Beijing, China In this region of Mongolia where Homo sapiens is said to have stood on two legs for the first time millions of years ago, the ancient nomadic tribal tradition persists. Thus, only around 2.5 million people live in hundreds of villages within a huge region half the size of Europe made up of mountains, forests, desert and the grassy plains known as steppes.The capital, Ulan Bator, houses about one third of the population. The rest comprise 16 minority groups who live in Mongolia: Myangad, Oold, Urianhai, Torguud, Zahchin, Uzemchin, Bayaduud, Durvud, Darhad, Shaazgan, Savar, Buruud, Hereid, Hotuud, Hoshuud and Taichuud. “This project is a real challenge!” remarks Wang Sicheng, the project manager from Beijing Jike Energy New Technology Development Company, who is working with seven Chinese and Mongolian experts on behalf of the REEEP (Renewable Energy & Energy Efficiency Partnership). They are planning to develop a financial model for the electrification of remote villages by renewable energy, and plan to reproduce it in other regions. Due to the nature of the territory and the sparse population (around 1.6 people per sq. km), there is no national electrical grid. Thus the plans are to install power in villages, not just in Mongolia but in other remote parts of East Asia as well, either through photovoltaics (PV) or through a hybrid wind/PV system, because these are more suitable for local, non-grid connected projects. However, the project developers, who are starting from scratch, face significant barriers before they can roll the project out all over the country as is desired. Neither the financial nor technical infrastructures are there to support the project as the situation stands. Getting Power to the Villages Financial support for capital investment is needed, as is a network of operations and maintenance professionals. Technical and support service companies (RESCOs) need to be established to take care of the system during its 15-20 year lifetime, as well as a supply chain for batteries and other electronic components. Last but not least, the Mongolian government, which is financing the power, has not made decisions on tariffs nor formed a revenue collection team. At this stage it is not even clear whether the government should be controlling revenue. By comparison with Mongolia, even Tibet, a region of China, looks developed. Between 2002 and 2004, it installed 329 PV and wind/PV systems amounting to 6694 kW through its National SongDianDaoXiang Program. The total number and capacity of PV and wind/PV within remote provinces of China supported by the national programme amounts to 662 and 15718 kW. The possibilities for expansion are huge and the work momentous. In Mongolia itself, there are 314 villages (known as soums), of which around 127 containing 180,000 households have no or limited access to electricity and operate within herding families or a small rural community way of life. The government has plans to power 12 of these villages and, depending on feasibility studies such as REEEP’s, to introduce a wider national village power program. “Electricity will play a role in developing the economy in the area”, explains Sicheng. “For example, it enables people in a rural area to get income from a job they are doing on the side, such as processing agricultural products and producing handcrafted goods using the artificial light at night.” Funds, Fees and Functions Such light generally plays a significant role in improving the living standards of rural households and rural social services, as well as helping protect the environment. Its provision can play a critical role in helping people escape poverty and can help them educate themselves because children can study during the dark hours. Lasting for a year from October 2005 to November 2006, the project will be used as a platform to discuss village power issues in this part of the Asian continent. The team will attempt to develop a business model for village power, which maximizes local revenue, thus increasing the chances of acceptability. One of the most difficult issues to address is that of capital investment. Usually, central government will pay for a centralized village power system, but in the case of local power system, there is a need to get local people investing in their own community power. In this case, there is a need for upfront capital investment, to which villagers might be expected to contribute as much as 50 percent of the cost. This could constitute a serious barrier to the development of the project. There is also a lack of clarity as to how high the tariff should be and who should set it. It is not clear whether villagers will want or be able to pay it, especially if it is more expensive than for grid-connected areas of the country. Stand-alone Village Solar Power Up until now, most rural electrification projects in the region have focused on grid-connected conventional systems. For remote off-grid soum centers, the catch in the project is that as a stand-alone system it may not be the least cost option, though the option of grid-connected solar power is still a strong one. The cost of stand-alone PV or wind/PV systems is much higher than grid-connected building Integrated PV (BIPV) systems. Grid-connected systems do not need a battery, which is 20 percent of the cost in a stand-alone system. “The stand-alone system is always in very remote places and that makes the cost of transportation, installation and services much higher than in a city-based grid-connected system,” explains Sicheng. In addition, a control room and battery room are required for a stand-alone system. Stand-alone systems also have lower operational efficiency. The business model will be copied in other villages in order to see how well it functions within demonstration village power systems, while at the end of the program, information gained from the experience will be shared at an international workshop. Since the costs are likely to be higher than for conventional or grid-connected solar power, one of the tasks within the business model will be to find a higher revenue stream. Overall, Sicheng is optimistic: “Either in China or Mongolia, village power systems will be widely distributed in the next 10 years. The results of the study by this project will give great help to China, to Mongolia and to other Asian countries that are going to build village power systems by PV or wind. People in charge of rural electrification will be educated, including government officers, system integrators, engineers, equipment suppliers,” he explains. What is not in doubt is the pioneering nature of the scheme. “Although there is a lot of best practice knowledge for solar home systems in the world,” said Sicheng, “there are very few experiences in this field in the world at the moment.” About the author Li Junfeng is Secretary-General of the Chinese Renewable Energy Industries Association. He is Director of REEEP’s East Asia regional secretariat in Beijing. Mr. Li Junfeng, graduated from Shandong Mining Institute in 1982 and he is also the General Secretary of Chinese Renewable Industrial Association and he also works at Energy Research Institute of NDRC as a senior research fellow and the Chair of the Academic Committee. Mr. Li currently is the focal point of REEEP program in China. He engaged himself of the projects development for GEF and World Bank, UNDP and other program for renewable energy development in China. Recent years, he also involved in Climate Change issue, especially in technology transfer, CDM and carbon trade issues. Meanwhile, he is also the chief leader author for the development of Chinese Renewable Energy Law. 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