Mongolia overhauls the Project Selection Procedure for the Construction of Renewable Energy Facilities and launches tariff auctions
- Jul 7
- 4 min read
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Nearly two decades after the 2007 Renewable Energy Law, Mongolia has overhauled the rules for building renewable energy facilities and has organized its first auction.
Until 2019, renewable energy project developers were required to determine the location, capacity, and resource type of their proposed energy generation facilities. Under the then-existing regulatory framework, the developers applied for a special permit to construct the renewable facility after they prepared the feasibility study. This is how Mongolia’s first renewable energy power plants were built and commissioned.
However, subsequent projects faced significant challenges in connecting and supplying electricity to the central grid. These difficulties largely related to insufficient transmission line capacity in the respective regions, the renewable plant’s technical limitations in storing energy and delivering uninterrupted, reliable electricity supply, in addition to other infrastructural constraints.
The Renewable Energy Law was amended in 2019 to mandate the Ministry of Energy (the “MoE”) to determine the project location, energy resource type, and capacity, in alignment with the state policy on renewable energy development and the stability of the central power grid. In particular, the 2019 amendments introduced a new regulatory approach whereby the MoE first determines the renewable energy projects to be implemented in Mongolia, along with the annual volume of electricity to be purchased from each of those facilities. Only then are project developers to be selected through a competitive selection process based on their technical proposals and price offers. Subsequently in 2020, the MoE adopted the Procedural Regulation on Project Selection for the Construction of Renewable Energy Generation Facilities (the “Project Selection Procedure”), which was updated in 2025.
However, for approximately six years following the adoption of the Project Selection Procedure, no competitive selection process had ever been announced for any specific renewable energy project.
On 22 May 2026, a decisive change was made in the regulatory environment when the MoE revised the Project Selection Procedure. The key feature of this revision is that the right to build renewable energy facilities and sign power purchase agreements can now be granted through (i) the competitive selection process introduced in 2019 or (ii) a tariff auction procedure (the “Auction Rules”).
Shortly after the Auction Rules were introduced, Mongolia organized its first renewable energy project auction on 19 June 2026. The auction awarded the winning participants the rights to construct and operate renewable energy facilities in five designated locations within the central grid region. Building on this momentum, the MoE is preparing to organize a subsequent round of auctions for five additional locations in the western and eastern regions and is currently inviting prospective entities to submit their expressions of interest.
The key features of the Auction Rules are set out below:
1. Eligibility Requirements
Under the Auction Rules, legal entities incorporated in Mongolia are eligible to participate in the auction either independently or by forming a consortium. However, foreign developers are permitted to participate in the auction only through a consortium with a Mongolian legal entity. This limitation appears intended to encourage local legal entities to partner with foreign developers and build capacity.
That said, the Auction Rules do not expressly restrict foreign legal entities from participating in the auction by registering a wholly owned local subsidiary in Mongolia.
2. Financial Requirements
The Auction Rules require that in the case of foreign legal entities, documentary evidence of their financial capacity to invest in the relevant project must be presented. However, the Auction Rules do not specify which documents are required to demonstrate the foreign participant’s financial capacity.
3. USD 5,000/MW deposit requirement
The auction participants are required to place a deposit in the amount equal to USD 5,000/MW. The deposit will be returned to the unsuccessful participants within 5 business days after the auction. The deposit placed by the winner will be transferred as a deposit guarantee for the power purchase agreement to be entered with the winner. If the winning participant refuses or avoids signing the power purchase agreement, the deposit will be withheld.
4. Six-month interval
The Auction Rules require at least a six-month interval between a participant’s successive auctions.
Summary of the auction process
Announcement of the auction - at least 40 days before the auction
The auction committee (the “Committee”) publishes the auction on the organizer’s website or through international media.
Submission of requests - within 14 days
Requests from interested parties are accepted within 14 days of the announcement.
Invitation to the auction - at least 21 days before the auction
The Committee evaluates technical capacity and experience, then issues an Invitation with detailed project information.
Registration as a participant - at least 5 days before the auction
Interested parties register by filling the required proposals, declarations and supporting documents.
Confirmation of participation - within 3 business days
The Committee reviews the documents and registers eligible entities or consortia as participants.
Conducting the auction & result - maximum 90 minutes
Participants submit a sealed price 1 hour before the auction. The auction proceeds by competitive bidding where participants must lower their price by at least 0.05 US cents/kWh within 5 minutes of the latest price announcement. The participant with the lowest price is declared the winner.
Complaints - within 3 business days
Participants may file a written complaint within 3 business days of the result. The Committee resolves it within 5 business days.
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This information has been prepared by Saruul Onch LLC for general informational purposes only and does not constitute legal advice. It does not create an attorney-client relationship between the reader and Saruul Onch LLC. While accurate as of the date of preparation, this information may become outdated due to subsequent changes in law or circumstance, and we assume no obligation to update it. We accept no liability for any action taken, or not taken, in reliance on it.
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