Power in Turkey is currently mainly generated by thermal power plants using fossil fuels (coal, lignite, natural gas and fuel oil), although there are geothermal and hydro power plants. In a bid to reduce its reliance on fossil fuels for energy generation, Turkey’s Energy Market Regulatory Authority (EMRA) has progressed the enactment of a Law On the Use of Renewable Energy Resources for the Generation of Electrical Energy - the “Renewables Law”.
In line with its new energy strategy, Turkey also announced last year that it would sign up to the Kyoto Protocol, and thereby commit to cutting its greenhouse gas emissions and to promoting clean technology through the Clean Development Mechanism (CDM) stipulated in the Protocol.
The development and use of renewable energy sources and technology is becoming increasingly vital for the sustainable economic development of Turkey. To date, the most significant developments in renewable energy production have been seen in wind, hydropower and geothermal sectors. In addition to these, however, Turkey also has considerable potential for developing solar energy.
Turkey lies in a sunny belt between 36º and 42ºN latitudes. Average annual solar radiation is 3.6 kWh per square metre per day with approximately 2640 hours of sunlight a year - sufficient to provide adequate energy for solar thermal applications. However, despite this huge potential, solar power is not yet widely used other than for flat-plate solar collectors which are used for domestic hot water production in the coastal regions. In 2004, about 8 million square metres of these solar collectors were produced. It is estimated that the total solar power production in the country currently stands at about 0.290 mega tonnes of oil equivalent (Mtoe). The amount of sunlight that Turkey receives annually is equivalent to approximately 11 thousand times the actual amount of electricity generated from solar power in the country in 1996. Clearly, both photovoltaic and solar-thermal systems could be used to great effect in Turkey. The total solar power potential of Turkey is calculated as 35 Mtoe per year. Solar energy production is expected to reach 602 kilo tonnes of oil equivalent (ktoe) by 2010 and 1,119 ktoe by 2020.
Turkey has not been optimising this solar potential for commercial purposes due to the high investment costs involved in this form of energy generation. According to EMRA’s latest figures, the investment cost for a solar field is $3,360,000 per MW. This figure is relatively high compared to other methods of renewable electricity generation systems (e.g. the investment cost for wind power is approximately $1,760,000 per MW). However, the high investment costs are unlikely to prevent future investment in solar. There is a ongoing power supply shortfall in Turkey which is likely to continue for some time to come. According to estimations of the Turkish Government, the industry requires $30 billion dollar of investment over the next 11 years to 2020 to meet demand.
To diversify its generation portfolio and to increase the ratio of renewable generation, the Turkish Government is likely to provide incentives for new entrants to the solar energy market by the end of this year. These could be either through long term power purchase agreements or price incentives (e.g. a feed-in tariff). EMRA will start accepting licence applications for solar power projects shortly after the regulations setting out such incentives are announced. We believe that the EMRA will receive just as many applications as it had for wind farm projects in the past. It is likely that, due to the high investment costs and a lack of local know-how, many Turkish applicants will seek to enter into consortia with financially strong foreign partners who have know-how and expertise in this field.
Solar power is likely to become a highly important sector in Turkey. If so, there will be significant opportunities for foreign investors to participate, both as foreign direct investors and as partners with local companies.