Zeynep Dereli is managing director of APCO Worldwide’s Istanbul office.
As Turkey approaches the centennial anniversary of the establishment of the Republic (in 2023), the government has set out a number of ambitious targets in its Vision 2023 plan to mark this important milestone. Many of these targets focus on energy, particularly renewables.
The Turkish government wants to increase the share of renewables in energy generation by 30 percent, primarily through new wind and solar power. For wind power, for example, Turkey has set a goal of increasing generating capacity from the current 2 megawatts (MW) to up to 20,000 MW, which would place it just behind Spain and Germany. Vision 2023 also aims to increase energy efficiency in Turkey by 20 percent.
This new focus on renewable energy is no coincidence. Turkey’s geography and climate provide excellent opportunities for generating wind, solar and geothermal power. Currently, however, Turkey meets 73 percent of its energy needs through imports, primarily from Russia and Iran. These imports account for roughly 70 percent of the current account deficit, which leaves the country’s economy vulnerable. Fatih Birol, the chief economist at the International Energy Agency, estimates Turkey’s energy import bill will be up to $68 billion higher this year as compared to last year. This is largely because Turkey has few energy resources of its own. Increasing Turkey’s energy independence can help alleviate this deficit.
As other markets are experiencing, increasing renewable energy supplies in Turkey is not without challenges. Renewable energy technologies are not yet cost-effective when compared to conventional technologies. There are also limited domestic electricity supply companies which would be sufficiently robust or able to support the development of industrial clusters. Finally, existing regulations and incentives do not adequately differentiate between energy production sources. As a result, cheaper energy production options are not necessarily the ones that are chosen, and competitive edge is weakened.
In Spain, the push for energy reform has experienced setbacks. Significant subsidies on renewable energy resulted in little by way of a return on investment – they have not made the economy more competitive or reduced energy costs for the average home owner. Spain’s experience has left the Turkish government hesitant to fully embrace renewable energy subsidies. However, it is looking at what it can do to incentivize private investment in renewables, primarily through government purchase guarantees, which are much lower than the market price but can be useful in securing financing.
The Turkish Ministry of Energy and Natural Sources and the Energy Market Regulatory Authority (EMRA) recently promulgated Renewable Energy Regulations with some amendments on the Renewable Energy Law (Tariffs & Domestic components). In addition, a law enacted in January 2011 has now come into force, giving an incentive to electricity produced from solar energy. The amount of incentives and guarantee of purchase are subject to increase if a solar power plant is assembled using domestically produced panels.
Investments are occurring, such as the World Bank’s Private Sector Renewable Energy and Energy Efficiency project. The World Bank has announced that it will provide an additional $500 million to this fund. The additional funds complement an initial World Bank loan of $500 million and Clean Technology Fund financing of $100 million, which went into effect in August 2009.
Turkey’s market developments have created a range of excellent opportunities for companies already established in the renewable energy sector, as well as those just entering the market. Direct product marketing, establishing a local sales office, a strategic partnership or a joint venture, or setting up a production site in Turkey are just some of the opportunities available. As we approach the 2023 milestone the number of opportunities will only increase, and with that a more sustainable and energy efficient Turkey could soon become a reality.