Turkey's renewable energy sector gets second wind

By bne IntelliNews March 11, 2011

David O'Byrne in Istanbul -

Fears that the development of new wind power projects in Turkey would grind to a halt due to the low guaranteed tariffs stipulated in Turkey's new renewable energy law appear to be overblown. Turkey's first tender for electricity grid access for new wind plants was completed in late February, with professionals from across the Turkish wind sector declaring the results a success.

The tender for grid access was necessary because of the huge number of applications for licenses to build new wind plants received in 2007 - over 780 applications to build a total of around 78,000 megawatts (MW) of new capacity. Many of these were competing for the same sites, and so for the same limited access slots to Turkey's underdeveloped national grid. In order to decide which plants could be built, Turkey's grid operator TEIAS was obliged to hold competitive tenders for developers to bid on what fee they would pay to get their electricity onto the grid. The first tender announced in January invited 27 developers to bid for 18 access slots for 12 regional substations with a total capacity of 686 MW.

Despite warnings the competitive process risked pushing up bids so high that wind power developers wouldn't get commercial credit to build their projects, the results were largely encouraging, with 17 wind farms totalling 636 MW awarded access to 11 substations.

With the basic feed-in tariff - a payment the state guarantees to pay for all the green electricity produced - set by Turkey's renewable energy law, which was passed in December, fixed at $0.073 per kilowatt hour (kWh), far lower than European norms of €0.08-0.09/kWh, many had feared that obliging developers to pay for grid access as well would render many projects unviable, even with the chance of extra tariff increments of up to $0.037/kWh depending on the use of locally manufactured components, such as turbines.

The results, though, were encouraging, with bids for 13 of the 17 winning projects coming in below 0.5 kuru/kWh (there are 100 kurus in TRY1) - a level that is equal to 0.31 euro cent and one that financiers at Turkish banks have confirmed to bne is low enough to ensure the companies would still be able raise capital to fund their projects. However, some speculate that many of the developers whose projects are feasible will opt to sell the licensed projects to bigger developers rather than develop the projects themselves - a perennial problem in the sector.

Big players

Also encouraged by the results is Erol Demirer, owner of Turkey's biggest wind plant operator Demirer Holding, who while pointing out that the feasibility of any project ultimately depends on the average wind speeds at each plant site, developers bidding 0.5 kuru/kWh should have viable projects, with those who bid up to 1 kuru/kWh also standing a good chance of having viable projects.

However, Demirer is still critical of the tender process, pointing to the result of the bids for one substation where one of two bidders opted to submit no bid, with the second bidding unnecessarily high at 1.79 kurus/kWh. "Essentially, all it does is take money away from the wind developers that they earn from the guaranteed feed-in tariff, and risks making some projects unfeasible," he explains.

Also critical is Christian Johannes of Ankara-based wind power consultancy Re-Consult, who points out that the three-year delay after the November 2007 tender meant that Turkey now has no way of meeting its planned target of 10,000 MW of wind power capacity by 2020. "Even if the rest of the grid access tenders go according to plan, there just isn't the available capacity to manufacture sufficient turbines to meet demand," he says.

That situation may change if international turbine manufacturers opt to begin production in Turkey - the aim behind the part of Turkey's renewable energy law that offers extra tariff increments for wind power producers using local machinery and parts. However, despite speculation of impending investment from several big name manufacturers including GE, as yet none have announced any firm plans to invest.


That may change, however, if grid operator TEIAS can continue to successfully complete its grid access tenders.

While Turkey may only currently have 1,400 MW of operating wind plant, another 2,000 MW had been licensed before the 636 MW of new plant that will be licensed after the February tender.

Two more tenders slated for the end of March will offer a further 785 MW, with one tender slated for March 29 inviting developers of 11 planned wind plant to bid for five access slots totalling 281 MW and one for March 30 seeing 26 developers competing for eight slots totalling 504 MW - for which bidders include Spain's Iberdrola and major Turkish players Turcas and Zorlu Enerji.

And with around another 7,000 MW of grid access still to be offered and developers looking for locally made turbines to allow them access to increased feed in tariffs, turbine manufacturers may yet find the Turkish market too lucrative to avoid.

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