Renewables sector

An Expert's View about Energy in Turkey

Posted on: 25 Aug 2012

Turkey is taking steps to combat imported energy dependency and improve its renewable energy policies through new regulations.

Renewables sector in Turkey Turkey is taking steps to combat imported energy dependency and improve its renewable energy policies through new regulations. It is part of a wider strategy to increase the share of renewable energy to 30% of total energy consumption by 2023. Market overview Turkey’s dependency on energy imports to satisfy its rapidly increasing electricity demand (currently growing at 7% per year) is having a negative impact on the current account balance, which makes the economy more vulnerable. Turkey is increasingly more receptive to developing new kinds of energy (especially nuclear, hydro, wind) investment. It plans to make energy investments worth of $130bn through to 2020 and the government is keen that this will largely be carried out by the private sector. The private sector share of energy production has grown to over 60% by 2011. Turkey’s energy bill was $54bn in 2011 and is expected to reach $60bn in 2012. The Government sees renewable energy as a good way to redress some of the increasing demand. Turkey does not have legally binding targets for primary renewable energy supply. However, the government has set a target for the share of renewable energy to reach 30% of total energy consumption by 2023. Turkey's renewable energy resource potential is estimated around 136,600MW (excluding hydropower and geothermal). Feed-in-tariff rates for renewables are as follows: Technology Tariff rate $/kWh Solar $0.133/kWh Wind (on-shore) $0.073/kWh Hydropower $0.073/kWh Geothermal $0.105/kWh Biomass $0.133/kWh A company can only benefit from the above sale tariffs for a maximum 10 years from its operation date and should start to operate until the end of 2016 to be able to benefit from these tariffs. An additional incentive has also been introduced to promote the use of power generating equipment that is produced in Turkey. Power plants which manufacture their components in Turkey can benefit from an additional tariff premium up to 0.067/kWh. Solar Solar energy is one of the most important renewable power sources for Turkey. Due to long sunshine hours average annual solar radiation levels are high at 1311 kWh/m2 (3,6 kWh/m2- day). But estimates suggest these figures could be even higher and capacity is very high in some regions, putting Turkey close to the potential of Spain. Turkey has developed a solar radiation map which shows the solar potential in regions and provinces in detail. Conditions for Solar Investment: In October 2011 the Ministry of Energy announced a list of transformer stations, to which solar energy power plants can be connected, and their respective capacities. The Energy Markets Regulatory Authority (EMRA) has released regulations on how companies can measure the solar potential of the prospective sites (the regulation also includes amendments for wind energy measuring). Investors need to make solar measurements in prospective investment sites before applying for licences. According to the regulation, the total installed capacity of solar power plants that will be licensed before 2014 cannot exceed 600 MW. Each individual investment application cannot exceed 50 MW. Licence applications will be taken between 10-14 June 2013 and licences to be given by the end of 2013.The aim is to start operations by 2015. EMRA plans to declare much higher solar capacities (over 600 MW) annually for post-2015 and expects production costs to fall which would make solar investments in Turkey more profitable for investors. Biomass Biomass is one of the other renewable energy resources which offer high potential for Turkey but until recently has attracted limited attention. Lately energy generated from waste has started to gain importance and the regulations for biomass law have been completed in September 2011. The amount of energy production from biomass is still very limited. Currently, electricity production from biomass (bio-power) is 200 MW and it is planned to reach 500-600 MW but only the potential of waste to energy is estimated to be 10 GW. Incineration method is most frequently used in the sector whereas gasification is the preferred government option due to its efficiency. Bio-fuel and bio-product are the other technologies of biomass and it is stated that if 20% of government owned agricultural land is used for biogas or biofuel, 75% of the whole gas demand of the country can be supplied. Wind energy Due to its climate and topography Turkey is attractive for wind energy investments particularly in the Marmara, Aegean and Eastern Mediterranean regions. Given the constraints on grid infrastructure potential, the highest feasible wind-power generation capacity is estimated at 48 GW and 10 GW of this total capacity is offshore wind. 20 GW has been set as the target capacity to attain by 2023 by the Energy Ministry. According to projections, wind’s share in total installed capacity will reach 5-8% by 2020. So far, EMRA has licensed 4,000 MW wind power projects and installed capacity is expected to reach 11,000 MW soon with recent licence applications. Target is to reach 20,000MW capacity by 2023 which means 9,000MW additional licence applications worth of 9bn Euros investments. TEIAS, the transmission system operator, has prepared an investment plan to accommodate 15 GW. Key opportunities ξ The Science, Industry and Technology Ministry presented a legislation that will allow the announcement of an industry zone to the Prime Minister. According to the legislation it is planned that in Konya, Karapinar a new industry zone will be built for solar energy with an estimated investment of $10.4 billion that is planned to make Turkey a regional base for solar industry. ξ The intention for the Industry Zone is there will be solar power generation as well as production of solar energy equipment. PV panels, solar control units, charge regulators, inverters etc will be manufactured for the first time here in Turkey. It is also planned that there will be extra incentives for investments in this new industry zone such as; facilitation for environmental impact assessment reports and other permissions(to be completed in 3 months), expropriations and infrastructure will be provided by the government. ξ Applications for the first solar power plants will be submitted In June 2013, companies started to make the measurements on sites. ξ There is still 9GW additional licence application waiting for wind energy until 2023. A total of 10GW offshore wind capacity offers investors a good potential in the area which is started to be considered recently by the government. ξ Waste (Biomass) to energy is another field of great potential. Only 5 cities in Turkey have waste to energy facilities and the government is open to the idea of building more of these facilities. Latest export opportunities – Renewable Energy Latest export opportunities – Turkey Getting into the market ξ On solar, there are opportunities for UK companies in both solar panel production and solar power plant investments in Turkey. An investment for 1 MW is expected to be around 3mn Euros and total investment to be around 1.8bn Euros. Foreign companies are not allowed to bid, but they can establish a company in Turkey within Turkish law and this company’s stakeholders can be 100% foreign. Chinese companies are interested in manufacturing side of the industry; countries like Germany, Spain, USA are interested in solar power plants. ξ On biomass most of the companies in the sector are foreign companies together with local partners. Arab countries also have an interest in this sector in the financing part. ξ On wind, Turkey’s largest conglomerates such as EnerjiSa and Zorlu have been partnered with major foreign companies such as GE and Vestas. Companies investing in wind are happy with the level of tariffs, but want the government to provide tariff premiums for companies using 50% local content rather than just for 100% local content. Government is now working on this amendment. The recently announced new incentive system offers important opportunities for wind equipment producers since it provides incentives to investors for local production of wind energy equipment like turbines and generators. EMRA noted that big producers such as GE and Siemens have already decided to make investments in wind equipment in Turkey. ξ Financing is another challenge for companies investing in renewable energy. World Bank and other international financial institutions assist Turkey to improve access to finance and key is a credible promise of profits. Also some of the Turkish banks are offering financing specifically for renewable energy. ξ According to International Energy Agency’s analysis on Turkey, the incentive structure and feed-in-tariffs are crucial in investment decision given the high upfront costs. Higher tariffs and longer support periods in Europe is seen as the main competitive disadvantages for Turkey’s wind market. Aim to increase wind power capacity requires upgrading the electricity system in terms of grid connections, transmission system reinforcement and grid management. More about doing business in Turkey Contacts Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS). To commission research or for general advice about the market, get in touch with our specialists in country - or contact your local international trade team. ξ Umay Uysal, British Embassy Ankara. Tel: +90 (0)312 455 3258 or email: Contact your local international trade team UKTI Events UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows. Latest events – Renewable Energy Other events: Renex Euroasia 2012 Trade Fair for Renewable Energy Technologies and Energy Efficiency 15-18 November TIREC 2012 16-17 October ICCI 2013 24-26 April 2013 Useful links More about OMIS and other UKTI services for exporters
Posted: 25 August 2012

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