10MW-scale solar power plant and rooftop solar power generation system

MOEJ/GEC JCM Project Planning Study (PS) 2013 Final Report 10MW-scale solar power plant and rooftop solar power generation system (implemented by Shimizu Corporation) Study partners Project site Category of project Description of project JCM Eligibility methodology criteria Sankou Seiki Polytech ADD, Inc. National Renewable Energy Centre National University of Mongolia Mongolia, Durgun and Ulaanbaatar Renewable energy This project for conducting solar power generation in Mongolia envisions two projects differing in scale. One is the 10MW solar power generation project in Durgun and the other is the solar power generation project on roof tops of ordinary buildings in Ulaanbaatar. Both of these projects are potential model project in this country. Criterion 1: A project that newly introduces solar power generation facilities in Mongolia. Criterion 2: A project which is Greenfield project, or a project which implemented at a site which has not been equipped with private electric generator and has purchased electricity from a grid prior to the implementation of the project activity. In addition, a project which has not been equipped with private electric generator except the introduced solar power generation after the implementation of the project activity. Criterion 3: A project that satisfies one of the followings: Case 1: A system which is constantly interconnected to a grid. Along with power generation facilities, storage batteries are installed as necessary. Power generation facilities are constantly have system interconnection to a grid. When power generation exceeds the power demand of the facilities (Ancillary/management facility and other power consuming facility, The same shall apply hereafter), electricity is sold to a grid or charged to

Default values Calculation of reference emissions Monitoring method GHG emission reductions storage batteries. On the one hand, when power generation is below the demand, electricity is purchased from a grid or discharged from a storage batteries. Case 2: A system which can change the interconnection to a grid and independent operation by a case. Along with power generation facilities, storage batteries are installed as necessary. Power generation facilities operate independently when power generation facilities and storage batteries are able to provide electricity to the respective facilities; otherwise, the power generation facilities are detached, and the facilities purchase electricity from the grid. Case 3: A system which is constantly operated independently. Along with power generation facilities, storage batteries are installed as necessary. They always operate independently. Criterion 4: The solar panels should be the product manufactured at the factory which obtained certification ISO 9001, and the product which passed the performance test IEC 61215 and safety study IEC 61730 of International Electrotechnical Commission. N/A Reference scenario is based on continued purchase of grid power and is calculated by multiplying the amount of power generation by grid emission factor. This is because additional emissions reduction has been confirmed through projection of the project's profitability based on anticipated amount of power generation. Amount of electricity generation and Grid electricity consumption (MWh): Obtained by recording values on watt hour meters at the beginning and end of the monitoring period. Monitored point shall be where net electricity generation could be monitored. Grid emission factor in year y (tco 2 /MWh) Monitored in accordance with the options mentioned in the methodology. In the case of Durgun 10 MW solar power plant Reference emissions:

Environmental impacts Project and its financial plan Promotion of Japanese technologies Sustainable development in host country 14,127(MWh/y) 1.0650(tCO 2 /MWh) = 15,045.26(tCO 2 /y) Project emissions: 0.234(MWh/y) 1.0650(tCO 2 /MWh) = 0.25(tCO 2 /y) Estimated value of emissions reductions: 15,045.26(tCO 2 /y) 0.25(tCO 2 /y) = 15,045.01(tCO 2 /y) In the case of roof top solar power generation, a model case where 3.78kw generation capacity Reference emissions: 4.478(MWh/y) 1.1030(tCO 2 /MWh) = 4.94(tCO 2 /y) Project emissions: zero Estimated value of emissions reductions: 4.94(tCO 2 /y) 0(tCO 2 /y) = 4.94(tCO 2 /y) We believe that this project will have hardly any negative impact on the environment, partly owing to the fact that it is a solar power generation project. As for cost of initial investment, our intention is to raise the half of the amount through subsidy from the Japanese government and the other half through subsidy from the Mongolian government. Investment from Japanese and Mongolian companies will also be considered. This project takes into consideration the use of products from Sanko Solar Mongolia. According to our survey, solar panel manufactured by Sanko Solar Mongolia was superior in terms of price and performance. It seems that introduction of this company's technology has full potential for serving as Japan's contribution. In the renewable energy program which was drafted as a part of sustainable energy strategy, a target value of increasing the percentage of renewable energy to 20 to 25% by 2020 has been set. This project will assist the attainment of this target and is believed to contribute to sustainable development of Mongolia.

JCM Project Planning Study (PS) 2013 10MW-scale solar power plant and rooftop solar power generation system (Host country: Mongolia) Study Entity: Shimizu Corporation 1.Study Implementation Scheme Sanko Seiki: Design of solar power plant based on system interconnection with the grid and projection of material and construction cost based on such design Polytech ADD, Inc.: Assistance in preparation of methodology and PDD National Renewable Energy Centre: Collection of information on regulations and licensing in Mongolia National University of Mongolia: Measurement and analysis of solar radiation in Durgun 2.Overview of Proposed JCM Project (1) Description of Project Contents: This project for conducting solar power generation in Mongolia envisions two projects differing in scale. One is the 10MW solar power generation project in Durgun and the other is the solar power generation project on roof tops of ordinary buildings in Ulaanbaatar. GHG Emissions Reduction is achieved substituting for grid electricity by renewable energy. (2) Situations of Host Country: In Mongolia Coal plays a central role of energy supply. Over 90% of generated electricity is derived from coal. As a result air pollution caused by combustion of coal has become serious, so the air pollution abatement measure is urgent task. Under such circumstance, climate change abatement policy is focused to utilize clean energy that does not cause air pollution. Therefore introduction of renewable energy is prioritized policy. 3. Study Contents (1) JCM methodology development a. Eligibility criteria For both Durgun 10MW plant and roof top solar power generation system Eligibility criteria for this methodology are as follows. Eligibility Criterion 1: A project that newly introduces solar power generation facilities in Mongolia. Eligibility Criterion 2: A project which is Greenfield project, or a project which implemented at a site which has not been equipped with private electric generator and has purchased electricity from a grid prior to the implementation of the project activity. In addition, a project which has not been equipped with private electric generator except the introduced solar power generation after the implementation of the project activity. <1>

Eligibility Criterion 3: A project that satisfies one of the followings Case 1: A system which is constantly interconnected to a grid. Along with power generation facilities, storage batteries are installed as necessary. Power generation facilities are constantly have system interconnection to a grid. When power generation exceeds the power demand of the facilities (Ancillary/management facility and other power consuming facility, The same shall apply hereafter), electricity is sold to a grid or charged to storage batteries. On the one hand, when power generation is below the demand, electricity is purchased from a grid or discharged from a storage batteries. Case 2: A system which can change the interconnection to a grid and independent operation by a case. Along with power generation facilities, storage batteries are installed as necessary. Power generation facilities operate independently when power generation facilities and storage batteries are able to provide electricity to the respective facilities; otherwise, the power generation facilities are detached, and the facilities purchase electricity from the grid. Case 3: A system which is constantly operated independently. Along with power generation facilities, storage batteries are installed as necessary. They always operate independently. Eligibility Criterion 4: The solar panels should be the product manufactured at the factory which obtained certification ISO 9001, and the product which passed the performance test IEC 61215 and safety study IEC 61730 of International Electrotechnical Commission. Rationale behind accuracy of Eligibility Criterion 1 stems from additional emissions reduction that has been confirmed through projection of the project's profitability from anticipated amount of power generation. Projection of power generation was made by using the data offering the largest power generation output for the amount of power generation, and observed data from the University of Mongolia for Durgun 10 MW plant, resulting in 14.127GWh/y. As for roof top solar power generation, power generation from 3.78kW system which was assumed as a model case came to 4.478MWh/y as a result of calculation based on data from Mongolian meteorological observatory. Here, the power selling unit price for system interconnection with the grid is set at 0.18 US$/kWh, which is upper limited stipulated in the Law of Mongolia on Renewable Energy, to secure maintainability. After a close review of construction cost, the figure ranged from 23 to 105 million yen, depending on scale. As a result, internal rate of return for Durgun 10 MW over a 20-year period will be low; in fact, it will be far lower than the lending interest rate of commercial banks in Mongolia. As for roof top solar power generation, the results showed that it will have no profitability. Eligibility Criterion 2 also includes projects newly implemented in areas with no facility at present, but does not permit substitution of private power generation. Eligibility Criterion 3 is the result of anticipating various types of solar power generation system that can potentially be used in Mongolia. Eligibility Criterion 4 is intended to exclude poor quality solar panels that are sold in Mongolia. The product from Sanko Solar Mongolia which is expected to be used in this project meets this criterion. <2>

b. Data and parameters fixed ex ante For both Durgun 10MW plant and roof top solar power generation system This methodology assumes that there are no other monitoring items other than the amount of electricity generation and emission factor. product of these two values. Emissions reduction is therefore calculated as the c. Calculation of GHG emissions (including reference and project emissions) For both Durgun 10MW plant and roof top solar power generation system Grid emission factor One of the values below shall be used to facilitate calculation of grid emission factor. Use one of the following values: *Option 1: A value admitted by the joint committee *Option 2: A valued calculated by the latest CDM tool. Vintage of the data shall be the latest available. Combined margin or weighted average emission factor shall be used. *Option 3: An emission factor of the area used in a monitoring report of any registered CDM project. Vintage of the data shall be within 2 years. *Option 4: An emission factor of the area used in a PDD of any registered CDM project. Vintage of the data shall be within 2 years. *Option 5: An emission factor of the area or the whole Mongolia reported by the Mongolian government or international organizations. Combined margin or weighted average emission factor shall be used. In the case of central grid, the grid's emission factors (OM, BM) are released by the Mongolian government at the CDM National Bureau website. Therefore, combined margin can be calculated by the following formula after selecting Option 5. = (1.1501+1.0559) 2=1.1030 (tco 2 /MWh) : Combined margin : Operating margin : Build margin In the case of Durgun 10 MW solar power plant, which will be connected to Mongolia 's western grid, approximate value of emission factor when the western grid is connected to the central grid in the future under Option 2 can be calculated as follows. Emission factor of western grid and central grid = (Emission factor of central grid X Scale of central grid + Emission factor of western grid X Scale of western grid) (Scale of central grid + Scale of western grid) <3>

=(1.103 3660.64+0 (93.64+37.04)) (3660.64+(93.64+37.04)) =(1.103 3660.64+0 (93.64+37.04)) 3791.32 =1.065 As this method has been accepted by the participants from the Ministry for Environment and Green Development of Mongolia at the host country conference, emissions reduction will be estimated in this document using these figures. Reference emissions Reference scenario is based on continued purchase of grid power and is calculated by multiplying the amount of power generation by grid emission factor RE y EGPJ, y EFPJ, y where RE y EG, PJ y EF, PJ y : Reference emission (tco 2 /y) : Amount of electricity generation (MWh/y) : Grid emission factor in year y (tco 2 /MWh) In the case of Durgun 10 MW solar power plant, estimated value of reference emissions will be as follows. 14,127(MWh/y) 1.0650(tCO 2 /MWh) = 15,045.26(tCO 2 /y) Emissions factor is a concept that has been supported by the participants from the Ministry for Environment and Green Development of Mongolia. Approximate value of emissions factor when the western grid is connected to the central grid in the future under Option 2 is used here. In the case of roof top solar power generation, estimated value of reference emissions in a model case where 3.78kw generation capacity system was installed in Ulan Bator will be as follows. 4.478(MWh/y) 1.1030(tCO 2 /MWh) = 4.94(tCO 2 /y) Project emissions Project emissions are calculated by the following formula: PE y ECPJ, y EFPJ, y where PE y PJ y : Project emissions (tco 2 /y) EC, : Grid electricity consumption (MWh/y) EF, : Grid emission factor in year y (tco 2 /MWh) PJ y In the case of Durgun 10 MW solar power plant, estimated value of project emissions will be as <4>

follows. 234(MWh/y) 1.0650(tCO 2 /MWh) = 249.21(tCO 2 /y) JCM Project Planning Study (PS) 2013 Final Report After a close review of anticipated electricity consumption for maintaining Durgun 10 MW solar power plant, annual consumption came to 2.34MWh after taking into consideration the electricity consumed by the office, lighting and power conditioner. In the case of roof top solar power generation, a model case where 3.78kw generation capacity system was installed in Ulan Bator was considered. Facilities reviewed above for Durgun 10 MW solar power plant were not needed and therefore project emissions became zero. Emissions reductions The formula is as follows. ER RE PE y y y where ER y RE y PE y : Emissions reduction (tco 2 /y) : Reference emission (tco 2 /y) : Project emission (tco 2 /y) Estimated value of emissions reductions will be as follows. Durgun 10MW 15,045.26(tCO 2 /y) 249.21(tCO 2 /y) = 14,796.05(tCO 2 /y) Roof top solar power generation 4.94(tCO 2 /y) 0(tCO 2 /y) = 4.94(tCO 2 /y) (2) Development of JCM Project Design Document (PDD) Environmental impact assessment Durgun 10MW In the environmental impact assessment process, it is necessary to first apply to the Ministry for Environment and Green Development for overview assessment. The following documents will have to be submitted in order to apply for overview assessment. *Application form requesting the Ministry for Environment and Green Development to perform the overview assessment. This shall be prepared using the applicant's letterhead and include the contact information of the applicant. *Feasibility study approved by institutions concerned. Approval from NREC may be sufficient in our case as it is the implementer. However, it will be reviewed by the Committee on Science and Technology if approval is to come from the Ministry for Environment and Green Development. This committee meets only once every month or two. Its feasibility study will have to include <5>

design documents prepared by the licensed contractor in addition to clear description of material specifications. Accuracy of a level enabling immediate implementation of the project will therefore be required. *Project outline. Details including project location, address of implementer, scale and specifications of the project, materials supplier and method of their transportation, and status of water source and electricity infrastructure must be included. *Description regarding waste. Shall describe what kind of waste is generated and how it will be treated. *Certificate from the head of local government. Will have to show that the soum having jurisdiction over the project location has approved the implementation of the project. *Information on peripheries of the project location. Shall include maps and photographs, as well as information on topography, meteorological data, population and area of soum, and demand. *Description of environmental technology and environmental management that has been introduced. Shall describe how environmental measures are taken through utilization of environmentally-friendly technology. *Documents verifying permission to use the land issued by local government such as aimag or soum. *Copy of applicant's registration. Must be notarized. Only Mongolian corporation or agency can apply because of this requirement. *Detailed information on material procurement. Copies of contract and memorandum concerning the procurement shall be presented if possible for the sake of perfection. Roof top solar power generation According to a hearing held with licensed environmental consultant, it falls under utilization of existing building rooftop and will not be subject to environmental impact assessment. Discussion with local stakeholders For both Durgun 10MW plant and roof top solar power generation system Provisions clearly defining the stakeholders to hold discussion upon implementation of the JCM Project and provisions clearly defining the method for collecting comments from stakeholders do not exist in Mongolia. Potential stakeholders in this project include: 1) central government agencies including the Ministry of Energy, 2) local government agencies including the Khovd prefectural government, and 3) local residents and others interested in the project. With regard to the central government, the following comment was obtained from the Vice Minister of Energy: "We want to support this matter. We are reviewing the Ministry of Energy's role in JCM and would like to utilize Japan's technology." At the Ministry for Environment and Green Development, the following comment was obtained from the person in charge at the Coordination Office for Climate Change: "Renewable Energy <6>

Program is currently being reviewed, and Durgun, along with Taishir, is the target area for strengthening hydro-electric power generation. Since it is already connected to the grid and the infrastructure for the grid has been developed, we are willing to add solar power generation. It therefore has a chance of being realized." As for the local government, the following comments were obtained from the Governor and Vice-Governor of Khovd Prefecture that has jurisdiction over the project location. The governor said, "strengthening of electricity supply is important for economic development of the western region. The prefecture as a whole will support this project. I mean what I say, so please let me know what I can do to help." CDM Project in Mongolia has also held meetings by inviting other people that are interested in the project. A study of PDD of projects that have already been registered revealed that some projects relied on a method that included local residents as stakeholders and used questionnaire or interview to collect comments. There was also a method that did not limit the scope of stakeholders and held forums to collect comments and a method that used television to broadcast reports. For this project, comments on Durgun 10MW-class solar power plant were collected using questionnaire method in late October 2013 at Durgun soum which is the location of the project. A questionnaire survey was conducted on 44 residents including 16 local government employees. None of the comments mentioned negative impact in connection with the environment. Monitoring plan Durgun 10MW plant We are envisioning to appoint either of the two vice-president/director level executive of the Renewable Energy Center participating in this study as committee member to be responsible for supervising monitoring to guarantee the quality of monitoring report, guaranteeing the quality of organization and procedure for preparing the monitoring report, and appointing control manager at monitoring posts who collects and maintains data at these posts and manages a monitoring device called watt hour meter (including its calibration and inspection). Monitored items consist of emission factor, amount of power generation and grid power consumption. While grid emission factor is obtained in a manner mentioned earlier, net amount of power generation is obtained, as a rule, by monitoring the official transaction volume with the power company measured by watt hour meter at beginning and end of the monitoring period. As for data storage, record data kept by the person in charge of monitoring will be stored in addition to the voucher issued by the power company. Copies of the data will be stored in office outside of the power plant to prevent loss. Roof top solar power generation While actual candidates have not been specified, the building owner will appoint the person in charge of monitoring to set up the system for monitoring. Monitored items consist of emission factor and net amount of power generation. While grid emission factor is obtained in a manner <7>

mentioned earlier, net amount of power generation is obtained, as a rule, by monitoring the data measured by the watt hour meter at beginning and end of the monitoring period. Monitoring data record will always be copied to prevent loss. Calibration of measurement instruments For both Durgun 10MW plant and roof top solar power generation system The only measurement instrument used for actual measurement of monitored parameters in this project is watt hour meter. In the hearing that was conducted with the Mongolian Agency for Standardization and Metrology and National Electricity Transmission Grid Company, we learned that watt hour meters that can measure electricity in both directions (selling and buying) can be used. As for precision, an instrument with Class 0.2S tolerance of 0.2% or less is required for 10MW-class power plant while an instrument with Class 1 tolerance of 1% or less is required for roof top solar power generation. Watt hour meters that can be used at -40C is required in Mongolia, and digital meters are being developed to meet this requirement. Calibration period for digital meter is 8 years. (3) Project development and implementation a. Project planning Durgun 10MW plant As for the financial plan, we are aiming to cover a portion of funds by receiving subsidy after being approved as project facility subsidized enterprise utilizing the bilateral offset credit system. Detailed study has been started by launching a committee with The Renewable Energy Center and Sanko Seiki which are anticipated members of the international consortium. We are aiming to realize budgetary measures by the Mongolian government to cover the portion that cannot be covered by facility aid from the Japanese government. According to a hearing that was conducted with the Vice-Minister of Energy, decision regarding budgetary measures from the Mongolian government would be decided after reading the results of this year's study. Under the budget system of the Mongolian government, application is usually made from the governing agency to the Ministry of Finance in August of the previous year in order to have the budget approved by the parliament in November. The earliest scenario for securing budgetary measures from the Mongolian government would require preparation of schedule in time for parliamentary approval of the project budget in November 2014. As production of solar panel will be the critical path, the challenge in this case would be whether the production can start at the same time as budget approval by the Mongolian government and complete the production by summer of 2015. Since foundation and mount are difficult to install in winter, it will have to be done from spring to summer of 2015. The entire construction including panel wiring and power conditioner installation will have to be completed by fall of 2015. This is the fastest schedule that can be anticipated at the present time. <8>

Discussion and review of raising funds through investment from Japanese and Mongolian private enterprises will also continue as source of funds other than budgetary measures from the Mongolian government. Roof top solar power generation Actual candidates have not been specified. In the hearing that was conducted with the Ministry for Environment and Green Development, we were told that this may qualify for subsidy in the future as part of air pollution measures in Ulan Bator, although actual review has not taken place. Financial sources that are conceivable at present are: 1) facility aid from the Japanese government plus own funds, or 2) own funds only. Forming an international consortium around Sanko Seiki is conceivable if we can organize several owners of buildings that assent to participating in the JCM project. b. MRV structure Durgun 10MW plant A MRV system that does not deviate from JCM guideline will be built in accordance with the monitoring plan and system that will be prepared following a discussion with our local counterpart, the Renewable Energy Center. Two vice-president/director level executive of the Renewable Energy Center participating in this study as committee member and expected to be appointed as monitoring director have already agreed to participate in MRV on-the-job training which is scheduled as part of committee activities after being briefed about its necessity. In MRV on-the-job training, the two committee members will be invited to Japan to take part in a course on storing monitoring record. They will also visit solar power plants that are already completed or in process of construction to deepen their understanding of maintenance and inspection of safety system, solar panel and power conditioner. We believe that enhancing knowledge as monitoring director through this on-the-job training will enable them to contribute to adequate operation of monitoring system. As for inspection, we anticipate receiving inspection by an institution to be approved by JCM in the future. Roof top solar power generation Actual candidates have not been specified. While building owners will be establishing the MRV system, the concept will be unfamiliar to ordinary building owners. It will be necessary to consider a capacity-building arrangement for the Renewable Energy Center and solar panel manufacturers in order to popularize the JCM project in the future. The Renewable Energy Center understands our need for their cooperation. c. Permission and authorization for the project implementation Durgun 10MW plant Special approvals needed for construction of Durgun 10MW-class solar power plant include authorization from the Ministry of Energy and that issued by Khovd Prefecture based on technical <9>

recommendation from the Energy Regulations Committee. Notification of approval or disapproval is issued within 60 days from submitting application to the Energy Regulations Committee. Maximum period for special approval of construction is 25 years. Application for extension of approval period must be made no later than 180 prior to expiration of that approval. All documents except those that cannot be prepared until official decision of the project implementing body are in place. Roof top solar power generation According to the Energy Regulations Committee, special approval and license are not needed for construction of power plant so long as its output is 1.5MW or less and is not connected to the grid. When we confirmed the possibility of system interconnection with the grid with the power company, interconnection with the grid at 380V cannot be permitted for the time being because of the possibility of destabilizing the system. d. Japan s contribution For both Durgun 10MW plant and roof top solar power generation system Sanko Seiki, the subcontractor for this study, has its 100% subsidiary Sanko Solar Mongolia that manufactures solar panels in Mongolia. Since Sanko Seiki's technology is used at its production line, transfer of Japanese technology to the host country is already taking place. However, adoption of products on a project basis in the future will enable transfer of Japan's software technology including maintenance. Actually, Vice-Governor of Khovd Prefecture has sent us a comment about his expectations for software technology support offered through Sanko Solar Mongolia in view of the fact that home solar panels have started becoming popular in the western region of the country. This project takes into consideration the use of products from Sanko Solar Mongolia. Low-quality solar panels are imported from China and have become popular in Mongolia due to lack of performance and safety standard with regard to imported and domestically produced solar panels in the country. This time, we conducted a price and performance comparison of typical solar panels sold in Mongolia to evaluate the procurability of solar panels that are compatible with international standards with an eye on confirming the potential of contributions that can be made by Japanese products. Solar panel products from typical production areas were selected and purchased for comparison. Origins of solar panels that were purchased included Mongolia (Sanko Solar Mongolia, Sopoco), Europe (REC), China (Solar Power) and Korea (Hyundai). Test results showed that solar panel SSM242BP60 from Sanko Solar Mongolia was superior in terms of price and performance, and that introduction of this company's technology has full potential for serving as Japan's contribution. REC is a Norwegian company that manufactures solar panel in Singapore. Their product has good <10>

performance but has high selling price because it is imported and is subject to transportation cost and import tax. Sopoco's panel is manufactured in Mongolia but is more expensive than Sanko Solar Mongolia's panel. Question remains with regard to the safety and durability of their product because it s not internationally certified. Existence of cells with micro-cracks has been confirmed in EL inspection. Solar Power is a Chinese manufacturer. It is an imported product and has the highest selling price due to transportation cost and import tax. In terms of performance, we have found that its label output is 11.3% lower than the measured value. Existence of cells with micro-cracks has been confirmed in EL inspection. Hyundai is a Korean manufacturer. Although it appears to have the lowest selling price, we have found that its label output is 36.2% lower than the measured value. It has a triple bus bar cell but only two bus bars are used in reality. Existence of cells with micro-cracks has been confirmed in EL inspection. e. Environmental integrity For both Durgun 10MW plant and roof top solar power generation system We believe that this project will have hardly any negative impact on the environment, partly owing to the fact that it is a solar power generation project. In a hearing that was conducted with a license company performing environmental impact assessment, we were told that it is unthinkable that a solar power generation project is seen as a problem by the Ministry for Environment and Green Development. The key to maximizing the positive impact on the environment lies in how to go about maximizing the amount of generated power sent without disturbing the grid, or maximizing the utilization of power that has been generated. Our study was conducted in view of the the present condition of the grid in western Mongolia and seasonal fluctuation of power demand. With regard to stabilization calculation for system interconnection with the grid which is required at the time of applying for approval of feasibility study to the Ministry of Energy, a design that does not place excessive burden on the grid and allows for synergetic effect with the currently operating Durgun hydroelectric power plant was used by anticipating that it will be checked by a licensed expert. f. Sustainable development in host country For both Durgun 10MW plant and roof top solar power generation system This project will promote introduction of renewable energy in Mongolia where more than 90% of electricity generated comes from coal-fired thermal power, reduce consumption of domestically-produced coal and contribute to alleviation of air pollution resulting from coal combustion. In the renewable energy program which was drafted as a part of sustainable energy <11>

strategy, a target value of increasing the percentage of renewable energy to 20 to 25% by 2020 has been set. This project will assist the attainment of this target and is believed to contribute to sustainable development of Mongolia. g. Toward project realisation (planned schedule and possible obstacles to be overcome) Durgun 10MW plant The greatest challenge lies in securing the initial investment financing. Although the plan is in place to form an international consortium and apply for facility aid from the Japanese government, we cannot go ahead with facility aid application unless there are prospects for the remaining portion which is more than half of the entire amount. It is necessary to gain understanding of the Ministry of Energy if we are going to rely on budgetary measure from the Mongolian government as it is the governing agency. However, approach from The Renewable Energy Center will be of utmost importance because The Renewable Energy Center is the Ministry's lower branch organization and has personnel connections with the Ministry. In addition, the Governor of Khovd Prefecture has been involved in Durgun 10MW-class solar power plant from the initial planning stage and is very eager to realize the project. The Governor is also positive about cooperating with The Renewable Energy Center. Moreover a member of the Parliament elected in Khovd Prefecture has expressed his intension to support the budget allocation by Government of Mongolia for this project. It seems that budget allocation by Government of Mongolia for this project comes to become a real possibility. Cooperation with The Renewable Energy Center presents a challenge in the future as we approach the central and local governments for realization of budgetary measures. On the other hand, as there is a possibility realization of budgetary measure by the government may not go smoothly, it will be necessary to explain the content of this project to leading private companies with strong financial base that are interested in renewable energy project in Mongolia and discuss their participation in the project. Issues regarding Mongolia's FIT system are as mentioned in Chapter 11. It is essential that purchasing price of electricity will be approved within the range stipulated in the Law of Mongolia on Renewable Energy. Furthermore, investment decisions of private companies become inevitably cautious because of precedents of undue pressure being exerted to limit power generation output after the project is launched. Inevitable caution in investment decisions shall be alleviated by clearly stating in the intergovernmental agreement document to the effect that such problem will not occur. Roof top solar power generation It will be necessary in the future to contact the building owners that may agree to participate in the JCM project through Sanko Solar Mongolia and brief them on the content of the project. Establishing the system of public assistance towards purchase of solar panels as a measure against <12>

air pollution in Ulan Bator to alleviate the burden of initial investment would also hold the key to popularization. Our task will be to continue requesting the Ministry for Environment and Green Development for cooperation through the Renewable Energy Center. <13>