Criterion 6 The solar power generation system installed in the project includes power
conditioner(s) with minimum conversion efficiency of 98%.
Criterion 7 The solar power generation system installed in the project is equipped
with remote monitoring system. The remote monitoring system emits
warning in the event of operational failure. The project owner/participant
located in the distance receives warning remotely and can quickly attend
to the issues for trouble-shooting and recovery.

In particular, regarding eligibility requirements 5, 6, 7, to prevent the influx of inferior products

into Mongolia, and in order to maintain long-term operation of the power generation plant, it is
aimed to introduce products having a certain degree of performance.

2) Calculation of GHG emissions (including reference and project emissions)

(1) Calculation of Reference Emissions
The methodology that applies to this project is introducing new photovoltaic systems or adding a
new unit to an existing solar power system to generate renewable energy to supply to the grid,
achieving emission reductions. Therefore, emissions reduction are calculated by multiplying the
amount of renewable energy to be generated by the project (EGREF,p) by the emission factor of the
grid power to be replaced (EFCO2,grid,p).

RE p  EG REF , p  EFCO2, grid, p

Description of the data Unit Value

RE p Reference emissions of period p tCO 2 / p Calculated
EG REF, p Amount of power that is supplied to the grid by the Monitored
MWh / p
project value
EF CO2, grid, Emission factor of the grid power to be replaced by tCO 2 /
0.817
p the project MWh

(2) Calculation of Project Emissions

In this project, air conditioning of the building, ancillary power consumption by the power control
unit (inverter and solar radiation meter, etc.) occur. The project site is located in a remote location,
since there is no nearby independent power generation equipment, this power will be imported from
the grid (purchases). Therefore, this power consumption will be monitored and multiplied by the
emission factor of the grid power, and this amount will be subtracted as project emissions.

PE p  EC AUX , p  EFCO2, grid, p

Description of the data Unit Value

PE p Project emissions of period p tCO 2 / p Calculated
EC AIX, p Amount of grid power consumed by the project Monitored
MWh / p
value
EF CO2, grid, Emission factor of the grid power consumed by the tCO 2 /
0.817
p project MWh

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 JCM Project Planning Study (PS) 2014 – Final Report
Based on the above calculation formula, the annual emission reductions of the project was
calculated as follows.

(Reference emissions)
RE p  EG RF , p  EFCO2, grid, p

= 15,579,405 (kWh / year) × 0.817 (t- CO 2 / MWh) / 1000 (kWh)

= 12,728,37 ≒ 12,728 (t- CO 2 / year)

(Project emissions)
PE p  EC AUX , p  EFCO2, g r , ip d

= 51,996 (kWh / year) × 0.817 (t- CO 2 / MWh) / 1000 (kWh)

= 42.48 ≒ 43 (t- CO 2 / year)

(Emission reductions)
ER P = RE P - PE P
= 12,728 (t CO 2 / year ) - 43 (t CO 2 / year )
= 12,685 (t CO 2 / year )

Annual emission reductions of the project are calculated as 12,685 (t CO 2 / year).

3) Data and parameters fixed ex ante

The ex ante parameter before project implementation used in this methodology is the grid emission
factor calculated in the next chapter of 0.817tCO2/MWh. The calculation method is shown below.

2.3.1 Understanding the Interconnectivity of the Mongolian Grid

There are 4 electrical grids in Mongolia - Central Energy System (CES), Western Energy System
(WES), Altai-Uliastai Energy System (AuES) and Eastern Energy System (EES). Of these, it has
been confirmed by this study that the WES and AuES, and the AuES and CES are interconnected.
Currently, the CES comprises more than 80% of the transmission amount of the entire Mongolian
power system, while the WES and AuES are overwhelmingly small as compared to the CES1.

Figure 6 Amount of Electricity Transmitted by Central, West and Altai-Uliastai Energy

System (2013, MWh)
Source: Study Team based on the data obtained from Altai-Uliastai grid engineers

1 National Dispatching Center の情報に基づく

http://www.kpx.or.kr/english_new/overview/data/3.%20Tsogtbaatar%20Khandsuren.pdf (Slide 5)
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 JCM Project Planning Study (PS) 2014 – Final Report
Features of the CES
The CES is composed mainly of sub-critical coal-fired power plants. Specifically, there are five
thermal power plants: the second thermal power (21.5MW), third thermal power (136MW), fourth
thermal power (580MW), Darkhan CHP (48MW), and Erdenet CHP (28.8MW). Also, in the CES,
in order to meet the increased power demand in the region that it powers, plans to build a new
subcritical coal-fired power station of 450MW in 2017 (5th thermal) are underway.

Features of the WES

The main power of the WES is provided by a single hydroelectric power plant of 12MW, which
was built as a CDM project. To compensate for the chronic power shortage, power is imported from
Russia.

Features of the AuES

The main power of the AuES is a hydroelectric power plant of 11MW, which was built as a CDM
project. In addition, imports from the WES and 2 diesel power generators (8.5MW and 7.0MW)
have been providing the power demand. From 2013, especially for dealing with seasonal power
shortages in winter, imports started from the CES, accounting for 45% of the total amount of
transmitted power of 2013 on the AuES.
From the current state as mentioned above, if the CES, WES and AuES are considered as one grid,
nearly 90% of power generation are composed of coal-fired power. In addition, in view of the new
plan for thermal power generation in the future of the CES, during the implementation period of
JCM until 2020, the status occupied by coal-fired power is not expected to greatly change.

2.3.2 Setting of Target Range of Emission Factor

In the setting of the emissions factor in this methodology, the CES, AuES and WES are regarded
as one grid. Power that will be most affected by the implementation of this project, is considered to
be coal-fired power generation facilities in the CES. Thus, it was decided to take the approach of
setting the grid emission factor in this methodology on the basis of the emission factor of the
existing coal-fired power generation.

2.3.3 Setting of Emission Factor

In determining the grid emission factor, in order to ensure that the net emission reduction is
achieved by the project to which the methodology is applied, a calculation process that estimates
lower than the actual emissions reduction in the emission reductions methodology was
examined. The procedure is described below.

①Determination of Thermal Efficiency of Coal-fired Power Generation Affected by the Project

The existing thermal power plants of Mongolia are all sub-critical pressure power generation
plants. Of the 5 plants connected to the CES, figures showing that the lowest thermal efficiency is
21.2%, and the highest is 40.5% have been published.

Table 2 Thermal Efficiency of Power Plants in CES

Installed Thermal Efficiency
Power Plant
Capacity (MW) (%)
2nd thermal plant ( CHP2 ) 21.5 21.2
3rd thermal plant (CHP3 ) 136 37.8
4th thermal plant (CHP4 ) 580 40.3
Darkhan CHP 48 40.5
Erdenet CHP 28.8 28
Source: Energy Statistics of Mongolia, 2011 based on the Study Team

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 JCM Project Planning Study (PS) 2014 – Final Report

The thermal plant due to be commissioned in 2017 will also be a sub-critical. In the calculation of
emission factors, by adopting the thermal efficiency of the latest supercritical pressure power or
ultra-supercritical pressure power plant, it is possible to realize the calculation of a more
conservative reference emissions figure. This methodology employs figures published by the
Ministry of the Environment and the Ministry of Economy, Trade and Industry of Japan
"Commercialization of State-of-the-art Power Generation Technology and Development Status
(BAT reference table 2)", giving the design thermal efficiency of power generation at generation
point of 44.5% as the thermal efficiency of power generation.

Table 3 Thermal Efficiency of Power Plants in Japan

Design thermal Design thermal
efficiency (power efficiency (sending
Power
Power generation generation end) end)
generation
method [%: HHV] [%: HHV]
scale
(In parentheses ( in parentheses
LHV ) LHV)
Ultra-supercritical
pressure /
700MW 42.5 ( 44.5 ) 40 (42)
Supercritical
pressure
Supercritical
500MW 42.5 ( 44.5 ) 38.5 (41.5)
pressure
200MW Subcritical pressure 41 (43) 38 (40)

②Determination of Parameters Required for Calculation of Emission Factor

Parameters required for the calculation of the emissions factor were determined as follows.

Table 4 Parameters of Emission Factor

Parameter Value Unit Source
IPCC 2006 Chapter 2
CO2 of coal emissions KgCO 2 /
101 Stationary Combustion Table
factor GJ
2.2
Conversion factor 3.6 MJ / kWh -
Ministry of the Environment of
Thermal efficiency 44.5 %
Japan
Source: Study Team based on the data obtained through the survey

③Calculation of Emission Factor

Based on the following calculation formula, a grid emissions factor of 0.817tCO2kg / kWh was
calculated.

Emissions Conversion Thermal Grid emissions

1000
factor of coal factor efficiency factor
101 x 3.6 / / 44.5 = 0.817
KgCO 2 / MJ /
MJ / kWh % KgCO 2 / kWh
GJ-coal GJ

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 JCM Project Planning Study (PS) 2014 – Final Report

④Confirmation of Conservativeness of Grid Emission Factor

To confirm that the calculated emissions factor compared to the actual emissions factor of the CES
is a conservative estimate, the latest value of the grid emission factor applied for CDM projects
connected to the CES was compared. This value has been calculated by the Institute for Global
Environmental Strategies (IGES) and has been published 3 . Both Operating Margin and Build
Margin are above 1.0tCO2 / MWh, confirming that the figure of 0.817kgCO2 / kWh used in the
methodology is a conservative reference emission figure.

Table 5 CDM Emission Factors for CES

Emission factor
Grid name Technique
( tCO2 / MWh )
Operating margin 1.1501
Central grid (CES)
Build margin 1.0559

2.3.4 Setting of Application Period of Emission Factor

In this methodology, the emissions factor of 0.817tCO2 / MWh, calculated above, is assumed to
apply until 2020. In the case that this project continues after 2020, either through JCM or a similar
emissions reduction scheme to be agreed, at that time, a review of the emissions factor should be
carried out, and re-confirmation that it is a conservative figure is recommended.

(3) Development of JCM Project Design Document (PDD)

1) Environmental Impact Assessment
In the present study, an environmental impact assessment of the project (general evaluation) was
carried out. The environmental impact assessment (general evaluation) sets out 12 evaluation items,
and the impact of the project is predicted and assessed for each of the items.

Table 6 Results of Environmental Impact Assessment for the Project2

Evaluation item Impact prediction and evaluation
2
Terrain 1.1 Over 530,000m building activity area (including the temporary
building at the time of construction, and the range of movement of
construction vehicles) has a possibility of change to the terrain caused
by vehicle movements
Climate 2.1 This business aims to reduce the greenhouse gas emissions caused by
coal combustion, and therefore has a positive impact on the climate.
2.2 Temperature rise due to reflected heat from solar panels is
expected. Excessive temperature rise may cause harm to small animals
and insects around, but for this project the possibility is small.
2.3 There is a possibility of bird death by electric shock from the
transmission line.
Atmospheric 3.1 This project does not cause direct impact on the atmospheric
environment environment.
3.2 Dust will be caused by the construction vehicles
3.3 During the construction period, greenhouse gases will be discharged
by coal combustion for heating for workers and running construction
equipment.
Noise and 4.1 During the construction period, vehicle noise and vibration will occur.

2 Excerpt of EIA report conducted by Grand Power LLC.

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 JCM Project Planning Study (PS) 2014 – Final Report
vibration 4.2 There will be temporary noise and vibration generated by the assembly
of the solar panels, but this will not be a significant impact on the
surrounding environment.
Rivers 5.1 Since there are no rivers near the site, prediction and assessment of the
impact on rivers has not been performed.
5.2 Water pollution due to hazardous substance leaks during the
construction period may occur.
Groundwater 6.1 This project does not have direct impact on the groundwater. However,
if there is leakage of hazardous materials during the construction
period, there is a possibility that ground water pollution occurs.
6.2 There is a possibility of water contamination due to improper
processing of wastewater.
Soil 7.1 During the construction period there is the possibility of soil erosion
by vehicles.
7.2 During the construction period there is a possibility of soil
contamination by hazardous substances leakage.
Plant 8.1 During the construction period temporary disruption of vegetation will
occur.
8.3 Dust caused by the comings and goings construction vehicles might
affect the ecology of the plants.
Animal 9.1 This project implementation might affect animal life.
9.2 During the construction period due to a temporary increase in
population, illegal hunting may occur.
Protected 10.1 Not Applicable (there are no protected areas in the vicinity of the
areas project site).
Cultural 11.1 Since no cultural properties exist near the site, prediction and
property assessment of the impact of the cultural properties has not been
performed.
Social 12.1 Employment creation through implementation of this project can be
economy expected.

As can be seen in Table 3-1, the environmental impact expected at the present consists of normal
effects that can occur during construction work, and there are no special environmental impacts of
the project. At 4.7km from the city, with no housing or nature reserves in the vicinity, it has been
judged that there are no special impacts on the surrounding environment due to the implementation
of this project. We have obtained comments that cases where a detailed environmental impact
assessment evaluation is required by the Ministry of Environment and Green Development for solar
power projects are rare, and further environmental impact assessment work is not expected to occur.

2) Local Stakeholder Consultation

For the implementation of this project, the following stakeholder consultation is considered
necessary.

1. Local residents (in particular residents living around the project site)
2. Altai Airport (facility adjacent to this project)
3. Altai-Uliastai grid (counterparty of the grid connection)
4. Altai Prefectural Government (party that has jurisdiction over the implementation areas of this
project)
5. Ministry of Energy (party involved in the power generation business in general)
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 JCM Project Planning Study (PS) 2014 – Final Report
Comments relating to stakeholder consultation obtained through this study are as follows (excerpt).

Organization: Altai Prefectural Government

Contact Person: BATSAIKHAN.D Vice Governor, CHINZORIG.D Deputy Governor
 Description of the implementation of this project to the local residents, has
already been implemented through prefectural assembly members meeting.

Organization: Altai prefectural government land Development Bureau

Contact Person: Land development director
 (About the possibility of adverse effects on Altai Airport due to reflected light or
the light from solar panels) This project site is separated from the Altai Airport by 500m
or more. Therefore, there is no fear of adverse impact on the airport.

In general, local residents living close to the site have high potential impact from the project
implementation and typically require consultation the project implementation, however ① at this
site there are no houses around and the site is away from any residential area, ② explanation have
been made to residents of the area ③ it has been confirmed that there is no problematical effect on
the airport due by the Land Development Bureau, therefore consultation and coordination have been
judged to be unnecessary.

3) Monitoring Plan
The following two points are the monitoring parameters for this project. Table 3-2 summarizes
these monitoring techniques.

Table 7 Monitoring Plan for this Project

Parameters Content Monitoring Frequency Data storage
technique
EC REF, P Net amount of Grid company to Based on the Data
power generated issue evidence (invoices, (CD-ROM ,USB ,
by the invoice ,receipt or receipts, etc.) etc.), paper
project (kWh other statement at associated with the medium in two
/p ) the time of sale of sale of electricity, forms, stored up to
electricity, amount but at least a 2020
of power that has cumulative total
been described will every month.
be recorded
EC PJ, P Amount of Grid company to Based on the As above
power issue evidence (invoices,
consumed by invoice ,receipt or receipts, etc.)
the project and other statement at associated with the
purchased the time of purchase of
( kWh / P ) purchase of electricity, but at
electricity, amount least a cumulative
of power that has total every month.
been described will
be recorded

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 JCM Project Planning Study (PS) 2014 – Final Report
4) Calibration of Measuring Instrument
Although a power meter will be used in this project, Mongolia national standards MNS5660:
2006 (Alternating Current Static Watt-hour Meters for Active Energy) does not describe clear
standards for calibration of the power meter. Therefore, in this project, the period of calibration will
be based on the standards of Japan. According to the provisions of the Ministry of Economy, Trade
and Industry in Japan, there are different validity periods of calibration depending on the type of
energy meter, and it is necessary to use the equipment within that period 5 (Table 3-3 ). This project
will use a 35 kV, 200 ~ 300A meter connected to the transmission line, therefore the validity period
of the power meter is set to 10 years.

Table 8 Types of Watt-hour Meter and Calibration Periods

Type Calibration
Period
a. Less than 300V rated voltage power meter 10 years
(Excluding those listed in intended to be used along with a transformer
and b (2).)
b. 300V rated voltage power meters, as listed below 7 years
(1) Used with a current transformer with rated primary current less than
120A
(except those used with the transformer with rated primary voltage over
300V)
(2) Rated current is 20A or 60A (excluding electronic type)
(3) Electronic type(except those listed in a. and (1))
c. Power meter other than what is listed in a or b 5 years

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