The World Bank’s Board of Executive Directors has approved last Thursday a USUSD 12 million scale up of a successful Mongolian energy project.

The Energy Project, which was first introduced in 2001, was instrumental in improving the financial sustainability of the energy sector by reducing losses and improving revenue collection in Ulaanbaatar and 9 other provinces in Mongolia. As of 2009, the cumulative reduction in total distribution network losses resulted in increased revenues of around USUSD17 million.

The energy project has helped to successfully lower technical and non-technical losses (from 31% to 22.7% in UB) and there is now a consensus in the country that it should be scaled-up to enhance its impact. The project’s scale up will enable the government of Mongolia to further reduce losses in the distribution networks and to address urgent investment needs for Ulaanbaatar electricity distribution network.

The population of Ulaanbaatar has nearly doubled since 1995, and the city is now home to more than one million of the country’s 2.7 million inhabitants. This increase in residential and commercial development has resulted in an increased demand for energy and according to estimates made by the Ulaanbaatar Electricity Distribution Network Company (UBEDN), demand for electricity is expected to double in the next five years and triple by 2020.

The city’s power system, including transmission and distribution networks, has been in operation for over 40 years without undergoing any technical overhaul. The system is straining to provide a reliable supply of electricity and cannot accommodate new connections, compounding the risk of system failure, especially during winter months when temperatures regularly plunge to minus 35 degrees Celsius.