Draft Final Report PROMOTION OF RENEWABLE ENERGY, ENERGY EFFICIENCY AND GREENHOUSE GAS ABATEMENT (PREGA) Mongolia GRID CONNECTED WIND FARM IN GOBI REGION A Feasibility Study Report1 February 2006 1 Prepared by the National Technical Experts: Mendbayar Badarch, Mongolian Nature and Environment Consortium (Environment Specialist), Damdinsuren Gantulga, IT Power Mongolia (Energy Specialist), Gombusoren Luvsan, MCS International Inc (Financial Analyst), and Jargal Dorjpurev, EEC Co. Ltd (Technical Specialist) 2Table of Contents List of Tables, Figures and Appendices 4 Abbreviations 5 1. Executive Summary 6 2. Map showing location of project 7 3. Introduction 8 4. Background 10 4.1 Description and prospects for the specific sector 10 4.2 Opportunities, constraints and issues related to the project sector 10 4.3 Sustainable development objectives 16 4.4 Government policies and strategies 16 4.5 Overlap of government and ADB objectives 18 5. Description of the Proposed Project 19 5.1 Project goals, objectives and expected results 19 5.2 Poverty reduction and other MDG impacts 20 5.3 Technology transfer 20 6. Technical Aspects 21 6.1 Wind resource and wind power application in Mongolia 21 6.2 Wind energy measurement at the site 22 6.3 Transportation 26 6.4 Wind turbine selection 28 6.5 Annual electricity production of wind farm 30 6.6 Grid connection 31 7. Project Implementation Plan 33 8. Project Baseline and GHG Abatement Calculations 35 8.1 Baseline methodology 35 8.2 Explanation of how and why the project is additional 36 8.3 Calculation of a baseline emission factor for the Project 38 8.4 Duration of the project activity and Crediting period 40 8.5 Calculation of GHG emissions by sources 40 9. GHG Emission Reduction Monitoring and Verification 41 10. Financial Analysis of the Project 42 10.1 Cost estimates of candidate turbines 42 10.2 Overall Cost Estimation 43 10.3 Project Financial Analysis 45 11. Risk and Sensitivity Analysis 46 11.1 Sensitivity Analysis 46 11.2 Risk Analysis 47 11.3 Exchange Rate 48 312. Environmental Impact and Social Acceptability 48 12.1 Visual impact 49 12.2 Noise 49 12.3 Land use 49 12.4 Birds 50 12.5 Electromagnetic interference 50 13. Key Factors Impacting Project Viability and Baseline Emissions 50 14. Conclusion and Recommendations 50 Appendices References 4List of Tables Table 4.1 Price Structure of Central Energy System 15 Table 4.2 Tariffs and Costs of Electricity for Households 16 Table 4.3 Policies and Strategies relevant to the Project 17 Table 5.1 Project Impacts to the Progress of MDG and Targets 20 Table 6.1 Climate Conditions: Monthly Average Temperature, 1988-1997 23 Table 6.2 Candidate Wind Turbines in the capacity range 600-1650 kW 28 Table 6.3 Wind Turbine Characteristics 30 Table 6.4 Calculation of Annual Energy Production 30 Table 7.1 Project Implementation Schedule 34 Table 10.1 Baseline Values of Financial Model 42 Table 10.2 Baseline Economic Evaluation 42 Table 10.3 Initial and Annual Cost Estimation 43 Table 10.4 Description of the Costs 44 Table 10.5 Financial Feasibility 45 Table 10.6 Cash Flow 45 Table 11.1 Sensitivity Analysis after Tax IRR 46 Table 11.2 Risk Analysis Parameters 47 List of Figures Figure 4.1 Annual Wind Power Developments 11 Figure 4.2 Integrated Energy System of Mongolia 12 Figure 4.3 Price Structure of Central Energy System 15 Figure 6.1 Results of Wind Observation at Manlai Soum Center 25 Figure 6.2 Top Ten Manufacturers Market Strength 27 Figure 6.3 Grid Connection Diagram 32 Figure11.1 Risk Analysis after Tax IRR 48 List of Appendices Appendix 1 Wind Energy Resource Atlas of Mongolia 52 Appendix 2 Proposed Project Target Area 53 Appendix 3 Shaded Topographic Relief Map 54 Appendix 4 Wind Energy Potential 55 Appendix 5 Results of Wind Speed Observation of Manlai Soum Center 56-65 Appendix 6 Results of Calculation of Parameters and Financial Analysis 65-71 5Abbreviations CDM Clean Development Mechanism CES Central Energy System CO2 Carbon Dioxide EES Eastern Energy System ERA Energy Regulatory Authority ESCO Energy Serving Company IRR Internal Rate of Return GHG Green House Gas GW Giga Watt GWh Giga Watt hour MNT Mongolian Tugrug MFE Ministry of Fuel and Energy MW Mega Watt MWh Mega Watt hour NTE National Technical Expert NREL National Renewable Energy Laboratory NPV Net Interest Value RE Renewable Energy REC Renewable Energy Corporation UNIDO United Nations International Development Organization UNDP United Nations Development Program WES Western Energy System 61. Executive S