Turkish wind energy growing fast with feed-in-tariff in the pipeline

The Turkish Statistical Institute announced that the Turkish economy shrank 13.8% and that the unemployment rate increased to 14.9% in the first quarter. Despite these difficult economic conditions, the Turkish wind industry is still one of the fastest growing industries in the country. One reason is that Turkey may face electricity shortages in the near future, furthermore Turkey has just ratified [the] Kyoto agreement which is going to result in carbon emission reduction targets for the post 2013 period.

Among other renewable resources, wind has been the most popular and most approachable power source in the last four years. The use of wind power started around 1,000-1,200 AD in Anatolia, as early as in other European countries. However, Turkey’s development throughout the centuries has not been as fast as that of its counterparts. At the time when Turkey installed its first 0.5 MW wind turbine in Izmir in 1998, Germany had already installed almost 3,000 MW.

In 2005, the total installed capacity in Turkey was a mere 20.1 MW generated by 34 turbines. The market was simply not attractive to anyone until the Turkish Parliament passed the first Law on Renewable Energy Resources in 2005. The market more than doubled in 2006 by reaching 50 MW, than tripled to 147 MW by the end of 2007.

As of today, Turkey has almost 490 MW of installed capacity, and by the end of 2010 it is projected to reach 1,500 MW — around 3,5% of the country’s total energy capacity (Graph-1). The Turkish Electricity Survey and Development Administration (EIE) in 2007 developed the Turkish Wind Atlas, which served as a big eye-opener to all types of investors. The Market Authority EMRA has licensed 78 projects constituting 2,900 MW of capacity. There have been almost 78,000 MW of license applications, and lots of them are in the waiting list.

One of the main entry barriers for wind developers is the weakness of the national electricity grid. Although there are many projects in the pipeline, they cannot be realized unless they are feeding into the grid without causing frequency fluctuations and system instability. According to Eurelectric’s Power Outages 2003 study, wind power was one of the contributors to critical outages, and the country’s grid will require substantial investments in order to mitigate these outages in the future.

Another reason why Turkey lags behind is state incentives. Currently, the feed-in tariff for renewables is limited to 55 EUR/MWh. The new proposed amendment to the law would offer 80 EUR/MWh for on land wind power applications (Graph-2). The Parliamentary General Assembly is on summer leave until October (that’s right…) and has postponed review of the proposal to the fall — and it looks like a decision won’t be taken quickly. Although global turbine prices are lower than before, the wind industry still needs public incentives.

Up to now, Turkey has not been a significant wind turbine manufacturer. Enercon has a production line in Izmir and has been producing 0.8 MW turbines since 2005. Enercon and Vestas seem to be dominating most of the contracts in the Turkish market (Graph-3), but new Turkish players are making their way into the market. Soyut Enerji produces small-scale turbines, whereas Model Enerji, is going to be the first MW-level turbine manufacturer in Turkey.

Turkey is becoming more attractive as public incentive discussions are becoming popular and power prices keep rising. The electricity price for residential customers was at 19,4 kr/kWh (93,20 Euro/MWh) by April 2009 after an increase of 31% since last year. The next years are going to be exciting and full of opportunities for domestic and foreign investors. The Investment Support and Promotion Agency of Turkey has identified renewable energy as an attractive area for foreign investment and is a good point of contact for any foreign investor that wants to learn more about investment opportunities in the country.

[photo credit: tribalenfexion; data sources: GWEC, EWEA; graphs by author]