Turkey looks to solar, but problems remain

23 November 2016
17 November 2016, Week 45, Issue 6078

Turkey's new energy strategy, targeting the development of domestic resources over imports, should be good news for the country's nascent solar power sector, but a combination of bureaucratic inertia and increasing political risk still threatens to stall growth, reports David O'Byrne from Ankara

WHAT: Turkey is prioritising development of domestic energy resources, including solar power.

WHY: Figures in the renewable energy industry, however, warn that Ankara will need to do more to support projects and improve legislation governing the sector.

WHAT NEXT: Solar power has potential in Turkey, but hefty costs and high political risks may see investors turn their attention elsewhere.

The news that Turkey will change its energy strategy should have been welcomed by Turkey's nascent solar power sector.

With plans to prioritise the development of domestic resources to meet the bulk of the country’s power needs, the country intends to move away from imported gas. The sector should also have been buoyed by the recent announcement that the government will launch a tender for the development of a 1-GW solar plant, and a domestic photovoltaic (PV) panel production facility to supply it. As well as local demand, these could even be exported to regional markets.

Yet speakers and panellists at the Energy Is Future international energy congress held in the Turkish capital Ankara last week begged to differ, instead warning that without major changes to the current guaranteed feed-in tariffs (FiTs), the attendant regulatory environment and the existing grid structure, Turkey would struggle even to meet its own modest targets for solar power development.

The country, they warned, is already between five and 10 years behind India in its solar power development and without major changes will be unlikely to meet current official targets of 5 GW of solar capacity by 2023.

The scale of the problems faced by the sector is made clear in the official statistics produced by state grid-operator TEIAS. Despite comparatively generous FiTs of US$0.133 per kWh, development of solar generating capacity has been restricted to small schemes.

Although the past three years have seen no less than 862 plants being commissioned, all bar one are “unlicensed” plants of 1 MW or under which can be developed without the need to go through the process of regulation and licensing by state energy regulator EPDK.

That regulatory process has to date only resulted in one 8-MW plant being commissioned, one other scheme of 4.9 MW being awarded a generating licence, and 27 projects totalling 297 MW being granted pre-licences. This entitles them to receive a full licence when the developers have demonstrated that they have secured finance for the project. No further licence applications are currently being processed.

According to delegates at the EIF conference this unbalanced development is the result of a combination of factors. These include a complex licensing process which makes it both difficult and expensive for projects of over 1 MW to transit this procedure within a reasonable time. In addition, delegates explained that developers face further delays and expense obtaining clearance from local authorities and other public bodies before new plant can begin generating.

Failed legislation

Further criticism was levelled at the legislation governing the sector, which delegates complained had been aimed at the development of larger “solar farms,” situated on open land and connected to TEIAS transmission grid.

They pointed out that as most projects developed to date were small, the legislation had clearly failed. This is further exemplified by the fact that developers have found it all but impossible to develop smaller rooftop solar installations, which would feed in to local distribution grids or use local storage, allowing developers to supply “off-grid” power to local buyers.

Given the right legislation and infrastructure, rooftop generation could add up to 1 GW per year of new capacity, one speaker said.

The point that was echoed by Birol Erguven, CEO of Limak Enerji, one of Turkey’s biggest power generation and distribution companies, who called for new legislation to provide incentives for regional power distributors to work together with solar power generators to provide local sales and storage through their distribution grids.

Without a major overhaul of the licensing and regulation, delegates warned, Turkey will fail to take full advantage of its solar potential.

Further criticism was aimed at the tariffs offered to developers – albeit not the US$0.133 figure but the period over which they are offered.

According to Yagmur Ozdemir, deputy CEO of Zorlu Enerji, one of Turkey’s biggest renewable energy developers, the cost of project finance for solar developers in Turkey is far higher there than in Pakistan, despite the latter’s far higher risk profile.

The difference, he said, is that Pakistan offers solar power tariff guarantees for 25 years against only 10 for Turkey, with the shorter guarantee, coupled with the current lack of legislation permitting solar power generators to supply local customers outside the main transmission grid raising the risk that developers may not be able to recover development costs.

Feasibility under fire

Turkey's planned tender for a 1-GW solar farm and development of a panel manufacturing facility also came in for extensive criticism. The first concern is that details of the project, for which a tender will be opened in December, are scant.

What has been confirmed is that the 1-GW facility will be developed at Karapinar, near Konya in southwest Turkey, and that the winning bidder will need to develop its own factory to produce silicon PV cells, as well as the full panels into which they will be fitted. 

Speakers warned that linking the development of the plant to that of a PV production facility risked stalling the project.

International PV cell production has long been dominated by highly experienced Chinese companies. Speakers warned that Turkey was already too late to compete in what is a very complex market. While Turkey does have companies able to supply silicon to make the cells, the quality is currently too low for PV production and none has the capacity to supply the volumes required for a 1-GW plant.

Increasing quality and expanding capacity would be risky, they said, given that the resulting facility would find it very difficult, if not impossible, to compete with imports in both the local market and in other regional markets which the government wants to see the facility able to supply.

While speakers broadly approved of the ambition of the planned 1-GW scheme, further criticism was levelled at its scale. While Turkey has 20-30 EPC companies capable of taking on the design and installation of solar farms, the small scale of projects developed in Turkey so far means that none has any experience of executing larger projects. Without sufficient qualified and experienced engineers and technicians, they said, the development of the project would be slow, and if it went ahead, would necessarily slow development of other projects across the country. 

Country risk

Even leaving aside these bureaucratic and structural issues, with Turkey’s focus so firmly on exploiting its domestic reserves and on reducing its independence on imported energy resources, observers could be forgiven for thinking that ultimately solar power development has a bright future.

As ever in Turkey, nothing is that simple. On the day when Turkish police arrested the leaders and senior deputies of Turkey's second biggest opposition party, and only days after senior editorial staff from one of the country's few remaining independent newspapers were also detained, one leading solar power developer told NewsBase of his own reservations. 

The past year has seen a failed military coup followed by the arrest of upwards of 120,000 people as well as exacerbation of what is increasingly being viewed as a civil war in the southeast of the country, and the intensification of civil wars in neighbouring Syria and Iraq – both of which threaten to spill back across the border into Turkey, he explained.

“Finance costs are high because the risks are high. So high, that if I had my own money to invest I would look outside Turkey,” he said. Other investors may well feel the same.


Edited by

Andrew Dykes


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