With far-reaching benefits and incentives designed to encourage private sector involvement in the sustainable energy segment being made available, Turkey’s plentiful renewable resources are hoped to reduce dependence on imports to meet domestic demand.
The Turkish energy sector is complex, with the country largely reliant on imports of oil and gas to meet a domestic demand which has increased over the past couple of decades in parallel with substantive economic growth. At the same time, its strategic location between power hungry European markets and the world’s most important oil and gas producers has made it a crucial transit hub for these supplies. Dependence on imports is a concern for state policy-makers, and the challenges of providing sufficient electricity for the nation has been dealt with under the incumbent government by introducing a fully privatized model. Distribution is now totally in the hands of the private sector, while power generation will, over the short term, be privatized in line with the broader liberalization strategy being implemented at present. In recent years, the possibilities offered by renewable energy sources have emerged as an increasingly auspicious alternative to traditional fuels, and the segment has begun to attract serious interest from potential investors.
Turkey has ample sustainable resource potential, with latent solar, wind, hydro, geothermal, and biofuel potential at hand for exploitation. Though these avenues have not yet been explored fully, the prospect of direct investment in the field has encouraged observers to begin seriously considering these options. Since 2005, incentives have been made available through official regulations, beginning with the promulgation of the “Law on Utilization of Renewable Energy Resources for the Purpose of Generating Electrical Energy.” Regrettably, feedin tariffs, or cost-based payments for firms generating renewable energy, remained low, and substantial advances in the development of the segment were not made until after 2010. In December of that year, an amendment to the law was introduced which applied the appropriate policy mechanisms to certain sustainable technologies, and started to stimulate genuine interest in both Turkish and international circles. These incentives have been put in place for a decade, and will be revised in 2020.
The tariffs applied vary from technology to technology. Hydroelectricity nets 7.3¢ per kWh, as does wind energy, while biomass and solar projects earn incentives of 13.3¢ each. Geothermal projects gain 10.5¢ per kWh. The more interest the government has in encouraging the exploitation of these particular energy sources, the higher the value of the incentive. Additional motivation is provided for producing energy using local input and locally manufactured products in the construction and operation of the plants. This latter aspect of renewable energy policy is important not to overlook, and goes hand-in-hand with separate efforts by the state to reduce carbon emissions, increase generation and transmission efficiency, and introduce more environmentally friendly and low energy technology for waste processing and other public services. These attempts to increase electricity efficiency and source more energy from renewables have created a dynamic and competitive market and made Turkey an extremely attractive investment destination.
Advantageous regulations for investors in renewable energy are not limited to that, with comprehensive price and completion guarantees offered as well. Interested parties will also gain from the more general inducements made accessible to foreign investors in Turkey. These range from VAT exemptions on imported and locally sourced equipment, reduced tax deductions on income based on the size of the investment, interest rate support on investment loans for project decade, the 2023 Vision, the year in which the country’s centenary will be celebrated, ambitious targets have been set for the energy sector and for the contribution of renewable sources to the mix. The total installed power capacity is expected to increase to 120GW, an enormous climb from the 31.84GW available in 2002 and the current capacity of around 70GW. The share of sustainable sources will be 30% if all goes to plan, and if sufficient levels of investor interest in private sector opportunities in the segment are reached. The main area being concentrated on is hydropower, but wind energy’s contribution will also be expanded to 20,000MW, while a lower objective of 5,000MW of solar energy and 600MW of geothermal energy will round out the combination of renewables. The opportunities presented by sustainable energy in Turkey are numerous, and with the government’s wide-ranging incentive program, it is the perfect time to explore the exciting possibilities on offer.