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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Turkish Economy Minister Nihat Zeybekci, drew attention to the significance of the agreement signed between Turkish and Italian Eximbanks as well as the need of new trade volume target. DEİK and its Counterpart Confindustria will establish a joint platform to seize business opportunities and to boost trade volume from 18 billion USD to 30 billion USD.
Renewal of Turkey- EU Custom Union will contribute significantly to EU and trade volume will increase by 55-60 percent. Turkish and Italian business communities will benefit from the renewal and he announced that Turkish Trade Center will be established in Italy in 2017. In the sectors of tourism and energy two countries complete each other; furthermore, new investments are kicked out in the energy sectors.

Italian Economic Development Minister Carlo Calenda, stated that Turkey can always trust Italy in the matters of EU, furthermore, during the Custom Union renewal Italy will act as supervisor and will follow up the procedure. Turkey shouldered great responsibility regarding illegal migration and Calenda thanked Turkey for its great efforts. The agreement between to Exim Banks will accelerate investment and necessary studies will be carried out to correctly inform and guide investors.
Italian Economic Development Minister Carlo Calenda expressed that Turkey and Italy are stronger in different countries of Africa and partnership efforts should be accelerated. Turkey and Italy do not only have economic interest, as a result, their partnership will be very fertile.

DEİK President Ömer Cihad Vardanstated that Turkey and Italy is in a great harmony and synchronization. In the past two years trade is declining between two countries, thus, business communities from both countries should expand this volume as soon as possible. Italy has chosen Turkey as a “Target Country” and this is very important for Turkey, as a result, many new partnerships will be established in the sectors of energy, agriculture, automotive, food, start-ups, innovative technology and renewable energy.
Turkey-EU Custom Union negotiations will start soon and DEİK hopes that Custom Union will be completed soon addressing many chronicle problems between Turkey and EU. Turkey hopes for permanent solutions to chronicle problems such as transportation quota, driver license, Visa practice to Turkish citizens. Business communities of Turkey and Italy can do much greater projects than today via joint projects.

DEİK/Turkey-Italy Business Council President Burak Vardanindicated that opportunities in both countries should come to live. Both economy complete each other, thus, project in third countries should be initiated. Partnerships in the field of health, infrastructure and energy would be beneficial for both countries. “To be a key player in the global economic arena, both countries should form partnerships not only in Italy and Turkey but in Africa, Iran, Middle East and Central Asia”.

Turkey-Italy Trade Figures (Ministry of Economy-2016)
Turkish export to Italy: 7.5 billion USD
Main export items: Automobile, motor vehicles, crustaceans, parts and components for land vehicles, iron-steel
Turkish import from Italy: 10.2 billion USD
Main import items:Parts and accessories for land vehicles, petroleum oils, diesel, semi-diesel engines, motor vehicles
Trade Volume: 17.8 billion USD
Trade Balance:2.6 billion USD in favor of Italy

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.