Turkey’s Alternative Energy Potential Needs to Get Unblocked

Turkey’s alternative energy potential is huge, but it remains locked – at least so far. Earlier this month, Ankara hosted the International Energy Congress on Renewable Energy where the Turkish energy sector was the main discussion point. The congress attracted a record number of participants from public and private sectors, including the Turkish Minister of Energy and members of the country’s Parliament. It was once more observed that the potential of investments in Turkey is by far exceeding the enthusiasm of the bureaucrats and the readiness of the Turkish infrastructure.

Currently 650 MW of wind capacity are installed in Turkey and 40 MW of geothermal capacity. Turkey is utilizing its geothermal resources mostly in the tourism sector. Turkish Hydro power capacity totals almost 14,000 MW. The Turkish solar thermal market is a mature market with 12 million sq-m of collector areas, however the solar PV industry is still at a crawling stage in this sunny Mediterranean state. The potential of all these Turkish renewable resources is very high, and Turkey could be a role model for other countries in the region. Even while investors are aware of the huge potential, legislation and feed-in-tariff incentives are lagging and infrastructure is not developing quickly enough.

The Renewable Energy Law, passed in 2005, was the first step towards utilizing Turkey’s own resources. Renewable energy resources, including hydro power, were seen as an important but not urgent alternative to the country’s dependency on foreign gas. Turkey uses 50% of total imported gas for 45% of the country’s total electricity production and the other 50% in industry and residential heating.

The amendment to the law in May 2007 secured a constant purchase price for all types of renewable sources. In November 2007, the market authority opened its doors for new wind project license applications. At that time, the total wind capacity was 143 MW, but in just one day 75,000 MW applications were registered, most of them being multiple applications on the same location, and some of them in unrealistic if not impossible locations.

The evaluation of these applications continues. The market authority has succeeded in reducing the number of eligible applications to 29,000 MW, but apparently infrastructure constraints in transmission lines limit the practical capacity to 7,500 MW. In order to further reduce the number of applicants, it is expected that a wind competition for recurring license applicants will be held this year, while asking for a wind energy contribution fee for 20 years.

On the other hand, an amendment to the renewable energy law regarding feed-in-tariff incentives still has not materialized. As I have discussed earlier on CleanTechies, the amendment was supposed to pass the National General Assembly last June, but it was suspended to reconsider purchase prices due to the fact that it would create an extra burden on the treasury. During the Energy Congress, it was understood that the solar PV industry still has a long way to go before it will get attractive incentives, and Turkey wants to take more cautious steps after having overburdened itself in the wind energy industry.

Despite the financial crisis which resulted in an estimated contraction of 6.5% of the Turkish economy and almost a 5.2% decrease in electricity consumption compared to last year, investors are not losing their interest in the sector as electricity prices are increasing. A supply shortage was postponed due to the decrease in demand but residential prices have increased 72% in only 22 months since the beginning of 2008.

It is now evident that dependency on foreign resources, lobbying investors and increased private interest in energy will force Turkey to make renewable energy a primary target within the next three years.

[photo credit: Flickr]