Harnessing Renewable Hydrogen: Mongolia’s Opportunity for Clean Energy Leadership

Mongolia has the potential to become a global player in renewable hydrogen production by leveraging its vast solar and wind resources. However, success depends on overcoming investment uncertainty, water scarcity, and technological gaps while implementing strategic policies and international partnerships.

The OECD Sustainable Infrastructure Programme in Asia (SIPA), in partnership with Mongolia’s Ministry of Economy and Development, the Mongolian Hydrogen Council, the Mongolian University of Science and Technology, and the Mongolian Academy of Sciences, has developed a strategic report on renewable hydrogen. As Mongolia seeks a transition toward a low-carbon economy, renewable hydrogen has emerged as a key player in this transformation. Historically, Mongolia’s economy has been powered by mineral exports, particularly coal, making it vulnerable to global market fluctuations and rising environmental concerns. The growing demand for clean energy worldwide presents Mongolia with an opportunity to leverage its vast renewable resources, and strong solar and wind potential for hydrogen production. If Mongolia can develop the right infrastructure, policies, and investment frameworks, it could become a global player in the hydrogen economy.

Challenges on the Road to a Hydrogen Economy

Despite its potential, Mongolia faces several barriers to renewable hydrogen development. The domestic hydrogen market remains in its infancy, making it difficult to secure long-term buyers for early production. Investment uncertainty is another key issue, as hydrogen production requires billions in infrastructure spending, yet unclear policies and regulatory gaps deter investors. A major environmental concern is water scarcity. Since electrolysis—the primary method of producing hydrogen requires a stable water supply, Mongolia’s arid climate raises sustainability concerns. Without clear water governance policies, large-scale hydrogen production could compete with essential freshwater needs. Technological gaps also hinder progress, as Mongolia lacks the expertise and research infrastructure needed for large-scale hydrogen innovation. Without stronger connections to global technology transfer programs, the country risks falling behind in deploying advanced hydrogen technologies.

A Strategic Vision for Renewable Hydrogen

The report outlines a roadmap for Mongolia to develop its hydrogen industry while addressing these challenges. Attracting investment is the top priority. The government must implement policy incentives such as tax breaks, carbon pricing, and direct subsidies to encourage private sector involvement. Aligning industrial policy with climate targets is crucial to ensuring regulatory stability, which would boost investor confidence. Mongolia should also focus on developing pilot projects in collaboration with international partners. These projects will test the scalability and market viability of hydrogen production before full-scale commercial deployment. Public-private partnerships can further accelerate investment by sharing risks between the government and businesses. Strengthening Mongolia’s science, technology, and innovation ecosystem is also critical. Establishing hydrogen research centers and collaborating with global leaders in hydrogen technology—such as Germany, Japan, and Australia—could help bridge the knowledge gap. Mongolia must also invest in education and training programs to build a skilled workforce for the hydrogen industry.

Ensuring Water Sustainability in Hydrogen Production

Since water is a critical input for hydrogen production, Mongolia must develop sustainable water management strategies. One potential solution is utilizing saline aquifers found in the South Gobi region, where most pilot projects are planned. Desalination and water recycling technologies could provide additional water sources while minimizing reliance on freshwater supplies. The government must also integrate hydrogen water-use policies into Mongolia’s broader climate resilience framework to ensure long-term sustainability. Establishing strict water usage regulations for hydrogen producers can help balance industrial growth with environmental protection. Without sustainable water policies, Mongolia’s hydrogen ambitions could face severe limitations.

Building a Global Hydrogen Hub

To succeed in the hydrogen economy, Mongolia must strengthen international cooperation and secure long-term export agreements. Given its proximity to China, Mongolia has an advantage in serving the rapidly growing Chinese hydrogen market, particularly for industrial applications such as steel production. Developing a national hydrogen certification system in line with international standards will ensure that Mongolian hydrogen meets global quality and sustainability benchmarks, making it more attractive to international buyers. Establishing a national hydrogen council can help coordinate efforts between the government, private sector, and international stakeholders. Several pilot projects are already underway, including the SunSteppe Power/Wolfson Energy solar-based hydrogen project, the Euro Khan Sainshand Hydrogen Hub, and the Gobi H2 Project, which utilizes Mongolia’s wind energy for hydrogen production. These early projects will provide valuable insights into the feasibility of large-scale hydrogen production and help position Mongolia as a global hydrogen exporter.

Mongolia’s transition to a renewable hydrogen economy presents a transformational opportunity for economic diversification and sustainable growth. By leveraging its abundant renewable resources, implementing forward-thinking policies, and attracting strategic investments, Mongolia can become a leader in the clean hydrogen industry. However, success will depend on overcoming regulatory bottlenecks, addressing water sustainability, and de-risking investments. If these challenges are met, Mongolia could not only achieve its climate goals but also reduce coal dependency and strengthen its economic resilience. The next few years will be crucial in shaping Mongolia’s role in the global clean energy transition.