The world’s first hybrid combined-cycle power plant, developed by General Electric and California-based eSolar, will not be built in the US or Europe. Instead, MetCap Energy Investments is launching the groundbreaking €450m project in the central Turkish province of Karaman. Revolutionary technology that combines natural gas with wind and solar power will fire the 532-MW plant, playing a part in the Turkish government’s target to generate 30% of electricity from renewable energy by 2023. The bulk of that – 36,000 MW – is to come from hydropower, while 20,000 MW will be from wind. The rest of the mix is 3000 MW solar, 600 MW geothermal and 2000 MW biomass. Turkey, the world’s 23rd highest carbon emitter, releases 2.8m tonnes of greenhouse gases each year. “Emissions in Turkey have almost doubled since 1990,” according to a 2010 European Environment Agency (EEA) report. “The increase has been driven by economic development, which resulted both in increasing energy demand and energy production.”
ENERGY BILL: Besides environmental concerns, the government is desperate to reduce its energy import bill, which is expected to hit $68bn in 2012, an increase of about 25% from 2011, according to the International Energy Agency. Turkey imports more than 90% of its natural gas, which fires about half of its power plants. Using plenty of wind, solar and geothermal makes economic sense. Hydro potential is 433 terawatt hours (TWh), almost 1% of the world’s capacity, and wind capacity is seen at 120 GW. Turkey has biomass reserves of 32m tonnes of oil equivalent, and geothermal potential has been estimated at 38 GW. The potential solar thermal energy is estimated at 26.4m tonnes of oil equivalent, while solar photovoltaic (PV) has the potential for 8.8m tonnes of oil equivalent. So far, that potential is not being tapped. Of the country’s 47 GW of total installed capacity, about 20% comes from hydroelectricity, while only 1% comes from other renewables, despite having the world’s third-highest installed solar thermal capacity. “The support for renewables has varied depending on the segment. Currently, hydropower is garnering the greatest support with the government’s feed-in tariffs,” said Aygen Yayıkoğlu, managing partner at private-equity firm Crescent Capital.
GONE WITH THE WIND: However, the past five years have shown relatively strong growth in renewables, despite regulatory uncertainty and limited government support for the industry. As recently as 2006, for example, Turkey had only 50 MW of installed wind power capacity. Growing private sector interest increased this figure to 458 MW by 2008 and 1329 MW by 2010. Still, delays in obtaining permits held back the industry.
In response to a 2007 call for applications, 751 proposals for wind projects totalling 78 GW were submitted in a single day. However, the overlapping nature of most of these applications required the Energy Market Regulatory Agency to hold individual tenders in areas with more than one proposed project. This led to significant delays, with the first permit approval issued in May 2010, and setting the stage for 66% growth in installed capacity that year.
At the same time, the government issued licences without verifying whether the bidders could actually pull off projects, said Ahmet Ümit Danışman, CEO of Akenerji, which is part-owned by Czech utility CEZ and is one of Turkey’s largest private power producers. Renewables make up 46% of Akenerji’s electricity generation, and although only 2% is from wind, the company purchased the output of Polat Enerji’s 128 MW of wind power in 2010.
“While the initial cost is high, over the long term, wind is a significantly more cost-effective option than natural gas,” said Zeki Eriş, CEO of Polat Enerji. “If the true cost, in terms of infrastructure, were calculated into the cost per KWh of natural gas, the grid-parity price for wind would look much more appealing.” According to Eriş, the government could boost investment in renewables by privatising BOTAŞ and phasing out natural gas subsidies, as well as committing to develop wind and solar energy.
The government has acted to provide financial support for renewables, but not nearly as strongly as green power advocates would have hoped. Parliament first passed legislation introducing feed-in tariffs in 2004, but the incentives for renewables were minimal. The price for energy generated by photo-voltaics and wind power was set at $0.07 per kWh, which significantly lagged European competitors. Moreover, the price was lower than that paid for natural gas facilities, and renewable producers could sometimes get better prices by negotiating directly with power consumers and utilities. New tariffs passed in late 2011 will boost the rate to $0.13 per KWh for solar and waste-to-energy projects.
The price of hydroelectric power will be set at $0.105 per KWh, while wind will remain at the $0.073 per KWh rate. Renewable power sources will also be privileged in utility purchasing, and the state-run grid is required to build the infrastructure to connect new power stations. The increase in prices in particular should help the fledgling renewable industry, especially after European countries like Germany moved to cut their tariffs to save money. Minister of Energy Taner Yıldız has said that government incentives and support will attract $30bn of investment to build wind power capacity alone. However, many in the industry are concerned that the tariffs are still too low. Even after Turkey’s rate hike and Germany’s cuts, Turkey’s tariffs are still lower.
At the same time, the new law may act as a stimulus of the local component manufacturing industry, as it guarantees up to $0.067 in tariff support for projects that use domestically sourced materials. This may help address the high cost of importing kit, which Danışman identified as an obstacle to further adoption of green tech. “The manufacturing of equipment locally should be encouraged. This is a long-term business, and if the manufacturing base were here, this would help to bring down the current-account deficit,” Danışman told OBG.
The 365 residents of the village of Akbıyık in northwest Turkey think wind is a better deal. After power to the village was cut off over an unpaid 33,000 TL (€14,025) electric bill for a vital reservoir pump, the community decided to generate its own power and received state funding to build a wind mill that can produce 50 KWh of power, Sabah newspaper reported. Soon Akbıyık will produce a surplus of wind villagers plan to sell back to the government grid.
HERE COMES SUNSHINE: Hydro power, and to a lesser extent wind, have a big head start, but a lack of support has held back the Turkish solar industry in the past. Solar thermal is a common method of heating, with cheap rooftop systems a common sight around Turkey. But photovoltaics have struggled to gain traction, with just 1 MW of electricity-generating solar systems installed. The 2011 revisions to the Renewable Energy Law mark a pivot toward solar, finally establishing an above-market price for PV electricity. The government estimates that investments under the new law could total $2.8bn. However, the decision to limit solar projects to 600 MW until 2013 has upset some in the private sector, who feel that solar has even higher potential.
Private projects have filled the gap somewhat, with recent announcements such as the collaboration between Germany’s Gehrlicher Solar and Turkey’s Merk Solar Energy to produce solar power in Turkey. 2011, meanwhile, saw US-Dutch solar company GiraSolar declare its intention to build Europe’s biggest photovoltaic power station in Turkey, producing 100 MW of power, according to Turkish daily newspaper Hurriyet. GiraSolar also plans to make solar panels for export to Europe.
At 8.2m sq metres, Turkey leads the world in installed solar panels. Domestic solar manufacturing is thriving, with around 100 companies producing 750,000 square metres of panel per year, helped by Chinese technology to now make cheap polysilicon, a key component of solar panels.
GEOTHERMAL: Turkey is the fifth-richest country in the world in geothermal energy potential. Its supply of thermal energy trapped beneath the Earth’s crust could eventually produce some 800 MW of power and 22,000 MW of direct-use heating, InsideClimate reported. The government has tendered three geothermal fields for $95m and plans 29 more.
Turkey’s declared targets for alternative energy are ambitious and may be elusive as the natural-gas sector is liberalised and global gas prices fall. Moreover, despite recent regulatory changes, there is a sense that the government’s commitment to promoting renewables does not match its promises. But opportunities for entrepreneurs are plentiful in the renewables market. Those who want to can take advantage of domestic manufacturing capabilities, cheap labour costs and a country hungry for more power.
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