Energy in Turkey

An Expert's View about Renewable Energy in Turkey

Posted on: 22 Sep 2010

The electricity industry is a large, high-growth sector in the Turkish economy. Energy sector offers one of the top growth opportunities for an array of business segments.

Power & Renewable Energy - Turkey Sector Report Energy Turkey Produced by: Taylan Atakan, Senior Trade and Investment Manager, British Embassy Ankara March 2009 Whereas every effort has been made to ensure that information provided through this Report is accurate, these Commercial Departments, UK Trade and Investment, the FCO and BIS accept no liability for any errors, omissions or misleading statements in such information and accept no responsibility as to the standing of any firm, company or individual mentioned. Published March 2010 by UK Trade & Investment. Crown Copyright © www.uktradeinvest.gov.uk Energy - Turkey Table of Contents OVERVIEW 3 OPPORTUNITIES 5 CHARACTERISTICS OF MARKET 6 KEY METHODS OF DOING BUSINESS 8 MORE DETAILED SECTOR REPORTS EVENTS 9 CONTACT LISTS 10 www.uktradeinvest.gov.uk Page 2 of 10 Energy - Turkey OVERVIEW The majority of Turkey?s electricity comes from conventional thermal sources. In 2007, Turkey had total installed electricity generating capacity of 40.8 Gigawatts (GW), a 36 percent increase since 2000. The country produced 143 billion kilowatt-hours (Bkwh) of electricity in 2007, while consuming 133 Bkwh. Conventional thermal sources comprise the largest share of Turkey?s electricity supply, contributing 68 percent in 2007. Hydroelectricity generation makes up almost all of the remainder. Although Turkey does not currently produce any nuclear energy, the only offer for the country?s first nuclear power plant tender came from Russian-led consortium of Inter RAO, Atomstroiexport and Turkey's Park Teknik and is expected to be awarded before the end of 2009. Transition in the electricity sector started in 1993 when the government agency, Turkish Electricity Authority (TEK) under the Ministry of Energy and Natural Resources (MENR) was split into two as generation & transmission (TEAS) and distribution (TEDAS). In March 2001, the Turkish government enacted a new Electricity Market Law, which set the new stage for liberalization of power generation and distribution activities. Under the law, the state- owned Turkish Electricity Generation and Transmission Corporation (TEAS) was split into separate state-owned companies: Turkish Electricity Generation Company (EUAS), Turkish Electricity Transmission Company (TEIAS), and Turkish Electricity Trading and Contracting Company (TETAS). Transmission of electricity will continue to be run by the state. TEDAS The Electricity Distribution Company is carrying out the privatization of distribution companies using a Transfer of Operating Rights (?TOR?) backed Share Sale model ("TSS model"). According to this model, the investor will be the sole owner of the shares of the distribution company and will be the unique licensee for the distribution of electricity in the designated region without retaining the ownership of distribution network assets and other items that are essential for the operation of distribution assets. The ownership of these distribution assets will remain with TEDAS. The investor, through its shares in the distribution www.uktradeinvest.gov.uk Page 3 of 10 Energy - Turkey company, however, will be granted the right to operate the distribution assets by a Transfer of Operating Rights Agreement ("TOR Agreement") with TEDAS. The new law also created the Energy Market Regulation Board (EPDK), which oversees the power sector and natural gas markets, including the setting of tariffs, issuing licenses, and assuring competition. Before the 2001 reforms, EUAS operated 91 percent of Turkey?s power supply. However, EUAS will sell off most of its power plants and other holdings under the government?s privatization plan. In June 2003, 27 state-owned coal and hydropower plants were transferred to a government holding company in preparation for privatization, accounting for 28 percent of the Turkish power generating market. The government of Turkey originally set a goal for the total privatization of EUAS, although this has proceeded more slowly. To date, the privatization process has wavered due to lack of investor interest and political uncertainty, although external institutions have kept the process on track. In August 2006, the EPDK approved the privatization of Turkey?s 20 regional electricity grids. The EPDK has approved a new electricity tariff structure, the final step before Turkey can invite tenders to auction the distribution grids. The power grids have been started to be sold in groupings of up to 6 regional grids at a time to encourage economies of scale and greater efficiency. DE-COMPOSITION OF END-USER TARIFF Source: TEDAS The Electricity Distribution Company www.uktradeinvest.gov.uk Page 4 of 10 Energy - Turkey OPPORTUNITIES Turkish Energy sector offers one of the top growth opportunities for an array of business segments within the next decade. The growth drivers are diverse. o The continuing steady growth of GDP, rapid growth of consumption per capita and demographic structure in Turkey will drive a double digit demand growth at a multiple of GDP. The geographic disparity between the sources of primary energy and demand for oil and gas is also driving growth for transportation of these commodities. Turkey?s strategic location among multiple sources and consumers of primary energy, will continue to drive the pipeline investments, while presenting opportunities for shipping industry vertical and its adjacencies such as ports. o Continuing high input prices and dependency for imported gas have been creating a compelling case for increased renewable energy investments and entry into nuclear energy production. o Continuing deregulation including privatization of electric distribution will bring new investments in distribution and control technologies. This represents about $100Bn + business potential in the next decade for multiple industries and needless to say this would not happen without financing models. Investment Needs of the Turkish Energy Sector 2008 ? 2020 Total=$128,574Million 100 Coal Extraction 90 Oil 80 70 Natural Resources 60 Water(DSI) 50 Generation(EUAS) 40 New Gen.Facilities 30 20 Transmission 10 Distribution 0 $M Investments Source: SPO State Planning Organisation UKTI publishes international business opportunities gathered by our network of British Embassies, High Commissions and Consulates worldwide. These opportunities appear in the Opportunities portlet on the relevant sector and country pages on the UKTI website. By setting www.uktradeinvest.gov.uk Page 5 of 10 Energy - Turkey up a profile you can be alerted by email when relevant new opportunities are published. New or updated alert profiles can be set in My Account on the website. CHARACTERISTICS OF MARKET The electricity industry is a large, high-growth sector in the Turkish economy. The industry constitutes an important part of the country?s GDP and is a USD 18.5 billion industry based on current end-user prices. The sector?s share in the Turkish economy has been growing rapidly, given the 10.6% per annum growth in electricity demand over the past two decades. This rate of demand growth has been higher than the growth rates seen in other major Turkish industries and outstrips growth in the Turkish economy overall. In 2007, the Turkish electricity sector recorded approximately 182 billion kWh of gross consumption (total consumption including loss/theft, internal consumption and exports) and 155 billion kWh of net consumption (excluding loss/theft, internal consumption and exports). The industrials customer group represent approximately 50% of the total demand, while residential customers consume slightly less than a quarter of the total. Commercials customer group, excluding public institutions, is placed third in terms of consumption with a 14% share. Distribution losses of the system, which amounted to 26.6 billion kWh in 2007, are high compared to international benchmarks. Accordingly, one of the primary objectives of the electricity sector reform has been defined as reducing the loss/theft ratio to OECD levels. Electricity consumption growth has historically been less volatile than the overall economic growth in Turkey. Between 1980 and 2007, GDP growth displayed a wide variance with a standard deviation of 4.6% around an average growth rate of around 4%. Consumption growth in the electricity sector during the same time period displayed a lower standard deviation of 3.0%, around a higher average growth rate of approximately 8%. As can be seen in the next chart, electricity consumption growth was negative only in a single year over the past 27 years. MAIN POWER GENERATION RESOURCES Power generation of Turkey in 2007 was based on: gas (45%), coal (27%, both indigenous and imported, including lignite), hydro (24%) and oil & negligible renewables (%4). Natural gas will continue to be a major input for power production, since cheap domestic lignite and hydro will not be enough to keep up with the demand. Today, power generation alone is accountable to around 56% of the total natural gas consumption of the country (Consumption breakdown of natural gas in 2007 was realised as: power generation at 56.1%, residential use at 22.3% and industrial use at 21.6%): Natural Gas/ LNG Turkey has 10 billion cubic meters of proven natural gas reserves as of January 2007. Although Turkey does not have sizeable reserves, it is an important natural gas transit country. Turkey is also a growing consumer of natural gas in its own right, with consumption having increased significantly over the last decade. In 2007, Turkey consumed 26,5 billion cm of natural gas, up 51 percent since 2000, while only producing 800 million cm of natural gas. Consumption of natural gas has increased substantially over the last several years in Turkey. Today, power generation alone is accountable to around 56% of the total natural gas consumption of the country. Consumption breakdown of natural gas in 2008 was realised as: power generation at www.uktradeinvest.gov.uk Page 6 of 10 Energy - Turkey 56.1%, residential use at 22.3% and industrial use at 21.6%):Percent shares of supply sources in 2007 were: RF (63%), Iran (17%), Algeria LNG (12%), Azerbaijan (4%), Nigeria LNG (4%), Spot LNG (0.47%) and Domestic (0.17%): Nigeria LNG Azerbaijan Algeria LNG 4% 4% Spot LNG 12% 0,47% Iran 17% TPAO Russia 0,17% 63% Coal Coal-fired power stations remain an important energy source for Turkey, and there is renewed interest in exploiting Turkey?s domestic coal resources following large natural gas price increases. In August 2006, tenders were offered by EUAS for the construction of two new 1,200-MW coal-fired units at the existing Afsin-Elbistan power plant. The Afsin-Elbistan region holds 3.3 billion short tons of lignite reserves, or 40 percent of Turkey?s domestic total. Over the last few years, several new conventional thermal power plants have come online. However, except for the recent EUAS tender, few new power stations are currently scheduled to be built in Turkey. The majority of Turkish coal production is for electricity generation. In 2007, Turkey had total recoverable coal reserves of 4,614 million short tons (Mmst), of which only 306 Mmst, or less than 7 percent, was ?hard coal? (anthracite and bituminous). The remainder, around 4,308 Mmst, consists of lignite and sub bituminous coal reserves. In 2007, Turkey produced 51 Mmst of total coal, of which 94 percent was lignite. The bulk of Turkey?s lignite production goes to coal-fired power plants. Turkey consumed about 70 Mmst of total primary coal in 2007, showing net imports of approximately 19 Mmst. Hydropower Turkey has significant hydroelectric power resources, with more than 100 total plants and total installed hydroelectric generating capacity of 12.6 GW. Turkey is also developing a great deal more of hydropower plants, especially as part of the $32-billion South-eastern Anatolia Project (GAP) along the basin of the Tigris and Euphrates Rivers. Under the GAP project, which is considered one of the most ambitious water development projects ever undertaken, Turkey will construct 22 dams, 19 hydroelectric power stations (with around 7.5 GW of generating capacity), and an expansive network of tunnels and irrigation canals covering 1.7 million hectares of land. The GAP project is overseen by the South-eastern Anatolia Project Regional Development Administration .By the end of 2007, 8 hydropower plants had been completed, representing 74 percent of total planned energy projects under the GAP scheme. The 8 power stations generated 18.7 Bkwh of electricity in 2007, which adds substantially to the share of hydroelectricity in Turkey?s energy mix. The entire GAP project is scheduled to be completed by 2010. Nuclear Turkey will undertake three nuclear power plants, each rated at 1,500 MW and making up a total nuclear capacity of 4,500 MW, by the year 2020. During Turkish Atomic Energy Agency?s in www.uktradeinvest.gov.uk Page 7 of 10 Energy - Turkey site studies at North Anna nuclear power plant during February 2006, the US Department of Energy urged for technologic cooperation with Turkey, stating that they wanted to cooperate with the Turkish Government in the area of nuclear energy with the latest technology, which is known as Generation 3.5. the only offer for the country?s first nuclear power plant tender came from Russian-led consortium of Inter RAO, Atomstroiexport and Turkey's Park Teknik and is expected to be awarded before the end of 2009. Renewables Other renewable sources add very little to Turkey?s total electricity supply, contributing only about one tenth of one percent to Turkey?s electricity generation in 2008. However, Turkey is considered to have a large amount of wind, geothermal, and solar power potential, and a number of projects to exploit these sources are underway. However, renewable energy sources are not likely to contribute significantly to Turkey?s energy mix in the near term. Renewable Energy Potential MW Wind Economic Potential 10,000 Hydro Economically Usable 35,000 Geothermal 35,000 Solar 35Mtoe KEY METHODS OF DOING BUSINESS Other background information on doing business in Turkey can be found on UKTI?s website. Simply go to the Turkey country page where you will find information on: o Customs and Regulations o Contacts and Setting Up o Selling and Communications o Background and Geography o Visiting and Social MORE DETAILED SECTOR REPORTS Research is critical when considering new markets. UKTI provides market research services which can help UK companies doing business overseas including: o Overseas Market Introduction Service (OMIS). Bespoke research into potential markets, and support during your visits overseas o Export Marketing Research Scheme. In-depth and subsidised service administered by the British chambers of Commerce on behalf of UKTI Contact your local International Trade Advisor if you are interested in accessing these services, or for general advice in developing your export strategy. www.uktradeinvest.gov.uk Page 8 of 10 Energy - Turkey When considering doing business in Turkey it is essential to obtain legal, financial and taxation advice. A useful contact list of lawyers and other relevant professional bodies, as well as further information is available from the British Embassy in Turkey. The British Mission Commercial Section in Turkey offers a range of services to British-based companies wishing to do business in the Turkish market. Our services include the provision of market information, validated lists of agents/distributors, key market players or potential customers in the Turkish market; establishing the interest of such contacts in working with you; and arranging appointments. We can also organise seminars or other events for you to meet contacts or promote your association/company. You can commission these services from us under our Overseas Market Introduction Service ,OMIS. This is a chargeable service operated by UK Trade & Investment, UKTI, to assist British- based companies wishing to enter or expand their business in overseas markets. You can find details of the OMIS service on the UKTI website: www.ukti.gov.uk You might also like to note that all information about UKTI/British Embassy commercial events and trade missions in Turkey is published on the UKTI portal and the Embassy website www.ukinturkey.fco.gov.uk We also post on the UKTI portal information about specific business opportunities in Turkey. As a UK-based company, we encourage you to register on the UKTI portal. This will allow you to set up your user profile to ensure that you receive automatic updates about opportunities in your sector in markets of interest to you. This service is free of charge. The portal also has a great deal of background information on priority business sectors in Turkey and on doing business here. You might also be interested to find out more about the range of services available to UK companies trading internationally through the UK Trade & Investment International Trade Team in your region of England, or through the Devolved Administrations in Scotland, Wales and Northern Ireland. You can find details of your local office on the same portal by clicking on ?Local Office Database? in the same section and/or the map above. EVENTS TRADE FAIRS IN TURKEY 2008/09 The Union of Chambers and Commodity Exchanges of Turkey www.tobb.org.tr/fuar/eng/ provides details of trade shows/fairs/exhibitions over 140 main and sub sectors under the headings: o Fairs According to Sectors o Fairs According to Cities o Fairs According to Dates o Fairs Organizing Companies o Fairs Search UK Trade & Investment?s Tradeshow Access Programme (TAP) can help eligible UK businesses take part in overseas exhibitions. Attendance at TAP events offers significant benefits: ? possibilities for business opportunities both at the show and in the future ? a chance to assess new markets and develop useful contacts ? grants are available if you meet the criteria ? UKTI staff overseas will be available to assist delegates www.uktradeinvest.gov.uk Page 9 of 10 Energy - Turkey Find out if you are eligible to apply to attend this event, and more about the support UKTI can offer, on the UKTI Market Entry web page. Details of TAP events can be found in the Events portlet on the Turkey page. Other Market Visit Support may be available via your local International Trade Advisor. CONTACT LISTS The UK Trade & Investment Power Sector team provide companies with knowledge, advice and practical support through a network of international specialists in the UK and in British Embassies and other diplomatic posts around the world. The Power Sector team can offer you: o Support to build export capability o Access to inward and outward market visits, seminars, opportunities and reports o Sales leads and bespoke research services specific to market o Assistance in exporting for the first time, including access to the Passport To Export programme UK Trade & Investment Contact: karen.smith@ukti.gsi.gov.uk Should you be interested in more in-depth, tailored information and/or contacts in the Turkey power and renewable sector, you should contact; Taylan Atakan Senior Trade & Investment Manager British Embassy, Ankara T: +90 312 455 3243 F: +90 312 455 3351 Taylan.Atakan@fco.gov.uk www.ukinturkey.fco.gov.uk UKTI?s International Trade Advisers can provide you with essential and impartial advice on all aspects of international trade. Every UK region also has dedicated sector specialists who can provide advice tailored to your industry. You can trace your nearest advisor by entering your postcode into the Local Office Database on the homepage of our website. For new and inexperienced exporters, our Passport to Export process will take you through the mechanics of exporting. An International Trade Adviser will provide professional advice on a range of services, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, translating marketing material, e-commerce, subsidised export training and market research. www.uktradeinvest.gov.uk Page 10 of 10
Posted: 22 September 2010

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