Overview of Renewable Energy Legislation in Mongolia

I. INTRODUCTION

Mongolia possesses significant renewable energy potential and is increasingly positioning itself as a future regional clean energy hub in Northeast Asia. Although the country’s power sector remains heavily dependent on coal-fired generation, Mongolia has substantial untapped wind and solar resources owing to its vast territory, high solar irradiance, and strong wind corridors, particularly in the Gobi Desert region.

Mongolia’s total electricity production reached 9,111.9 million kWh in 2025. The country is heavily reliant on coal-fired power plants as the primary source of electricity and heat. Therefore, 91.1% of energy production comes from coal-fired power plants, 8.3% from solar and wind sources, 0.6% from hydropower, and 0.0001% from diesel-fueled power plants. As of 2025, Mongolian renewable energy facilities with a combined installed renewable energy capacity of about 336,8 MW[1].

These renewable energy facilities consist primarily of wind farms, solar power plants and small hydroelectric power stations. Renewable energy currently accounts for 17.4% of Mongolia’s installed electricity generation capacity. 

The renewable energy sector in Mongolia currently includes:

• wind power plants with a combined installed capacity of approximately 155 MW;
• solar photovoltaic power plants with a combined installed capacity of approximately 155.5 MW;
• hydroelectric power plants with a total installed capacity of approximately 26 MW; and
• limited pilot bioenergy and waste-to-energy projects that are still in early stages of development.

The potential for foreign investment in Mongolia’s renewable energy sector is considerable. Mongolia’s rapidly growing mining industry, urbanisation and rising electricity consumption require substantial new generation and transmission infrastructure. In addition, Mongolia remains dependent on electricity imports from neighbouring countries during peak demand periods. 

To satisfy domestic demand and support long-term economic growth, Mongolia is expected to require several gigawatts of new generation capacity by 2035. According to Mongolia’s current long-term development policy, Vision 2050 include energy transition strategies, future power sector development is expected to include:

• significant expansion of wind generation capacity, particularly in the Gobi region;
• large-scale solar power development supported by battery energy storage systems;
• upgrades and expansion of hydroelectric generation projects;
• modernisation of coal-fired generation assets to improve reliability and reduce emissions;
• development of gas-fired generation capacity and energy storage systems to improve grid flexibility; and
• exploration of regional electricity export opportunities through cross-border green energy projects.

Moreover, Mongolia is increasingly considering waste-to-energy and waste recycling projects as part of its broader environmental and energy transition policies. Rapid urbanisation, particularly in Ulaanbaatar, has resulted in growing municipal solid waste challenges. Large quantities of household and industrial waste are currently disposed of in landfills, creating environmental and public health concerns. As of 2025, 2 legal entities hold special license to build biomass power plants from the Energy Regulatory Commission of Mongolia[2]. The Mongolian government has therefore expressed interest in introducing modern waste management and waste-to-energy technologies capable of reducing landfill dependence while generating electricity and thermal energy. Such projects may become particularly important for district heating systems in urban areas. According to the Energy Regulatory Commission of Mongolia’s 2025 report, there are total of 30 license holders for constructing renewable energy sources. 

The principal legal framework governing renewable energy development in Mongolia is the Renewable Energy Law of Mongolia adopted in 2007, with significant amendments made in 2015, 2019. The law establishes the goals, forms and mechanisms of state support for renewable energy generation and investment. Under Mongolian Renewable Energy Law[3], renewable energy sources defined as:

a.    solar energy;
b.    wind energy;
c.    hydropower;
d.    geothermal energy;
e.    biomass. 

The regulation of Mongolia’s energy sector is primarily carried out by the Ministry of Energy, the Energy Regulatory Commission and other relevant government authorities. The Ministry of Energy formulates state policy and sector development strategies, while the Energy Regulatory Commission regulates tariffs, licensing, and market operations.

Despite substantial opportunities, Mongolia’s renewable energy sector faces several structural challenges, including:

a. an ageing electricity transmission and distribution network that limits the integration of variable renewable energy sources;
b. insufficient flexible and dispatchable generation capacity needed to balance intermittent wind and solar production;
c. limited domestic financing capacity for large infrastructure projects; and
d. the need for expanded regional transmission infrastructure.

To address these issues, Mongolia has been pursuing transmission grid modernisation, battery storage initiatives and international cooperation with development finance institutions such as the Asian Development Bank[4], the European Bank for Reconstruction and Development[5] and the World Bank[6].

I. THE YEAR IN REVIEW

Mongolia’s energy sector has continued to evolve in response to rising electricity demand, energy security concerns and international decarbonisation trends. Policymakers have increasingly prioritised renewable energy expansion, grid stability and investment diversification.

In 2025 the energy sector policy discussions have focused on:

a. approval of revised rule on selection of renewable energy generation projects – improving more detailed procedures for project selection procedures and requirements for 6kw or more capacity renewable energy sources to be build[7]; 
b. Energy tariff revisions to address cost-recovery shortfalls between production and retail electricity prices[8];
c. Continued commitment to Paris Agreement 2017, approving national determined contribution 3.0[9];
d. accelerating renewable energy investment in the Gobi Desert region;
e. reducing winter air pollution in Ulaanbaatar through cleaner heating and electricity solution;
f. improving cross-border electricity connectivity with neighbouring countries. 

Mongolia has also continued discussions regarding regional green energy initiatives, including Asian Super Grid and Northeast Asian Power System Interconnection (NAPSI). Some of the biggest energy projects being handled by the Capital city administration, including TPP-5, and two waste to energy projects, scheduled be implemented between 2025-2028. 

II. THE POLICY AND REGULATORY FRAMEWORK

i. The policy background

Mongolia’s long-term development strategies strongly support increasing the share of renewable energy in the national energy mix. The Government’s New Revival Policy targets envisage renewable energy accounting for approximately 20% of installed capacity in the medium term and potentially reaching 30% or more by 2030.

Adopted by Parliamentary Resolution No. 63 of 2015, the State Policy on Energy (2015–2030) aimed to reform Mongolia’s energy sector by strengthening the legal and institutional framework, expanding generation capacity, improving supply reliability, and promoting public-private partnerships. However, in 2021, the policy was repealed under the Law on Development Policy and Planning to address policy inconsistencies and better align sectoral planning with Mongolia’s broader national development objectives.

Under Vision 2050, Mongolia’s energy transition is structured in three phases:

• 2025–2030: Fully meet domestic demand
• 2030–2040: Become a net energy exporter
• 2040–2050: Become a net-zero energy

The New Revival Policy targets a 30 percent renewable share in installed capacity by 2030 and commits to reducing energy sector emissions by 8.34 million tons, consistent with Mongolia’s Paris Agreement obligations. As of 2025, Mongolia operates three wind farms, nine solar farms, and several small hydropower plants, which together make up 17.4 percent of the country’s installed[10]. This shows the need to accelerate efforts if the target of reaching a 30 percent renewable energy share within the next six years to be achieved. The country’s renewable energy strategy is closely linked to broader environmental and climate objectives, including greenhouse gas emissions reduction and air quality improvement. 

ii. The regulatory framework

The principal legislation governing Mongolia’s energy industry includes:

a.    the Energy Law of Mongolia; 
b.    the Renewable Energy Law of Mongolia; 
c.    the Law on Energy Efficiency; and
d.    related environmental, land, construction, and investment legislation.

The Energy Law is the primary legislation regulating the energy sector in Mongolia and establishes the legal framework governing the generation, transmission, distribution, dispatching, and supply of electricity and heat. It also sets out the institutional structure, regulatory procedures, and policy framework applicable to the energy sector. Under the Energy Law, the two principal regulatory authorities in the energy sector are the Ministry of Energy and the Energy Regulatory Commission. The Ministry of Energy is responsible for implementing energy laws and government policies, sector planning and development, national energy strategy, infrastructure expansion, licensing oversight, and the supervision of state-owned and public-private energy projects. The Energy Regulatory Commission is responsible for regulating electricity generation, transmission, distribution, dispatching, and supply activities, approving tariffs, issuing licenses for regulated activities, and implementing energy efficiency policies and standards.

Pursuant to the Energy Law, the following energy-related activities require permits or special licenses issued by either the Ministry of Energy or the Energy Regulatory Commission, depending on the nature of the activity:

• electricity generation;
• heat generation;
• electricity or heat transmission;
• dispatching coordination and control;
• electricity distribution;
• heat distribution;
• regulated or unregulated energy supply;
• import and export of electricity;
• construction of energy facilities and infrastructure;
• gas supply; and
• preparation of designs and technical documentation for energy facilities and infrastructure, including construction, installation, repair, testing, commissioning, and related engineering services.

Electricity generation, transmission, distribution, and supply activities are subject to licensing requirements administered by the Energy Regulatory Commission. Renewable energy activities are subject to the same licensing framework. Renewable energy projects in Mongolia are generally developed under independent power producer (“IPP”) structures involving long-term power purchase agreements with state-owned or regulated offtaker. However, amendments to the Renewable Energy Law adopted in 2019 introduced a competitive project selection mechanism applicable to renewable energy projects connected to the national grid.

Under the amended framework, renewable energy projects may only be implemented following a project selection process announced by the Ministry of Energy, the National Dispatching Center, a state-owned renewable energy entity, or an authorized project selection committee. The amendments were introduced primarily to address limitations in Mongolia’s grid capacity and to better regulate the integration of independent power producers into the national electricity system.

Renewable energy projects involving grid-connected generation facilities compete through a selection process based on technical qualifications and proposed electricity tariffs. The procurement process is conducted through a competitive auction system administered by the Ministry of Energy. Under the Regulation for Competitive Selection of Renewable Energy Projects[11], the project selection process generally consists of the following stages:

a. preparatory phase for project selection;
b. preliminary assessment;
c. technical assessment;
d. financial assessment; and
e. negotiation and execution of agreements with the selected bidder. 

III. RENEWABLE ENERGY PROJECT DEVELOPMENT

i. Project finance transaction structures

Renewable energy projects in Mongolia are commonly financed through a combination of foreign direct investment, multilateral development bank financing, export credit agency support, and private commercial lending under Mongolia’s Public-Private Partnership framework[12]. This structure generally excludes projects financed directly by the Government of Mongolia or the Development Bank of Mongolia.

Renewable energy producers are required to enter into a power purchase agreement with the National Dispatching Centre using a standard form agreement approved by the Energy Regulatory Commission. The duration of the power purchase agreement is generally determined based on the estimated investment recovery period of the project. However, as the generation license for an energy producer may be granted for a maximum term of 25 years, extendable once for an additional 25 years, the term of the power purchase agreement is effectively limited by the duration of the applicable project license. An offtake power purchase agreement is mandatory for all renewable and conventional energy projects connected to Mongolia’s central electricity grid system.

ii. Power purchase in renewable energy sector 

Renewable energy producers generally sell electricity under long-term power purchase agreements approved by the Energy Regulatory Commission. Tariffs may be established through regulatory approval, negotiated agreements, or competitive procurement mechanisms, depending on the structure and scale of the project. Feed-in tariffs and related support mechanisms have historically played an important role in stimulating early-stage renewable energy investment in Mongolia. At the same time, Mongolia continues to explore more market-based procurement and pricing approaches for future renewable energy development.

The provisions governing renewable energy tariffs were amended in 2015 and 2019. These amendments replaced the previous tariff framework, which established both minimum and maximum tariffs, with a system that imposes only maximum tariff caps without specifying minimum tariff levels.

The Energy Regulatory Commission reviews and approves electricity pricing calculations, sets tariffs within the limits prescribed above, and oversees agreements between renewable energy producers and the National Dispatching Centre. The National Dispatching Centre is responsible for purchasing electricity generated by renewable energy producers at approved tariffs and for managing grid expansion, excluding the physical connection of producers to the transmission network. The National Power Transmission Grid is responsible for constructing and operating the transmission connection from the renewable energy facility to the grid, with the associated costs typically borne by the project developer.

Tariff caps are determined based on projected investment recovery periods to ensure that renewable energy projects remain financially viable. This approach seeks to encourage investment in clean energy infrastructure while avoiding excessive financial burdens on consumers. Pursuant to Article 11 of Mongolia’s Renewable Energy Law, differences in the cost of electricity generated by renewable energy producers connected to the transmission grid may be compensated through feed-in tariffs. Feed-in tariffs are a policy mechanism designed to promote renewable energy development by guaranteeing fixed payments to electricity producers for the energy they generate. These mechanisms typically provide long-term pricing certainty, often at above-market rates, thereby encouraging investment in renewable energy infrastructure.

IV. DISTRIBUTED AND RESIDENTIAL RENEWABLE ENERGY

Distributed renewable energy and small-scale solar systems remain at an early stage of development in Mongolia. Nevertheless, interest in rooftop solar, hybrid off-grid systems, and renewable-powered rural electrification continues to grow, particularly in remote provinces where grid connectivity remains limited.

In Ulaanbaatar, improving air quality and expanding district heating connectivity to ger areas have been pressing challenges over the past two decades due to rapid urbanization and inadequate urban planning. The city government has implemented several redevelopment projects through public-private partnerships, including the recently launched Selbe redevelopment program[13] covering a total area of 158 hectares. However, the heating supply for these developments continues to rely primarily on coal-fired heating plants. Given Mongolia’s harsh climate conditions, centralized heating remains essential and requires substantial energy capacity that current renewable energy sources are not yet able to fully meet.

In ger districts that are not connected to centralized heating systems, households continue to rely largely on coal-fired stoves and furnaces for heating. To encourage the adoption of renewable energy and cleaner heating technologies, the government and financial institutions have introduced several incentives, including electricity tariff reductions for renewable energy use and energy-efficient heating systems, as well as preferential loan programs supporting the purchase and installation of renewable energy equipment and energy-efficient household improvements. 

At the residential level, commercial banks in Mongolia have become key actors in promoting sustainable financing through the Sustainable Finance Association NGO[14], established under the Mongolian Bankers Association. As a result, most commercial banks now offer green or sustainable loan products that provide preferential or discounted interest rates for households and small businesses investing in renewable energy systems, energy-efficient appliances, and energy-efficient residential buildings.

V. RENEWABLE ENERGY SUPPLY CHAINS

Mongolia currently relies heavily on imported renewable energy equipment and technologies, including solar panels, wind turbines, battery systems and grid infrastructure components. However, the country’s extensive mineral resources, including copper and rare earth elements, may create future opportunities for participation in global clean energy supply chains.

VI. OTHER KEY CONSIDERATIONS

i. District heating and urban decarbonisation

Given Mongolia’s extreme continental climate, heating demand represents a dominant component of national energy consumption, particularly in urban centres such as Ulaanbaatar. District heating systems therefore remain a critical element of urban infrastructure and are expected to play a central role in Mongolia’s energy transition.

Future policy direction is likely to focus on improving the efficiency of existing heating networks, reducing reliance on coal-fired heat generation, and gradually integrating lower-carbon and renewable energy solutions. This includes the development of waste-to-energy facilities, improved thermal efficiency standards, and the potential integration of renewable electricity into heating applications through electrification and hybrid systems. Recent initiatives by the capital city, including waste-to-energy projects and redevelopment programmes incorporating more efficient heating infrastructure, reflect early steps toward urban decarbonisation. However, large-scale transition remains constrained by infrastructure limitations and the continued need for high baseload heat supply during long winter periods.

ii. Energy security

Energy security remains a central strategic priority for Mongolia due to rising electricity demand, seasonal supply constraints, and continued reliance on electricity imports during peak periods. These vulnerabilities are further exacerbated by an aging grid system and limited domestic reserve capacity. Accordingly, the expansion of domestic renewable energy generation is increasingly viewed not only as an environmental policy objective but also as a key pillar of national energy independence and economic resilience. Strengthening cross-border interconnections, diversifying generation sources, and improving system flexibility through storage and dispatchable capacity will be essential to enhancing long-term energy security.

VII. CONCLUSIONS AND OUTLOOK

Mongolia holds exceptional wind and solar energy resources and is strategically well positioned to develop into a significant renewable energy producer in Northeast Asia. While the national energy system remains heavily dependent on coal-fired generation, policy direction is clearly shifting toward diversification, decarbonisation, and increased integration of renewable energy sources.

Achieving Mongolia’s long-term energy transition objectives will require sustained investment in transmission and distribution infrastructure, modern grid management systems, and flexible generation technologies, including energy storage and balancing solutions. Continued regulatory refinement and the strengthening of market-based procurement mechanisms will also be essential to improving investment certainty and project bankability. If these structural reforms are effectively implemented, Mongolia has the potential to evolve from a largely import-reliant electricity system into a regional clean energy contributor, offering significant opportunities for foreign investment and cross-border renewable energy trade in Northeast Asia.

 

Appendix 1

ABOUT THE AUTHORS

BOLORMAA VOLODYA[15]
GRATA International Mongolia Law Firm

Bolormaa Volodya is a Partner at GRATA International Mongolia Law firm. She is a lawyer with over 16 years’ work experience for advising foreign local companies from various sectors including mining, pharmaceuticals, construction and infrastructure, telecommunications, and trading in Mongolia. She advised several cross-border projects in different sectors which has expanded its business in Mongolia successfully and specialized in business law. She is arbitrator of Mongolian International commercial arbitration center. 

GRATA INTERNATIONAL MONGOLIA LAW FIRM
302a Ambassador office 15A-5, Peace Avenue, 1 khoroo, 

Sukhbaatar district, Ulaanbaatar, Mongolia 

Tel: +976 7015 5031

bvolodya@gratanet.com 

www.gratanet.com

 

References

[1] Energy Sector Statistics 2025, Energy Regulatory Commission (link)
[2] Energy Regulatory Commission Report 2025, Energy Regulatory Commission (link)
[3] Article 4.1.1 of Mongolian Law on Renewable Energy (2007)
[4]  The Asian Development Bank has engaged with the Government of Mongolia on upscaling a renewable energy project (link); the latest component includes a 19.8 MW solar PV plant with a 4 MW battery storage system, scheduled to commence construction in May in Myangad soum, Khovd Province (link).  
[5] As of May 2026, the Ministry of Energy of Mongolia, in cooperation with the European Bank for Reconstruction and Development (EBRD), is implementing four infrastructure projects, including the Choyr–Sainshand 220 kV double-circuit 220.04 km transmission line with associated substation construction and expansion works, the Songino–Darkhan 220 kV double-circuit 196.5 km transmission line with substation upgrades, the Sainshand–Tsagaansuvarga 220 kV double-circuit 204.6 km transmission line with expansion of the Tsagaansuvarga substation, and the Ulaanbaatar central district heating project, which is approximately 85% complete (link). 
[6] The World Bank has been a key financier of Mongolia’s energy security sector, and on 2 October 2025 it approved the Fourth Energy Sector Project with a proposed USD 78 million loan, comprising transmission infrastructure investments (including a 220 kV Mandal–Uvurkhangai line, new and expanded substations, and related 110 kV connections) and an implementation support component to strengthen the institutional and technical capacity of the Ministry of Energy and affiliated agencies (link)
[7] The Regulation on Competitive Selection of Renewable Energy Projects, approved by Resolution No.A/217 of 2025, Minister of Energy. 
[8] According to Resolution No. 639 dated November 1, 2024, on Approving Tariffs, and Resolution No. 715 dated December 31, 2025, on Amendments to the Resolution of the Energy Regulatory Commission, the tariff changes will be enforced effective January 1, 2027, instead of the original enforcement date of January 1, 2026.
[9] Resolution No.91 of Cabinet of Mongolia, dated September 10, 2025, Approved the renewed Nationally Determined Contribution (NDC) target under the Paris Agreement
[10] Energy Sector Statistics 2025, Energy Regulatory Commission (link)
[11]  Mongolia’s renewable energy sector is still evolving, and the Government is making ongoing efforts to strengthen its policy and regulatory framework. The Regulation on Competitive Selection of Renewable Energy Projects was revised and approved in September 2025, introducing significant changes to project selection procedures as well as the methodologies for technical evaluation and financial cost calculation (link).
[12] Mongolia renewed its Public-Private Partnership Law in 2022 (link) with the aim of strengthening the legal and policy framework for public-private partnership projects and enhancing incentives for private sector investment.
[13] The Selbe Redevelopment Program is currently one of the largest redevelopment projects in Ulaanbaatar and is projected to eliminate approximately 10,063 household coal fired stoves (link).
[14] Mongolian Sustainable Finance Association (“MSFA”) established in 2017 by the Mongolian Bankers Association, MSFA strives to green the financing system by promoting sustainability and green growth in its member financial institutions and businesses. MSFA consists of commercial banks, mortgage corporations, non-bank financial institutions (NBFIs), asset management companies, insurance companies, research and training institutions. MSFA closely works with their members and partners to design integrated and transformative policies, business approaches, and multi-sector initiatives that create positive change in line with the Sustainable Development Goals (SDGs), the Paris Agreement, as well as Mongolia’s Sustainable Development Vision, Nationally Determined Contributions (NDC), and Green Development Policy.
[15] Bolormaa Volodya is Partner at GRATA International Law Firm in Mongolia.