Mongolia is attractive for the deployment of green hydrogen production and more renewable energy projects can be developed in the Central Asia region, Elixir Energy Managing Director and CEO Neil Young said in an interview.
“Mongolia has very high quality wind and solar resources – and our analysis shows that in addition, these 2 renewable sources are very complementary in terms of combination to produce very strong annual capacity factors. However, Mongolia’s main attraction as a green H2 project site is its close proximity to potentially very large Chinese H2 markets. H2 is very expensive to move – so location close to markets is arguably the most important source of competitive advantage,” Young told New Europe and EnerLoop by Invest In Network and as part of the next Central Asia and Mongolia Energy Week 2022 in Tashkent from April 26 to 28.
“Our analysis shows that shipping H2 from Mongolia to China via pipeline would cost around 10% of the cost of liquefying it and shipping it by ship from distant countries like Australia. If our view is correct, we expect many more to follow us – the available renewable resources are large in scale – as is the potential market in China in the coming decades,” he added. .
Energy Elixir is an ASX-listed energy company that is pioneering the exploration of natural gas, in the form of coal bed methane (CBM), in Mongolia. Recently, Elixir Energy became the first international or local company to seek to leverage Mongolia’s renewable energy resources through a green hydrogen project and, despite the challenges of COVID, was awarded the title of “Investor of the Year” for 2020 and 2021 by the Mongolian Minister of Mines and Heavy Industry.
Assessing the current stage of green hydrogen development across the Central Asia region, Young said green hydrogen projects around the world are currently immature, reflecting market demand for the product, which , although it is expected to increase very significantly as the world moves towards net zero ambition by the middle of this century, is still in its infancy. “The Central Asia experience mirrors this global experience: there is a lot of interest from multiple private sector and government parties, but real projects are currently still on the drawing board,” he said. -he declares.
There was no specific green hydrogen legislation in Mongolia when Elixir Energy decided to enter the market, which is also common for many Central Asian countries. Young said his company had recently conducted a legal analysis to determine whether Mongolia’s current legal system could support a green H2 project using Western Australia’s precedent as a basis from which to assess this. “The main conclusion of this analysis was that the current legal system was adequate for green H2 developments to continue. We therefore do not consider the absence of specific green H2 legislation in Mongolia to be a disadvantage for our project,” he said.
Asked about the importance of government support in the emerging green hydrogen market, especially for pioneers, the managing director and CEO of Elixir Energy said some wealthier governments like Australia are currently providing support. material tax to green H2 projects in their countries. “The weaker fiscal positions of Central Asian countries are naturally less able to support such projects. However, in our view, this type of support will only be a relatively minor contributor to determining which green H2 projects will succeed on a global scale – rather factors such as strong renewable resources and market strategies will be much more important. The ideal role for governments will be to establish a level playing field and then let the private sector do it,” he said.
Assessing general trends in the use of renewable energy in Mongolia and their correspondence with overall regional development, Young said Mongolia has only a small power grid – ~1,000 MW – with limited interconnection with Russia. and China. A number of grid-scale wind and solar farms are already present in the system – but the immediate scope for more will have to wait for more energy storage to back them up and/or higher inter-country interconnection.
“Ultimately, however, the country’s coal-fired fleet is very old and will need to be replaced – likely with a combination of renewables, gas, storage and interconnections. The latter will also provide export options for renewable energy and meet local demand. These factors are probably quite common to other Central Asian countries with their common Soviet histories,” he said.
Asked about the most pressing issues that could prevent a large influx of international investors into green hydrogen projects in the region, Young said general sovereign risks that relate to the region and affect any FDI will also be relevant. for green H2 projects such as trust in the rule of law and reasonable tax systems. He noted that geopolitical factors specific to Eurasia will also overshadow investor views. He added, however, that the latter can be both positive and potentially negative as, for example, the Chinese government’s Belt and Road Initiative (BRI) could provide projects with finance and markets.