XacBank has become Mongolia’s first private bank to fund the completion of a large-scale, solar plant in a financing partnership with the Green Climate Fund (GCF).

The 10MWh solar photovoltaic (PV) plant, completed at the end of last year, has started feeding into Mongolia’s main electricity grid to help drive the country’s transition to renewables.

The new solar plant is located in the Sumber Soum area of Mongolia’s Govisümber province.

XacBank’s ability to fund the construction of the Sumber solar power plant in a little over half a year was buoyed by GCF’s ability to plug the financial risk gap for initial renewable investment. GCF alleviated the financial risk through a long-term, concessional loan of USD 8.7 million.

The start of the solar power plant operations comes as GCF implements a growing number of climate finance initiatives around the planet from its current portfolio of 93 approved projects, worth a total USD 4.6 billion in investment.

The solar plant – built with a total investment of USD 17.6 investment – is forecast to reduce greenhouse gas emissions by 12,270 tons annually, while at the same time providing 15,395 MWh of electricity every year.

Dr Z Batjargal, the Mongolian Government’s focal point with GCF, said this project aligns closely with the country’s Green Development Policy, approved by the national parliament in 2014. The policy sets a renewable energy target of installed power capacity in Mongolia of 20 and 30 percent by 2020 and 2030 respectively.

“The Sumber solar power plant is the first successful project jointly implemented by the Ministry of Environment and Tourism with XacBank, based on strong GCF support,” he said on Saturday during an official opening ceremony for the solar plant in the Mongolian capital of Ulaanbaatar. “This project will contribute significantly to Mongolia’s efforts to upgrade its emissions reduction targets.”

Power of the local private sector

Ayaan Adam, Director of GCF’s Private Sector Facility, commended the Mongolian Government and XacBank for getting this project up and running so quickly as proof of how the entrepreneurial energies of local businesses in developing countries can drive climate finance.

“This marks an important turning point for Mongolia, which has previously relied on overseas financial institutions to fund large-scale solar generation,” she said.

“XacBank has shown that, with initial concessional loan support from GCF, it is possible for local businesspeople to set their own course in addressing the climate challenge. I hope the commissioning of this solar plant will serve as a model to show how the local private sector can expand renewable markets, not just in Mongolia but also in other countries.”

GCF’s support for the building of the solar plant reflects the Fund’s country-driven approach, which is designed to empower governments and local markets to ramp up climate action after GCF’s initial assistance.

XacBank CEO Bold Magvan said the solar power plant is a model of large-scale climate change mitigation finance.

“Mongolia has already experienced climate change at an accelerated pace, with rising temperatures and land degradation driving migration and livelihood instability,” he said. “Completing the plant is symbolic for combating those effects, as well as a tangible decarbonisation of Mongolia’s energy supply.“

The power plant is being operated by Mongolian company ESB, with Japanese partner firm Sankou Seiki providing most of the technological input in its construction, including the assembly of the plant’s 31,000 solar panels.

Khurelbaatar Sukhbaatar, director of ESB, said he hoped the power plant would help create a leading role for Mongolia, based on its plentiful sunshine, in an emerging “super grid” of renewable energy stretching across the Asian region linking China, Japan and the Republic of Korea.

Not possible without GCF support

Norimasa Shimizu, senior managing director of Sankou Seiki, added “the solar plant would not have been built without GCF support through its provision of concessional loans.”

While focused on reducing global emissions, this project also has strong health co-benefits for people living in the Mongolian capital of Ulaanbaatar.

The widespread use of coal in Mongolia’s factories and homes led the United Nations Children's Fund (UNICEF) to declare an “air pollution crisis” in the country at the beginning of last year.

The government’s plan to expand its use of renewables, including solar and wind power, is designed to wean the country from its current reliance on coal for most of its energy needs.

Output from the Sumber plant will fill five percent of the country’s renewable energy mix.