Invest in Electricity Sector in Turkey
Why invest in Turkey?
Demand for energy and natural resources has been increasing due to economic and population growth in Turkey. In recent years, Turkey has seen the fastest growth in electricity demand among OECD members, with an annual growth rate of 5.596 since 2002. Turkey will increase by 5096 its energy use over the next decade, Moreover, the projections of the Ministry of Energy and Natural Resources (MENR) confirm that this trend will continue in the long term. Turkey’s installed capacity has reached 88.5 GW in 2018 and 90.4 GW in August 2019. Turkey has achieved an additional capacity increase of 3,351 MW in 2018.
Turkey has substantial amount of renewable energy potential, and the utilization of this potential has been increasing over the last decade. As of the end of August 2019, hydro and wind resources constitute the vast majority of Turkey’s renewable energy capacity, accounting for 28.44 GW and 727 GW respectively of the total installed capacity of 90.4 GW. Furthermore, Turkey’s target is to develop around 10 GW additional installed capacity each in solar and wind energy by 2026 compared to the 2016 baseline. Additionally, Turkey aims to increase the share of domestic and renewable energy in power generation to 2/3 by 2023.
Making full use of the Renewable Energy (RE) potential is at the top of Turkey’s agenda, and the potential is still to a large extent untapped. As of August, Turkey has an installed capacity of about 727 GW and more than 35 GW of licensed wind capacity is under construction. On the other hand, Turkey has an onshore wind potential of 37 GW and a completely untapped offshore wind potential of 11 GW.
The Renewable Energy Zone (REZ) model was created by Turkey in order to ensure efficient and effective use of RE resources by setting up large scale REZS in selected areas. The model was designed in a way that also serves to help attain the localization target set in the National Energy and Mining Policy. The REZ model is, in essence, an auction mechanism where the winner of the tender is granted the right to generate and sell the electricity at a price determined as a result of the process. The tender involves the condition of the establishment of local manufacturing and R&D facilities or using locally manufactured equipment with an aim to ensure localization. The REZ model is important for Turkey as it is a tool for fast-tracking the realization of planned projects and technology transfer.
Turkey has been gearing up its RE investments, and one of the tools Turkey employs to this end is the REZ tenders. In 2017, Turkey held two tenders for solar and wind energy with 1 GW capacity each by using REZ auction. In 2019, a new wind tender covering 4 regions with a total installed capacity of 1 GW was completed.
As for the solar potential, annual average daylight duration in Turkey is 7.5 hours and the average annual radiation is 1,527 kWh/m2, which is higher than most of Europe. Turkey’s installed solar capacity is only around 5.53 GW, although solar power potential in Turkey is nearly twice that size of Northern Europe’s. The effort to invest in RE will lead to growing demand for RE equipment such as turbines and photovoltaics (PV) panels. Turkey will continue to incentivize localization through providing bonuses for locally manufactured equipment.
The Turkish electricity sector has gone through a significant transformation in the past two decades. Throughout this period, the electricity market underwent a liberalization process along with the establishment of a regulatory authority for the energy sector, went through reforms, and became a functional electricity market with large-scale private sector participation following privatization.
Seeking to become a full member of the European Union, Turkey took the initiative to open its electricity market to competition in 2001. This marked a turning point for Turkey, as the design and legal framework of the new market were adapted from those of the European Union. Since 2001, there have been some major developments in the market. In 2013, the new Electricity Market Law No. 6446 was published and the privatization processes of 21 distribution companies were completed.
Turkey also aims to increase the share of domestic coal in electricity generation by transferring coal reserves to the private sector with the obligation of building and operating coal-fired power plants in the vicinity.
Coal still has a major share in the electricity generation mix of Turkey. As of the end of August 2019, electricity generated from domestic coal is 34,039 GWh (16.796 of the total generation 203,548 GWh) and the installed capacity of domestic coal is 11.5 GW (1259 of total installed capacity 90.4 GW).
For detailed information about the electricity sector in Turkey, please visit: https://www.enerji.gov.tr//File/?path=ROOT%252f1%252fDocuments%252fAnnouncement%252fInvestor%25e2%2580%2599s%2bGuide%2bfor%2bElectricity%2bSector%2bin%2bTurkey%2b.pdf&version1%2c00
Source: Ministry of Energy and Natural Resources of Republic of Turkey / link: https://www.enerji.gov.tr//File/?path=ROOT%252f1%252fDocuments%252fAnnouncement%252fInvestor%25e2%2580%2599s%2bGuide%2bfor%2bElectricity%2bSector%2bin%2bTurkey%2b.pdf&version1%2c00
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