I received a couple of questions from a journalist who is working on a story about renewable energy from the Gobi. I’ll answer them here, since that makes it more convenient to link to previous posts.
Question 1: Why can the Asian super grid vision possibly meet Japan’s future energy security needs?
Whatever the Asian super grid delivers to Japan’s future energy security needs will be on top of whatever would be available without that project.
Assume for example that the project is delivering 10 percent of Japan’s electricity in 2025. Then China decides to turn off the delivery (they can do so, since the power lines would run over their territory). That would mean that Japan would be back to the status quo right now.
It would of course also mean that Japan might want to keep relations to China so friendly that this kind of thing doesn’t happen.
Before electricity from Mongolia reaches the Japanese market, it will reach the Chinese market, which is located conveniently right next door. That will be of major strategic importance for doing something about climate change. There is still a lot of coal capacity in China to replace, and a major Gobi project could contribute to that goal.
Question 2: Do you think Japan, South Korea and China will ever be able to strike a deal on the interconnected grid system?
I don’t know. We will need to wait and see.
But the way to go ahead is to strike a deal with Korea first. Masayoshi Son does have some contacts there. There is no need to wait for everyone to be on board before building the first power lines. Just go ahead and do the Korea connection first.
Question 3: Project finance represents another big question mark. Have multilateral institutions showed any support in terms of low cost financing so far? Can we expect the RE produced in the Gobi desert to reach grid parity?
Multilateral institutions like the World Bank and the German KfW have been involved in financing the Ourzazate project in Morocco, which is one of the first projects to go ahead in the Sahara Desertec vision.
The European Development Bank and the Netherlands Development Finance Company have already provided the first modest $85 million in funding to Newcom in 2012.
Softbank has plans to invest $626 million in a 300 MW wind project in the Gobi. They also have received a lease from the Mongolian government for an area larger than the Tokyo prefecture to use for further projects.
And Son thinks he can get wind energy for 3 cents a kWh in the Gobi, which would be pretty good if true. Eventually solar will of course be even cheaper.
Last question: How is the casino development related to the whole Asia super grid project?
If Mongolia goes ahead and builds a casino at Zamyn-Uud, obviously that project would need a lot of electricity for the many hotels that go with such a project. That would be good for the desert energy project, since it would provide a source of demand close up. One alternative would be to sell power to the Oyu Tolgoi project, where the plan still seems to be to build a stinking coal power plant.