World Bank Launches $78M Power Grid Project to Boost Mongolia’s Energy Security

In a landmark move to modernize Mongolia's electricity infrastructure and accelerate the country's shift to a low-carbon economy, the World Bank has approved a US$78 million investment for the Fourth Energy Sector Project. This initiative aims to strengthen the capacity, resilience, and sustainability of Mongolia's Central Energy System (CES), while expanding access to renewable energy and reliable electricity for thousands of households across the country's central and western regions.

The financing comes through the International Bank for Reconstruction and Development (IBRD) and supports Mongolia's broader ambitions under its New Recovery Policy and Government Action Plan for 2024–2028, which prioritize infrastructure development, green energy transition, and inclusive economic growth.

"The World Bank is pleased to continue supporting the Government of Mongolia in its efforts to strengthen the reliability and sustainability of the country's electricity system," said Taehyun Lee, World Bank Country Manager for Mongolia. "This project will help advance Mongolia's low-carbon development goals while supporting inclusive economic growth and job creation."

Project Overview: What the Fourth Energy Sector Project Covers

At its core, the project focuses on reinforcing Mongolia's national grid and preparing the system to better integrate renewable energy. Key infrastructure components include:

• Construction of a new 220 kV high-voltage transmission line linking the existing Mandal Substation to a new substation in Uvurkhangai Province.

• Expansion and modernization of substations in Mandalgovi, Arvaikheer, and Bayankhongor, three critical hubs in the CES network.

• Development of 110kV associated transmission lines to connect these substations efficiently.

The project will deliver a significant upgrade to the country's electricity infrastructure, addressing one of Mongolia's long-standing challenges: frequent power outages and limited grid coverage, particularly in sparsely populated or rural regions.

A Major Boost to Clean Energy Integration

Mongolia's Central Energy System currently struggles with both capacity constraints and fossil fuel dependency, primarily coal-fired generation. By increasing grid capacity by over 590 megawatts (MW), the new project will reduce outages by nearly 50% in target areas and unlock the potential to integrate at least 150 MW of wind and solar PV capacity into the national grid.

This aligns with Mongolia's commitment under the Paris Agreement, where the country pledged to reduce greenhouse gas emissions by 22.7% by 2030 and achieve 30% renewable energy penetration by 2030.

The new infrastructure will make it technically and economically feasible to bring clean energy projects online, especially in areas with high wind and solar potential such as the Gobi region and the steppe belt.

Improving Access and Climate Resilience

Approximately 200,000 residents across central and western Mongolia are expected to benefit directly from enhanced electricity reliability, a key enabler of economic opportunity, health, education, and digital services in remote areas.

The project also incorporates climate resilience measures, or "climate proofing," in the design and construction of substations and transmission lines. These will ensure that Mongolia's power infrastructure can withstand climate-induced hazards, such as extreme temperatures, dust storms, and seasonal floods, which are becoming more frequent due to climate change.

Part of a Regional Clean Energy Transformation

The Fourth Energy Sector Project is part of the World Bank's Accelerating Sustainable Energy Transition Multi-Phase Programmatic Approach (ASET-MPA). This initiative aims to support countries across East Asia and the Pacific in scaling up renewable energy, integrating clean energy into grids, and implementing reforms for sustainable power sector development.

For Mongolia, this represents more than an infrastructure upgrade—it is a strategic shift toward a resilient, sustainable, and inclusive energy future.

Mongolia's Energy Journey with the World Bank

Since Mongolia joined the World Bank in 1991, the institution has provided over US$1.5 billion in funding across sectors, with energy infrastructure being a recurring priority. Previous phases of energy sector development focused on transmission upgrades, energy efficiency, rural electrification, and technical assistance for policy and regulatory reform.

The Fourth Energy Sector Project builds upon those foundations, introducing modern engineering, climate-smart design, and forward-looking investment to prepare Mongolia's grid for the coming decades.

As the country moves to meet its climate goals, create jobs, and improve service delivery, this project signals a strong partnership between Mongolia and the World Bank to tackle global and local energy challenges in tandem.