Geothermal project development with case study from Tsetserleg, Mongolia

Abstract

This report describes geothermal project development issues in Mongolia and economic feasibility of a geothermal pilot project in the town of Tsetserleg. Mongolia has 43 hot springs, mainly distributed in the central and western provinces. The hot springs are used for bathing and traditional balneological purposes. There is presently no geothermal electric power generation in Mongolia. The methods most commonly adopted in exploring for geothermal energy, financing aspects and risks for geothermal projects are reviewed. Tsetserleg town is located at N47º28′ and E101º27′ in the central-west part of Mongolia. There are three types of heat consumers in Tsetserleg, those supplied by central boiler stations, individual boilers or individual stoves. In 2002, the central boiler stations in Tsetserleg produced 51,739 GJ (14.38 GWh) of thermal energy, consuming 7,600 tons of coal. To start a geothermal pilot project in Tsetserleg, it is suggested that a separate geothermal company be formed. Maximum geothermal water flow in the new suggested district heating system is 60 l/s, the peak load will be served by coal-fired boilers and the heating season will be 9 months a year. IRR of the project is calculated to be 14%, ROE is 41% and NPV at 8% inflation rate is 1.65 million USD. Feasibility of the project is most sensitive to the heating tariff, meaning that the feasibility of the project greatly depends on the customers’ payment abilities and the existing tariff system. Feasibility of the project would be enhanced by cost optimization.