FLANDERS INVESTMENT & TRADE MARKET SURVEY

Transcription

1 B A W E N E R I Y G R E N E LE Y E K R U NT FLANDERS INVESTMENT & TRADE MARKET SURVEY

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3 RENEWABLE ENERGY IN TURKEY December 2014 Prepared by: Ezgi Çeri Fidan, Trade Consultant, Flanders Investment & Trade, Istanbul office Edited by Raphael Pauwels, Trade Commissioner.

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5 Content Table of Contents Content... 3 List of Tables... 4 List of Figures Introduction Turkey's Dependence on Imported Energy Renewable Energy in Turkey The Renewable Energy Market in Turkey Hydroelectric Energy in Turkey Wind Energy in Turkey Solar Energy in Turkey Geothermal Energy in Turkey Biomass Energy and Biofuels Renewable Energy Policies and Regulations in Turkey Common Laws & Regulations for Renewable Energy Generation: Public and Private Incentives for Renewable Energy Projects Air Quality & Greenhouse Gas Emission Control Energy Efficiency Selected Sector Related Fairs Sector Establishments and Institutions Selected Sector Related Associations Sources Renewable Energy in Turkey December

6 List of Tables Table 1: Feed-in tariffs in Turkey... 9 Table 2: Top five countries; annual investment / net capacity additions / production in Table 3: Renewable energy potential in Turkey Table 4: Solar water heating collectors global capacity and additions, top 12 countries, Table 5: Feed-in tariff for renewables Table 6: Legislation directly related to climate change adaptation List of Figures Figure 1: Total energy imports of Turkey... 7 Figure 2: Current account balance excluding energy imports... 8 Figure 3: Installed capacity by resources, Figure 4: Total installed power in Turkey, Figure 5: Wind power installed capacity in Turkey Figure 6: Solar water heating collectors global capacity, shares of top 10 countries, Figure 7: Solar water heating collector additions, top 10 countries for capacity added, Figure 8: Highest installed geothermal capacities in EU Figure 9: Geothermal power capacity additions, share of additions by country,

7 1 Introduction This report analyses the development of the renewable energy sector in Turkey, its current situation, strengths and weaknesses. We hope to shed some light on where and how Flemish companies can find business opportunities in this bourgeoning sector in Turkey. Turkey has big ambitions in renewable energy, and it is very well positioned thanks to its natural assets : sunshine, wind, rivers... And, apart from hydropower, the whole field of renewable energy in Turkey is still very young, younger than it is in Flanders or the rest of Western Europe. This means there's still a lot of growth in this domain to be realised in coming years. Which offers a nice perspective to companies from Flanders: they can find a new market in Turkey for their products, services, experience and knowhow developed over the past decades. There are opportunities for developers of wind, solar, biomass or other power projects, for suppliers of technical components or complete installations, for products and materials that enhance the energy efficiency - and the 'green' character - of buildings, for engineering knowhow for the so-called 'smart grid', and for other kinds of consulting. In order to set the background, it must be mentioned that Turkey is heavily dependent on its neighbouring countries for its energy needs, as shown in its elevated oil and gas imports. It is especially dependent on Russia for natural gas. National and international energy policies play a very important role in regional and global power equilibriums and their importance is increasing. In this respect, diversification of energy resources and their transportation routes, efficient use of local resources and the use of existing energy resources with various technological and strategic practices in the most efficient way possible, are necessary in order to improve energy security and reduce dependence on foreign energy sources. In recent years, growing volatility in global crude oil markets and concerns over climate change have become major challenges all over the world. In this regard, energy is considered as a key issue for sustainable economic development. As in many countries, energy is one of Turkey s most important issues for economic growth and social progress. The Turkish economy has been rapidly growing during the past decades. Turkey also faced a rapidly growing demand for energy in the last two decades. Primary energy demand is projected to reach 220 Mtoe (millions of tonnes of oil equivalent) in 2020 which means a 92 percent increase from the current level (114.5 Mtoe). It is estimated by the International Energy Agency (lea) that Turkey will likely see the fastest medium to long-term growth in energy demand among the IEA member countries. It is estimated that total final energy demand and the total primary energy demand will more than double and reach annually and Mtoe respectively by It is also estimated that electricity, natural gas and oil demand will reach billion kwh, 59 BCM (Billion cubic metres of natural gas) and 59 million tons respectively. In order to meet such an immense growth in energy demand, huge levels of investment are required in all three sectors alike. To meet the growing demand in the coming years, the power plant capacity needs to be increased from 63,620 MW in 2013 to around 100,000 MW in According to the Turkish Ministry of Energy this will require investments of around USD 130 billion. Renewable Energy in Turkey December

8 It is estimated that USD 33 billion will go to hydropower, USD 30 billion to wind and solar power plants, USD 21 billion to coal-fired and nuclear power plants, USD 7 billion to gas power plants, and USD 18 billion on expanding, improving and adapting the "grid" (electricity distribution). Turkey is extremely foreign-dependent in energy. In 2013, crude oil and natural gas imports reached USD 36 billion, together with coal, refined oil products, and lignite, these imports had reached USD 5.9 billion and constituted 22 percent of the total USD 252 billion in imports. While these sectors exported USD 8 billion, their net imports totalled USD 47 billion. If we take the average of the five years between 2009 and 2013, then the average is around USD 42.5 billion. The bill is rising with each passing day. Turkey s energy strategy is multi-dimensional. It strives at diversifying its energy supply sources and routes, as well as its energy basket by increasing the share of the renewables and adding the nuclear energy. Having a substantial potential for renewable energy resources, Turkey ranks seventh in the world and first in Europe in terms of geothermal energy. Turkey also aims at further increasing its use of hydro, wind and solar energy resources. Turkey envisages producing 30% of its electricity need from the renewables by Turkey has participated in the Founding Conference of the International Renewable Energy Agency (IRENA) on 26 January 2009 in Bonn and has signed the statute of IRENA. Therefore, Turkey has become one of the founding members of IRENA. 1 Turkey has a substantial amount of renewable energy potential and the utilisation rates are growing. Hydro, wind and solar energy resources are the major portions of its renewable portfolio. The aim of this report is to examine the current situation and potential of renewable energy in Turkey. Ezgi ÇERİ FİDAN Administrative & Commercial Assistant 1 Ministry of Foreign Affairs Energy Report 6

9 2 Turkey's Dependence on Imported Energy Before we delve into the analysis of Turkey's situation in the area of renewable energy, it is useful to take a quick look at the general "energy picture" of Turkey. First thing to note is that Turkey is highly dependent on energy imports. In 2013 some 73 percent of the country's energy needs were covered by imports. According to the data from the Turkish Petroleum Corporation (TPAO); Turkey's oil import dependency ratio is 90.4% and dependency ratio for natural gas import is 98.5 %. In 2013, Turkey's crude oil import dependency was satisfied by the following three countries; Iraq (32%), Iran (28%) and Saudi Arabia (15%). In accordance to the embargo against Iran in 2013, there have been important changes in the share of countries where crude oil was imported. Iran's share of 51% in the year 2011 has been gradually reduced to 39% in 2012 and 28% in On the other hand, Iraq s share in this regard has been increased to 30% from 10%. In terms of natural gas imports; Russia ranks first place with 58% share, this is followed by Iran at 19% and Azerbaijan and Algeria both at 9%. According to data from the Turkish statistical institute for 2013, USD 55.9 billion of Turkish imports were in the "energy" category. That is 22% of the country's total imports of USD 252 billion. Figure 1: Total energy imports of Turkey The huge energy bill is the main factor in Turkey's total trade deficit. In fact, excluding energy imports, Turkey managed to have a trade surplus in a number of recent years, as can be seen in the graph here below. Renewable Energy in Turkey December

10 Figure 2: Current account balance excluding energy imports 8

11 3 Renewable Energy in Turkey 3.1 The Renewable Energy Market in Turkey Turkey s economic and social development has led to a massive increase in demand for electricity over the last decades. Economic growth, an increase in income per capita and rapid urbanisation are the primary causes of the increasing energy demand in Turkey. The Turkish Electricity Transmission Company (TEIAS) estimates that demand will increase by 6 % to 7% annually until Since the country has no major oil or gas reserves, it is highly dependent on energy imports and is exposed to energy insecurity in the future. But Turkey does have huge potential for renewable energy exploitation. There has been a huge growth in the construction of wind power plants and small hydropower plants in recent years. To meet the growing energy demand, the Turkish Government has adopted incentives for investments in renewable energy production. Most crucial are the so-called "feed-in tariffs", which are available for 10 years from commissioning of the renewable energy plant. A feed-in tariff is the price paid to a (small or large scale) producer of renewable energy when he puts his generated energy on the national "grid" (network). In Turkey the feed-in tariffs (FIT) have two components: one is the 'basic' tariff for the electricity produced, the other one is a kind of 'bonus' in case that electricity is generated using equipment/components/technology produced in Turkey. Table 1 shows the current FITs (that Turkey officially states in USD per MegaWatt hour): Table 1: Feed-in tariffs in Turkey Note: 1 US Dollar is assumed to be equal to 2.2 TRY (Turkish Lira). Turkey's renewable capacity of 24,300 megawatts in 2013 is projected to reach 38,800 megawatts in In 2013 Turkey was in the world's top-5 in terms of capacity increase in certain domains of renewable energy, like geothermal power capacity, hydropower capacity, and solar water heating capacity, as Table 2 shows: Renewable Energy in Turkey December

12 Table 2: Top five countries; annual investment / net capacity additions / production in 2013 Turkey's 2023 energy goals * Turkey aims to add 50,000 megawatts to the currently installed power capacity of 68,236 megawatts by investing USD 122 billion by Turkey aims to reach installed capacity of 120,000 megawatts in nine years, according to the Energy Minister Taner Yıldız. * Renewables' share in electricity production is targeted to rise to 30 percent in 2023, according to the government of Turkish Prime Minister Ahmet Davutoğlu. * In accordance with the 2023 goals, wind power is projected to reach 20,000 megawatts, geothermal to reach 600 megawatts and solar to reach 3,000 megawatts. Figure 3: Installed capacity by resources,

13 For 2012, the installed capacity in renewable energy was as follows: Hydroelectric Dams 19,600 MW Thermal power plants 35,000 MW Geo Thermal 162 MW Wind 2,260 MW And at the end of April 2014 the total installed power in Turkey, was as indicated in Figure 4 here below: Figure 4: Total installed power in Turkey, Table 3: Renewable energy potential in Turkey Currently, various state-owned enterprises continue to dominate sub-sectors of the electricity market. For example: EÜAŞ ("Elektrik Üretim A.Ş., The Electricity Generation Company) is the largest electric power company in Turkey. It is controlled by the government, and it produces and supplies electricity throughout the country. EÜAŞ' total installed capacity represents 37.1% of the country s total. Another state company, TETAŞ (Türkiye Elektrik Ticaret ve Taahhüt A.Ş., Turkish Electricity Trading and Contracting Company) is responsible for the wholesale distribution of electricity in Turkey, as well as importing and exporting additional electricity resources. TETAŞ accounts for 50% of the overall electricity trade, including import-export activities with neighbouring countries 2 (. Thanks 2 TEIAS (Turkish Electricity Transmission Co.) Renewable Energy in Turkey December

14 to privatisation procedures organised in 2012 and 2013 the state currently has no share in local distribution activities anymore, while it was more than 50% in At the end of 2013, around 43.8% of electricity generation came from natural gas fired power plants, which made Turkey an import dependent country with regard to both natural gas and oil 4. To wrap up this chapter, we integrate two slides from a recent presentation by Turkey's Directorate- General of Renewable Energy, highlighting the "potential" and the targets to be reached by Energy Market Regulatory Authority, EMRA 4 TEIAS (Turkish Electricity Transmission Co.) 12

15 3.1.1 Hydroelectric Energy in Turkey Turkey s hydropower potential constitutes 16% of Europe s theoretical hydropower potential and 1% of the world s total As of January 2014, 458 hydroelectric power plants are in operation in Turkey, the total installed capacity of which is 22,804. The installed capacity of the projects realized by General Directorate of State Hydraulic Works is 12,295 MW. The total installed capacity of Turkey is 64,044 MW and it is foreseen to reach to a hydroelectric installed capacity of 30,000 MW in year Turkey has an economic capacity of 128 billion kilowatt per year of hydroelectric energy potential both from the public and private sectors. However, Turkey is using 36 percent of this capacity, currently generating 46 billion kilowatt per year of electricity from hydroelectric power plants. Especially the Black Sea region is rich in terms of rivers and altitude. Most of the Black Sea region is hilly which makes it possible to develop relatively higher heads without expensive civil engineering works. Therefore, relatively smaller flows are required to develop the desired power. In these cases, it may be possible to construct a relatively simple diversion structure and to obtain the highest drop by diverting flows at the top of a waterfall. There are intensive studies to improve the small and large hydropower development in Turkey. Turkey's geography, a rectangular plateau peninsula surrounded on three sides by seas, is highly conducive to hydroelectric power generation; Turkey has about 1% of the total world hydroelectric potential. There are many rivers in Turkey and five separate watersheds. The Persian Gulf watershed in eastern Turkey includes the Tigris River (known in Turkey as the Dicle River) and the Euphrates River (known in Turkey as the Firat River), which flow southwest into Iraq and eventually merge and empty into the Bay of Basra at the northern end of the Persian Gulf. The Aras/Caspian watershed in eastern Turkey includes the Aras River, which flows eastward and whose waters eventually empty into the Caspian Sea. The Black Sea watershed covers much of northern Turkey and includes Turkey's longest river, the Kizilirmak. The Mediterranean watershed covers much of Southwestern Turkey, where rivers either flow south to the Mediterranean Sea or west to the Aegean Sea. The fifth watershed covers the region around the Marmara Sea, which includes several smaller rivers. Hydropower is the most commonly utilized renewable energy resource in Turkey. According to the Ministry of Energy and Natural Resources forecast, Turkey s technically feasible hydroelectric potential corresponds to approximately 36,000 MW. Additionally, according to the General Directorate of State Hydraulic Works (DSI), Turkey has hydroelectric resources providing a potential 140 TWh of economic electricity generation. As of the end of 2012, installed hydroelectric power was at 19,609 MW which constitutes 54% of the abovementioned potential. In terms of generation, hydropower generation reached 57.8 TWh at the end of This data includes renewable and non-renewable hydro plants. It should be noted that according to the Renewable Energy Law only power plants with less than 15 km 2 of reservoir area and river hydroelectric power plants are considered renewable energy resources. In 2012, dams composed 75% of the installed capacity, whereas RORs (Run of River) accounted for only 25%. 5 5 Renewable Energy & Environmental Technologies Report by Deloitte, 2013 Renewable Energy in Turkey December

16 The Turkish Electricity Market Law no was published in March 2001 and has led to the establishment of the Electricity Market Regulatory Authority. Thus, the private sector has been able to obtain a licence granted from this authority to own, build and operate power plants. In Turkey, Environmental Impact Assessment (EIA) reports were not required for hydropower plants with installed capacity below 50 MW before 17 July But since then, the regulation states that hydropower plants having an installed capacity between 0.5 MW and 25 MW are required to undertake an EIA. Renewable Energy Law No applies to small hydropower or hydropower production facilities having a reservoir area less than 15 km 2 and makes no limitation regarding installed capacity. This makes the interest of private sector move towards large hydropower system for the potentially higher profits Turkish Legislation on Hydroelectric Energy The legal ground for hydroelectric power plants consists of the laws and regulations concerning the electricity market and renewable energy. First of all, an investor intending to operate a hydroelectric power plant shall consider two significant points: licensing procedures and incentives. Licence procedures of a hydroelectric power plant are performed under the conditions of the related laws and regulations on renewable energy and electricity market. It shall be considered that each electricity market activity may be operated with a related licence excluding unlicensed electricity manufacturing from renewable energy resources under the conditions which have been stated by the Electricity Market Law. Another significant question is whether the establishment and operation of hydroelectric power plants is subject to the incentives provided by the state. As is known, the investment incentives have been regulated by the related Decision of the Council of Ministers and a Communiqué which include the state s support measures such as tax reductions, tax exemptions and social security premiums support, depending on their regions and types Legal Exceptions If the generally accepted definition of renewable energy resources is considered, hydroelectric power is regarded as a renewable energy resource. However, for the Turkish Law on Renewable Energy Resources only a certain category of energy resources is regarded as renewable resources. The renewable energy resources covered by the Turkish Renewable Energy Law No (the Renewable Energy Law ) are wind, solar, geothermal, biomass, biogas (including landfill gas), wave, stream, tidal, river and arc type hydroelectric generation facilities, and the hydroelectric generation facilities with a reservoir area of less than 15 square kilometres Incentives for Investments in Hydroelectric Energy As mentioned above, investments in certain types of hydroelectric power plants can benefit from incentives which are provided to investors in electricity production from renewable energy resources. In the event that a hydroelectric power plant fulfils these conditions, this investment will be able to benefit from the following incentives and support mechanisms for renewable energy: Feed-in tariffs for renewable energy resources 6 United Nations Industrial Development Organization (UNIDO) and International Center on Small Hydro Power (ICSHP). World Small Hydropower Development Report

17 Financial support for local equipment used in the power plant Diverse financial supports of the state such as tax exemption or tax reduction depending on the scope and location of each project Licensing incentives especially with regard to the license fee Incentives in land allocation such as price reductions under certain conditions Priority for electricity manufacturing plants from renewable energy and local natural resources in connection processes The Pros and Cons of Hydroelectric Energy Compared to certain other energy resources, the most essential advantage of hydroelectric power is its (relative) harmlessness for the environment. Moreover, the power manufacturing costs are not high due to the inexpensiveness of water, its main resource. Such projects have longer life spans compared to primary energy resources. However, the investment costs of a hydroelectric power plant are high. According to the statistics, the theoretical hydroelectric potential of Turkey is 433 bn kwh, and 216 bn kwh is the technical available potential. Currently, there are more than 200 hydroelectric power plants in operation and a further increase of the number of hydroelectric power plants in Turkey in coming years is expected. 7 7 HERDEM Law Firm Renewable Energy in Turkey December

18 3.1.2 Wind Energy in Turkey An official target of 20 GW, a potential of 48 GW and installed capacity at slightly above 2 GW: the wind energy market offers tremendous opportunity Turkey intends to increase its wind energy capacity 16-fold to 20,000 MW by 2020 from 1,265.5 MW in 2010, despite some concerns over the inconsistency of power generation intensity, Turkey s Wind Power and Hydropower Plants Businessmen s Association said. The Ministry of Energy and Natural Resources in 2007 produced the country s wind energy map, showing areas of Turkey that are suitable for wind energy development. The provinces of Balıkesir, Çanakkale, İzmir, and Manisa in northwest Turkey, and Hatay on the Mediterranean Coast have the strongest and most consistent winds needed for the development of wind farms. In 2007, hundreds of private companies applied for licenses to build and operate wind farms with a total capacity of 78,000 MW, nearly double Turkey s present total power generating capacity. The government decided to hold tenders for projects in areas where there was more than one application. Half a dozen foreign companies are selling wind energy technology to Turkey, including General Electric, Venisys (Costa Rica), Furlander, Conergy, Nordex and Enercom of Germany and Vestas of Denmark. 8 New licenses for wind power: 3000 MW by April 2015 In December 2013 TEİAŞ announced 3000 MW connectable capacity for new wind power plant applications. Applications for this capacity will be taken by EMRA in April About 1500 existing masts are applying for a new license in April All applicants need to submit at least 1 year of measurement data on the requested area. The government has indicated the total capacity divided over several grid connection points in the country. If on a grid connection point, the requested capacity is higher than the available capacity, a tender will be organized within 4-6 months after April For interested investors, market opportunities in this part of the market would be in cooperating with applicants where competition is low and available capacity large. A number of Turkish players are indeed looking for cooperation in this phase of the project development Wind Potential The techno-economic wind potential of Turkey is 48 GW, according to the General Directorate of Renewable Energy. The locations with highest potential are in the Aegean, Marmara and Eastern Mediterranean and Hatay. 8 Renewable Energy in Turkey 2013 Report by McBDC Business Development & Consultancy Services 16

19 The Distribution of Average Wind Speed at 50 m. of Elevation above Ground In accordance with the Ministry of Energy s Strategic Plan, Turkey is targeting 20,000 MW installed wind-power capacity by the end of Figure 5: Wind power installed capacity in Turkey The first wind turbine in Turkey was established in 1986 in Cesme with 55 kw power to cover the electric requirement of Altinyunus touristic facilities. This wind turbine could annually produce an average of kwh electric energy and has no significance other than being the first application in our country. The first wind power station in Turkey is the auto-production power station facility of 1,5 MW power in Cesme-Germiyan location with three wind turbines each having 500 kw of power. The wind energy power station in Cesme-Alacati having started its operation in 1998 with Build-Operate- Renewable Energy in Turkey December

20 Transfer model is recorded as the second wind power station in our country. Alacati Wind Energy Power Station includes 12 turbines with 600 kw power having 7,2 MW of size. The second wind energy power station built with Build-Operate-Transfer model is the facility of 10,2 MW established power put in operation in Bozcaada in 2000 with 17 turbines each having 600 kw power. The aforementioned facilities may be accepted as the pioneers of wind power stations in Turkey. Many wind energy power stations having recently and more specifically during the last few years spread around the country are bigger in size and stronger. At the end of July 2014 there were 87 wind power plants in operation in Turkey, and 39 more plants (with a total capacity of 1,162 MW) under construction WPP Basin (Collector) Substations In regions where wind potentials are high, Wind Basin Subs are planned to be established and connectable WPP capacities are announced by TEIAS to integrate WPP s. For new wind power plant applications, 3,000 MW connectable capacity is announced by TEİAŞ in December Applications for this capacity will be taken by EMRA in April These capacities are announced as regional capacities since substation based capacities do not allow larger projects. 9 9 TEIAS - Renewables Integration in Turkish Power System

21 3.1.3 Solar Energy in Turkey The Turkish solar market is still struggling with its "teething", but observers expect a boom in the coming years. East Asian vendors show interest, but investors are still somewhat restrained. Turkey offers perfect natural conditions for solar power plants. The country is geographically located in the Mediterranean sun belt. Solar radiation values are similar to Spain and Portugal, as can be seen on the map here below. 10 Source: Renewables 2014 Global Status Report Compared to the rest of Europe, insolation values are higher and conditions for solar power generation are comparable to Spain. The government is aiming for at least 3 gigawatts (GW) by Heating and hot water But up till today, the use of solar energy in Turkey has mostly been limited to flat-plate collectors for domestic hot water systems. Turkey is one of the leading countries in the world with a total installed capacity of 10 GWth as of 2011 (129 kwth /1,000 inhabitants). The industry is well developed with high quality manufacturing and export capacity. The number of companies is around 100 and the annual flat-plate solar collector manufacturing capacity is about million m² million m² flat-plate solar collectors are in use. Turkey is one of the biggest producers of the solar collectors in the world. Some amount of this production is exported. 10 Renewables 2014 Global Status Report 11 Ministry of Energy and Natural Resources, An Overview of Renewable Energy Situation in Turkey Report Renewable Energy in Turkey December

22 Figure 6: Solar water heating collectors global capacity, shares of top 10 countries, 2012 Source: Renewables 2014 Global Status Report Figure 7: Solar water heating collector additions, top 10 countries for capacity added, 2012 Source: Renewables 2014 Global Status Report 20

23 Table 4: Solar water heating collectors global capacity and additions, top 12 countries, 2012 Source: Renewables 2014 Global Status Report Apart from the use for water heating (small scale installations, for individual families), very little has been realised up to now in Turkey in terms of capturing & using solar energy, in larger scale projects. The potential is there, though, unmistakably. And the government wants to tap into that source: the Turkish government's aim is to have an installed base of 3000 MW in solar power plants by Total connectable capacity for solar power plants was declared as 600 MW in Renewable Energy in Turkey December

24 Applications for this capacity were taken by EMRA in June After technical evaluation of these applications, capacity auctions will be carried out by TEİAŞ. The first auction was realised on 12 May The potential may be big, but right now Turkey is still only in the "warming up" phase in solar energy. Turkey has, together with Spain, the largest solar energy potential in Europe. Especially southern Central Anatolia, Southeastern Anatolia and the southern coastal region shine here with top values in terms of sunshine duration and intensity. TürkStat, the Turkish Statistics Office has published a map showing the average irradiation values of the past 20 years. In general, these are twice as high as in Germany or Belgium. In prime locations the Turkish values climb to 1700 kilowatt hours per square meter and more - values we can only dream of in Western Europe. In the first phase of market development, sites in the provinces of Konya and Van seem to be especially popular, because conditions there are optimal Installed photovoltaic capacity: Estimated total installed capacity today is around 15 MW. This includes the unlicensed facilities and the systems in forest fire watching towers, highway communication towers and meteorological stations Installed CSP capacity (Concentrated Solar Power): A 5 MW solar power tower was constructed, mainly for research purposes: a Concentrated Solar Power (CSP) thermal energy production system with 500 heliostats near the southern city of Mersin Equipment Production Capacity: PV module and cell manufacturing capacity are around 240 MW/year and 100 MW/year, respectively. A parabolic collector production facility with a capacity of 47 MW/year is also based in Ankara. Turkey pays solar power plants a feed-in tariff of USD cents per kilowatt hour for a period of 10 years. At first that does not sound like much, but the high sunlight values make an investment lucrative for domestic and foreign investors. Turkey also pays a bonus to the feed-in tariff in the first five years if the individual components in the substructure, the modules, the inverter or the cells come from domestic production. This way, in the best case a maximum fee of more than 19 US cents per kilowatt hour can be obtained. As a result of such measures, Turkey should also be able to play a role as a production base for all kinds of components for solar energy plants in the long term. Everything that is needed for solar projects, up to the solar cells, is today already available "Made in Turkey". But the Turkish companies will not be able to keep the market to themselves for a long time. From East Asia great interest in the Turkish market is already showing. Recently the Hanwha Group of South Korea opened an office in Turkey. The giant from East Asia aims to position itself as a reliable supplier of wafers, cells and modules, as well as project development and financing in the market. Hanwha is one of the largest players in the global solar industry. 22

25 A competitor from Japan is also examining his chances: Solar Frontier (with none other than Royal Dutch Shell behind it). The Japanese subsidiary counts among the world's leading technology companies with its thin-film modules. They are currently probing the Turkish market. Industry experts believe that Solar Frontier plans to set up its own production in Turkey and is willing to spend a three-digit million figure to do so Milestones for Solar Energy in Turkey The licensing process for solar power projects is finally moving forward in Turkey. In line with the recent amendments in the Licensing Regulation which requires bidding processes for pre-licensing when there is more than one interested party, the first competitions for two portfolios of 8 MW in Elazığ and 5 MW in Erzurum took place on 12 May The first round of pre-license applications for 600-MW capacity was received in June 2013, when 496 applications with a total capacity of 8900 MW were made. The Energy Market Regulatory Agency (EMRA) has granted no pre-licenses to solar power projects so far. This required a series of bidding processes for the regions for which more than one entity had applied. Some license-exempt projects under the Regulation on License-Exempt Power Generation, on the other hand, have started operation and they are already selling their excess output to the incumbent supplier company in their distribution region. Here below we will be outlining the regulatory landscape for licensed and license-exempt solar power projects Licensed solar power projects Regulatory requirements for licensed solar power projects All applicants willing to produce energy from solar resources shall follow a tender and licensing procedure to be granted a pre-license. The EMRA evaluates the solar power license applications and considers the eligibility of the projects for the connection to the electricity transmission network by obtaining the opinion of TEİAŞ, Turkey s state-owned electricity transmission company. In case there is more than one application to connect to the same network, TEİAŞ organizes a tender in accordance with the Article 15 of the Licensing Regulation to determine the eligible applicant. The applicant who offers to pay the highest contribution fee per MW shall be deemed the winner of the tender and granted a pre-license to produce solar power. The contribution fee shall be paid to TEİAŞ in three annual instalments following the preliminary acceptance of the facilities. If there are no competing bids for the same area, license applicants may precede with the licensing and interconnection formalities set forth under the EML and Licensing Regulation without the need to attend the tenders. Within this legal framework, EMRA has initiated pre-license tenders in 2013 for a solar energy portfolio with the total production capacity of 600 MW to start the licensing of the solar energy projects. In the first round of the tenders, 496 applications with a total capacity of 8,900 MW were received, which indicated that the sector has presented significant interest in solar energy licenses. The first round of the tenders took place in May in relation to two of the solar power plant projects in the portfolio, one in Elazığ with 8 MW installed capacity and the other in Erzurum with 5 MW installed capacity. The winning bidders were the ones who offered to pay the highest amount of contribution rate to TEİAŞ. It should be noted that EMRA has not issued the pre-licenses of the winning solar power project owners following the tenders, therefore the procedure and license obligations of the first ever solar power license holders is not yet clear. It is expected that EMRA will proceed with the remaining Renewable Energy in Turkey December

26 tenders of the 600 MW portfolio and the new connection points and capacities that will be made available to the solar production facilities will be determined by the end of December, The EML and Licensing Regulation introduced a pre-license requirement, which changed the entire licensing process applicable for all energy generation facilities. As per the EML, applicants shall apply for the preliminary license prior to the construction of a generation facility and they can only be granted a full generation license upon fulfilment of their obligations under their preliminary license. The matters that have to be completed within the preliminary license period as per Article 17 of the Licensing Regulation are as follows: i. Preliminary license holder must acquire the property and/or usufruct rights pertaining to the field where the generation plant will be constructed. If expropriation is needed, the decision with regard to expropriation shall also be obtained from the relevant authority; ii. Construction plans for the generation plant must be approved by the relevant authority and construction permits shall be obtained; iii. Project pre-approval for the generation plant must be obtained; iv. Necessary opinions and approvals set forth in Article 17 of the Licensing Regulation must be obtained from the relevant authorities; v. Environmental Impact Assessment decision must be obtained. This application shall be made within 90 days following the date of preliminary license; vi. Separate agreements required for the generation plants with governmental authorities such as DSİ and TEİAŞ must be executed. In addition to standard pre-licensing requirements listed above, solar energy project owners are required to submit the documentation proving that the field has a solar energy measurement in compliance with the standards set forth under the Licensing Regulation and obtained within the last three years and having at least one year duration. It is aimed to determine the projects eligible to connect the system at the beginning of the licensing process with the detailed technical measurement procedures for solar energy. The market players mainly criticized the preliminary licence period for being too short, by taking into account the fact that to obtain the required permits, licenses, approvals and decisions usually takes more than 24 months. In particular, expropriation of the project area and approval of the construction plans within the provided 24 month period is not always realistic, considering the constant delays and problems caused by the relevant administrative authorities. While solar energy licensing created a certain enthusiasm in the energy market, investors carefully evaluate the possible technical difficulties and administrative obstacles in completion of the pre-license obligations, as the solar licensing is new to the market. 12 After a pre-license application is accepted by EMRA (Energy Market Regulatory Authority) for evaluation, it is forwarded to TEIAS and/or relevant distribution company for a connection opinion. Solar power pre-license applications also need to receive a positive technical evaluation opinion from the Renewable Energy General Administration under the Ministry of Energy and Natural Resources. In case there are several solar power pre-license applications for the same connection capacity and/or piece of land, TEIAS shall organize tenders to determine which power plant will be granted a pre-license. The applicant, who bids the highest contribution fee per MW, wins the tender. This fee 12 Moroğlu Arseven Law Office 24

27 shall be paid to TEIAS in three annual instalments following the preliminary acceptance of the facilities. Commercial considerations for licensed power plants Legal entities having a generation license are granted a Renewable Energy Resource Certificate (RER Certificate) by the EMRA, for determining the type of resource in purchase and selling the electric energy generated from renewable energy resources in domestic and international markets. The RER Certificate allows the holder the ability to benefit from the RER Support Mechanism. The RER Support Mechanism means the support mechanism, which includes the procedures and principles regarding the fees from which the entities conducting generation activities from renewable energy resources can benefit, time periods and the payments to be made to those. The fees to be applied to the generation license holders who are already or will be operationalized by the end of 2020 and can participate and benefit from the feed-in tariffs for the first 10 years of operation is set at USD 133 per MWh under current legislation. In the event that the mechanic and/or electro-mechanic devices used in such generation plants are manufactured in Turkey, a local content fee is added to the above mentioned fee. Such a fee ranges between USD 0.04 and USD 0.25/kWh considering the plant type and types of devices that are manufactured in Turkey. In addition to the feed-in tariffs of the RER Support Mechanism, renewable energy license holders are exempt from the obligation to pay the license fee following the first eight years of the date of completion of the facility as per Article 43 of the Licensing Regulation License-exempt solar power projects Regulatory requirements for license-exempt solar power projects All electricity production activities are subject to the licensing procedure of the EMRA in Turkey. As an exemption to this rule, electricity legislation in Turkey allows certain small-scale facilities to generate electricity without the burden of obtaining a license and incorporating a company, provided that the conditions under Article 14 of the EML are met. Within this scope, electricity generation facilities based on renewable energy resources with a maximum 1 MW installed capacity are exempt from the obligation to obtain a generation license. Regulation on Electricity Generation without Licence in the Electricity Market was recently published for the purpose of ensuring the efficient usage of the small-scale electricity plants and to enable electricity consumers to procure electricity from the closest generation facility. It should be noted that licence exempt generation opportunities particularly draw the attention of investors willing to produce electricity from solar power. Research by private institutions indicates that as of September, 3,609 facilities applied to obtain permission to generate electricity without a licence and 1,604 of these applications were approved. It should be highlighted that 1,184 of the approved projects were in relation to solar energy projects. The number of applications point out a significant increase compared to the term of the former EML, which is considered the result of the capacity increase for license exempt generation from 500 kwh to 1 MW with the new EML. As a result of this increase in capacity, large electricity users (i.e., factories and hospitals) now have the opportunity to generate all or most of their electricity themselves and sell the remaining amount to the relevant distribution company. It should be noted that although the number of applications is relatively high there are still procedural and administrative problems preventing the facilities from commencing operations, such as the lack of capacity limit of the power distribution units, issues and Renewable Energy in Turkey December

28 delays in Environmental Impact Assessment procedures and procedural issues between distribution companies and TEİAŞ. In order to be eligible for the licence exempt generation, facilities need to apply directly to distribution companies within their region or to organized industrial zone distribution license holders to obtain permission in relation to above-mentioned activities. In order to be eligible for the exemption, installed capacity of the renewable energy plant shall not exceed 1 MW and the facility must be connected to the system as an electricity consumer. License exempt facilities can also benefit from the incentive and support mechanisms for the renewable energy plants, which is an important matter for the investors. 13 Commercial considerations for license-exempt power plants The main purpose of the license exemption is to encourage the manufacturing and commercial establishments to meet their energy needs through their own generation facilities. Excess output is allowed to be fed into the grid and the incumbent supplier in the region, i.e the unbundled retail sales arm of the power distribution company, is required to purchase the net power exported to the grid at the YEKDEM feed-in tariff (detailed above) for 10 years. Please note that this excess output can only be sold to the incumbent supplier as described above, without leaving any room for trade with the other suppliers nor with the eligible customers. Another dimension within this framework is that real persons and/or legal entities may bundle the consumption in their consumption facilities and establish a license-exempt generation facility by entering into a consumption bundling arrangement. All participating entities should be connected to the same connection point OR their consumption shall be measured with a single meter. Excess power that is not consumed within the group may still be sold to the supplier company within the YEKDEM mechanism. The entities in the arrangement designate one entity within the group as their representative in the group s dealings with the system operator and the retail supplier Moroğlu Arseven Law Office 14 Spotlight on solar power in Turkey / 2014 PwC Turkey 26

29 3.1.4 Geothermal Energy in Turkey Turkey has the richest geothermal resources in Europe and seventh biggest in the world, with the theoretical potential for 31,000 MW of electricity generation capacity a year, according to the state Mineral Technical Exploration Agency (MTA). Turkey has 1,000 known geothermal wells and mineral springs. Of these 184 have temperatures of over 40 C. Some 13 have temperatures averaging anywhere between 130 C and 242 C and are suitable for electricity production, the Electricity Affairs Research Administration reported. Some 77.94% of the country s geothermal resources are located in the Aegean region, while 8.52% and 7.43% are situated in Central Anatolia and the Marmara regions of the country while 4.77% are in Eastern Anatolia. Other areas of the country have insignificant geothermal resources. Central heating from geothermal energy currently is used in some 103,000 homes and 215 wellness centres in Turkey, the Electricity Affairs Research Administration said. It said six percent of the country s geothermal energy is used to produce electricity, 55% for heating homes and 39% for other usage, including heating of Spa s and electricity for industrial usage. Research regarding geology and mineral exploration is conducted by the General Directorate of Mineral Research and Exploration (MTA). Geothermal resources in Turkey are mostly used in heating, thermal tourism, greenhouse heating and electricity production. According to the Mineral Technical Exploration Agency (MTA), there are 17 settlements that use geothermal resources for central heating which corresponds to 85,903 residences, MWt. There are also 350 thermal resorts that employ balneotherapy treatments which attract tourists from all over the world. According to the General Directorate of Renewable Energy (YEGM), Turkey has an estimated 2,000 MW of generation capacity from geothermal sources. Currently, there are 18 geothermal fields that have been discovered by the MTA which are suitable for electricity production and all of them are located in Western Anatolia Investment Support and Promotion Agency of Turkey, Renewable Energy & Environmental Technologies 2013 Renewable Energy in Turkey December

30 Geothermal Resources Map in Turkey 'Theoretical' geothermal capacity of Turkey is 31,500 MWt (megawatt of thermal output). 77.9% of this potential is in Western Anatolia. Geothermal Electricity Potential: 2000 MWe (megawatt of electrical output). 55% of the geothermal areas in Turkey are suitable for heating practices. Greenhouse heating & 100,000 households in 19 settlements heated with geothermal energy. Totally 28 projects of MWe capacity are licensed 317 MWe is under operation as of March, Even though Turkey s potential in geothermal energy is high 2,000 MWe the installed capacity was 162 MWe at the end of This discrepancy signifies the need for large scale investment to tap into the full potential. According to the European Geothermal Energy Council (EGEC), Turkey is one of the hottest markets in Europe for geothermal energy. In Europe there are a total of 62 geothermal power plants for electricity generation and 15% of these plants exist in Turkey. The biggest players in electricity production from geothermal resources in Turkey are: Zorlu Enerji, Güriş Enerji and BM Holding. Figure 7 demonstrates the major EU players in electricity production from geothermal sources. The EGEC predicts an installed capacity of 976 MW will be achieved in Turkey by Considering Turkey s current installed capacity, 814 MW of investment opportunity exists if the potential given by the EGEC is to be reached. 16 Renewable Energy in Turkey Report by General Directorate of Renewable Energy 28

31 Figure 8: Highest installed geothermal capacities in EU The Electrical Energy Supply Security Strategy Paper written by the Ministry of Energy and Resources, on the other hand, aims for a capacity of 600 MW by The Renewable Energy Support Mechanism s feed-in tariff for geothermal energy is USD 10.5 cent/kwh. Extra incentives exist for steam or gas turbines, generators, power electronics components, steam injectors and vacuum compressors manufactured in Turkey which equals 13.3 USD cent/kwh. 17 Turkey added at least 112 MW of geothermal generating capacity in 2013, for a total of at least 275 MW. Most notable may be the installation of a 60 MW triple-flash turbine in the Denizli field. Other capacity to come on line in Turkey in 2013 was made up of smaller binary units. Turkey promises to be an important market in the region in the near future, with over 300 MW of additional capacity under licence or construction at 2013's end. Figure 9: Geothermal power capacity additions, share of additions by country, Investment Support and Promotion Agency of Turkey, Renewable Energy & Environmental Technologies 2013 Renewable Energy in Turkey December

32 Source. Renewable Energy Policy Network, Renewables 2014 Global Status Report. In Europe, there have been recent efforts to improve accounting of direct use geothermal energy across all sectors, specifically balneology (e.g., spas, swimming pools), which may not have been fully reported before. Such examination reveals divergent profiles for geothermal heat applications. For example, district heating commands a relatively minor share of geothermal heat capacity in Hungary (19%), Turkey (30%), and Italy (10%), but very substantial shares in France (81%), Iceland (80%), and Germany (77%). 30

33 3.1.5 Biomass Energy and Biofuels Biomass is one of the rising stars of the renewable energy sector According to the definition in the Renewable Energy Law (REL), biomass is a resource obtained from agricultural and forestry products including vegetable oil waste, agricultural harvesting waste as well as from organic waste, and from the by-products formed after their processing. Biomass sources include agriculture, forests, animals, organic urban waste, etc. Waste potential is around 8.6 million tons equivalent of petroleum (TEP), 6 million TEP is used for heating. Installed Power Capacity in Turkey (2013): 241MWe Source: Status of Bioenergy in Turkey by Ege University. Total Amount of Waste from Forests is 4,800,000 Tons (1.5 MTEP) (600 MW) From Agriculture 15,000,000 Tons (300 PJ) Potential map of biomass energy (BEPA) is prepared by GDRE Biogas MTOE (Million Tonnes of Oil Equivalent) biogas potential. Annually app. 180 million m 3 biogas produced by 20 running biogas plants. Recently landfill gas extraction gained importance (total capacity 162,7 million m 3 /year) The role of biomass in the share of renewables experienced significant growth especially in the last few years. Steady growth in the early 2000s gained momentum after 2007 due to the enactment of the Renewable Energy Law. Renewable Energy in Turkey December

34 It is also important to note that installed biomass capacity increased at a CAGR of 19% in the last decade. The given installed capacity combines the installed capacity of electricity generation from all types of biomass activities. Considering the potential gasification capacity of 600 MW from forestry waste, Turkey continues to hold opportunities for investors. Waste management and disposal are high priorities in the public sector. In 2010, a total of TRY 3 billion worth of investment was allocated by the government to environmental technologies where TRY 91 million was used for waste management activities. Some of the major municipalities in Turkey such as Ankara, Istanbul and Adana already utilize electricity generation from waste. Major players in the industry include ITC (Integrated Solid Waste Management Systems) and Ortadoğu Enerji. The feed-in tariff applied to biomass and biogas projects is USD 13.3 cent/kwh which also includes electricity generation from landfill. Biomass technologies receive the second highest incentive rate after solar CSP technologies (Concentrated Solar Power). The total feed-in tariff that can be applied to biomass technologies is USD 18.9 cent/kwh. Generation of electricity from waste has attracted the attention of foreign investors. The South Korean company CEV-Clean Energy & Vehicle has a project in Gaziantep to produce 3.3 MW of electricity from methane gas. Additionally, the company is involved in a research and development project regarding solid waste storage and its ability to be utilized in electricity generation Investment Support and Promotion Agency of Turkey, Renewable Energy & Environmental Technologies

35 3.2 Renewable Energy Policies and Regulations in Turkey Renewable energy policies and regulations have a rather short, but effective history in Turkey. Renewable energy has been one of the hot topics on Turkey s energy agenda in recent years. Significant progress has been made in the field of renewable energy starting from 2005, after the enactment of the Law on Utilization of Renewable Energy Resources for the Purpose of Generating Electrical Energy (Renewable Energy Law, REL). In need of an important transformation, Turkish authorities have been persuaded about the opportunities provided by its wind, solar, geothermal, biomass or wave resources to set a sustainable and independent energy policy for the country. This has been revealed even more urgent after the signature of the Kyoto Protocol in These reasons have driven the recent legislative reforms in the sector that aim to develop a liberalized, transparent and sustainable energy market in Turkey, with the objective of relying on renewable resources at a rate of 30% by Investments in renewable energy technologies remained limited between 2005 and 2010 due to the lack of secondary legislation and relatively low feed-in tariff prices. Nevertheless, the REL amendment in December 2010 introduced higher feed-in tariff rates for separate technologies, and various other monetary and non-monetary incentives Common Laws & Regulations for Renewable Energy Generation: The main legal documents are: Electricity Market Law No: 6446 Law on Utilization of Renewable Energy Sources for the Purpose of Generating Electrical Energy Law No: 5346 The Turkish renewable energy Law is regulated in three main pillars: The Law on the Utilization of Renewable Energy Resources in Electricity Generation (number 5436) that was passed in May 2005 constitutes a clear move towards the promotion of solar, wind or tidal energy in Turkey. Its first article explicitly states its purpose to encourage the better use and diversity of renewable resources as well as the protection of the environment. Legal persons wishing to operate in the sector must hold a Renewable Energy Resource Certificate in order to ensure the identification and supervision of the renewable resource concerned. Such certificate is expedited in turn by the Turkish Energy Market Regulatory Authority (EMRA). In order to catch up with the pace of the innovations introduced with this law, the Turkish legal panorama has experienced in the recent past two main changes in its energy framework. On the one hand, the new Turkish Electricity Market Law (number 6446) was passed in March 2013, substituting the old regulation of 2001 (number 4628). On the other hand, a secondary legislation to further detail its elements, the Electricity Market License Regulation, was approved last November. Beyond carrying out a simplification in the type of licenses needed, these two texts have introduced a new key element non-existent to date, Preliminary licenses. Under this innovation, legal entities willing to carry out energy generation activities in Turkey are granted a temporary permit during the preconstruction phase while they arrange the required approvals and permissions for the project. This allows an easier beginning in the country for international investors. Renewable Energy in Turkey December

36 This new framework, accompanied by the amendments in 2010 to the Law on the Utilization of Renewable Energy Resources in Electricity Generation introduces many specific advantages to renewable resources energy projects: 1. License exemption: The new law envisages a waiver of license for those generation facilities based on renewable resources. This allows investors to initiate solar or wind energy projects, among others, in Turkey without needing a previous authorisation from the Energy Market Regulatory Authority. In order to benefit from this advantage, it is however required that the installed capacity should not exceed 1MW, which may be eventually further increased by 5MW by the respective authorities. The old legislation established on the contrary a more restrictive limit of 500Kw. 2. Feed-in tariffs: The amendments introduced in 2010 to the Law on the Utilization of Renewable Energy Resources in Electricity Generation rely on the mechanism of feed-in tariffs to incentivise foreign investment in the sector. By granting long-term conditions in the contract to renewable energy producers, Turkey grants a defined and transparent price for this kind of electricity. 3. Fee reduction in licensing: In case companies cannot take advantage of the license exemption, a reduction of 10% in the fees compared to those required for non-renewable energy sources is conceded. All in all, it seems clear it is Turkey's deliberate intention to move towards the investment in renewable resources as a way of escaping from the energy production deficit while preserving at the same time the environment. The recent legal reforms have opened the doors to a dynamic and competitive sector that will turn renewable energies into a key asset. 19 Each type of renewable energy has a special regulation enabling secondary regulations to be more precise. According to the REL, renewable energy resources are defined as non-fossil energy resources such as hydro, wind, solar, geothermal, biomass, biogas (including landfill gas), wave, current and tidal energy. Wind Technical Regulation for Evaluating Applications of Wind Energy Generation Communique on Measurement Standards for Wind & Solar Energy Solar Communique on Measurement Standards for Wind & Solar Energy Technical Regulation for Evaluating Applications of Solar Energy Generation Geothermal Regulation on the Utilization of Geothermal Energy Sources for the Purpose of Electricity Generation Geothermal Law No: 5686 Biomass and Waste Environmental Law No: Yilmaz & Cinar Law Firm 34

37 Solid Waste Control Regulation Regulation on the General Principles of Waste Management Public and Private Incentives for Renewable Energy Projects Incentives Provided by the Ministry of Economy Generation licenses subject to the RES (Renewable Energy Support Mechanism) that are or will be commissioned before December 31, 2015 will benefit from: Feed-in tariff (Schedule I) for a period of ten years. Local equipment bonus (Schedule II) for a period of five years, if domestically manufactured mechanical and/or electromechanical equipment is used in the generation facility. Schedule II in Figure 6 demonstrates the total amount of bonuses offered for each technology. Establishing energy generation facilities; Provision for domestically manufactured electromechanical systems; R&D and manufacturing of generation systems by utilizing solar cells and focusing units; R&D facilities for the generation of electric energy or fuel by utilizing biomass sources shall be eligible for incentives, based on the decision of the Council of Ministers. Utilization permits for the real estate under the ownership of the Treasury or the state in its entirety shall be granted by the Ministry of Environment and Forestry or the Ministry of Finance in exchange for remuneration. A 50% deduction shall be implemented for permission, rent, right of access and usage in the investment period. Lease, easement and usufruct permission fees shall be 85% discounted during the initial 10 years of investment & operation of facilities that will be commissioned until December 31, Leasing or easement will be established by the MOF in exchange for remuneration in relation to any publicly owned pasture, quarter, grazing and grassland. Collection of the Forest Villagers Development Revenue and Erosion Control Revenue will not be made. The Ministry of Economy provides further incentives for renewable energy technologies. Currently, energy investments are eligible to benefit from the General Investment Incentive Program which allows investors to be exempt from custom duty and VAT. Even before the General Investment Incentive Scheme, the Ministry of Economy provided incentives to energy projects. For instance, 718 incentives regarding energy generation technologies were issued between 2005 and % of these incentive documents were issued for new projects, whereas the remaining 10% were issued for improving existing ones. Out of these 718 documents, an astounding 86% were issued to renewable energy technologies with 615 applications. Renewable Energy in Turkey December

38 The scope of the General Investment Incentive Program offers incentives for six different renewable energy generation technologies, including hydroelectric, wind, geothermal, biomass, thermal power, cogeneration and solar energy power plants. Table 5 demonstrates the incentive documents issued according to energy production technologies between 2005 and As shown, the highest share of incentive documents were issued to hydroelectricity power plants with 65%, followed by wind which accounts for 11% of renewable energy generation. The total number of incentive documents for renewable energy technologies account for an installed capacity of 17,171 MW. The highest share of investment belongs to hydropower with approximately TRY 26 billion followed by wind with approximately TRY 7 billion. All investors, foreign and domestic, can take advantage of incentives offered by the government. The Ministry of Economy provides incentives for all foreign and domestic investors. According to the Ministry of Economy, the total number of 77 incentive documents were issued to companies with foreign capital for the purpose of energy generation. 73 of these investment documents are still in the process of completion. Similar to domestic investment trends, the highest number of incentive documents were issued to hydroelectric power plants with 52 documents, followed by wind which accounts for 7 incentive documents. Incentives provided to foreign investors account for an installed capacity of 6,398 MW. This corresponds to 21% of the total installed capacity achieved via incentive documents. According to the Ministry of Economy, approximately 12 billion TRY worth of incentives were provided to companies with foreign capital. Figure 8 displays the distribution of expenses in foreign energy investments. Building construction fees and imported goods led the way with 37% and 34%, respectively Incentives Provided by the Renewable Energy Support Mechanism (RES) In order to encourage investments in Turkey and RES within the framework of the Law No.6446 and the related secondary legislation, electricity generation plants based on renewables are supported by the following mechanisms: Payment of only 10% of the total licensing fee: According to By-Law on Electricity Market Licensing, legal entities applying for pre-licenses and generation licenses for construction of facilities based on renewables are required to pay only 10% of the total licensing fee. Exemption from payment of annual license fees for the first 8 years of operation: Generation facilities based on renewables are exempted from paying annual license fees for the first 8 years following the facility completion date inserted in their respective licenses. Priority for system connection: Priority shall be given to RES based power plants by EMRA when forming the connection opinion. Exemption from being a balancing mechanism unit: Article 18 of By Law on Electricity Market Balancing and Settlement says that generation facilities listed below are exempted from the liability of being a balancing mechanism entity, but can be registered as a balancing mechanism entity, if requested by the market participant and agreed by National Load 36

39 Dispatch Centre within TEIAS that generation facility or unit can participate in the balancing mechanism: Canal or river type hydroelectric generation facilities Wind power plants Solar power plants Power plants based on wave Power plants based on tidal energy Cogeneration facilities Generation facilities based on fluidized bed technology Purchasing electricity option: All legal entities engaged in generation activity may purchase electricity from the market up to 40% of the annual average generation amounts indicated in their licenses in a calendar year in order to meet their contractual obligations. Exemption from licensing and establishing company: In addition, power plants based on renewables with a maximum capacity of 1 MW are exempted from establishing a legal entity and obtaining the related license from EMRA to enter the electricity market. The first law related to promotion of renewables - the Law No was introduced in However, this law failed to attract investors to benefit from the support mechanism. Then the Turkish government decided to change the Law No by passing the amending Law No in A- Support Scheme after 2011 (Period II) In 2011, Law No was amended by Law No The amendment brought a new support mechanism even though the feed-in price is used again. But, apart from earlier legislation, the new mechanism envisions different feed-in prices for different renewables. In addition, there is an extra support price for the use of domestic equipment in RES power plants. Table 6 shows the feed-in price for electricity generation from renewables and the maximum support price if the renewable based power plant is completely built with local equipment and machinery. Turkey s feed-in tariffs (FIT) and spot market prices from December 2011 to 2014 January are compared in table 5 below. Table 5: Feed-in tariff for renewables Note: 1 USD is assumed to be equal to 2.2 TRY. 1 includes waste gas. The support mechanism is run on a calendar year basis. Participation in the mechanism is voluntary. When a RES power plant participates in the mechanism, it must remain in the mechanism during the calendar year. It is important to note that the participating power plant is not allowed to sell its energy on a bilateral market or in any other mechanism. All RES power plants constructed or to be constructed between May 18, 2005 and December 31, 2015 may participate in the support Renewable Energy in Turkey December

40 mechanism. However, the power plants can only benefit from the mechanism during their first 10 years of operation. The interested power plants will apply to EMRA by October 31 to join the support mechanism in the next calendar year. All generation from participating power plants is considered in the mechanism. In the case of hybrid plants, only the generation from renewables is subject to the support. Information flow diagram of the support mechanism The system operator prepares a regional/national electricity generation forecast on hourly basis for every hour of the next day, using the data received from participant RES companies and assigned regional suppliers. The system operator inputs electronically these forecasted values in the market information system of the market operator by 10:30 a.m. Then the market operator announces these forecast values by 11:00 a.m. on its website. The forecast energy from participating RES generators and distribution utilities on behalf of distributed generation is sold in the day-ahead market without bidding a specific price on behalf of all suppliers under a portfolio opened and run by the market operator. For this purpose, only the forecast quantity is inputted to the market management system of the market operator by 11:30 a.m. The monetary value of the energy sold within RES portfolio is distributed to suppliers on a monthly basis according to their market shares. In the operation of the support mechanism, the system operator plays a critical role. What is expected is that the realized generation perfectly equals the forecast amount. In practice, this is a difficult task. Since the forecast involves different renewables, the deviation in the forecast amount has been expected to become smaller. Depending on the forecast performance of the system operator, the following three scenarios would occur in the support mechanism. The first is the scenario with no deviation. This refers to the fact that suppliers will be required to pay the monetary amount of RES based generation during the specific month. The second is the scenario with positive generation, meaning that the realized generation is more than the forecast amount. In this case, a certain amount will be paid to suppliers. The third scenario is the one with negative deviation, 38

41 meaning that the realized generation is less than the forecast amount. In this case, a certain amount will be collected from suppliers Air Quality & Greenhouse Gas Emission Control In the case of increases in the global temperature of up-to 2 C, the expected impacts in the Mediterranean Basin, in which Turkey is situated, show the extent to which measures taken against the impacts of climate change need to be programmed. In the Fourth Assessment Report of the IPCC it is indicated that a 1 C - 2 C increase in temperatures in the Mediterranean basin would be observed, that aridity will be felt in an even wider area, and heat waves and the number of very hot days will increase especially in inland regions. For Turkey, on the other hand, the average increase in temperatures is estimated to be around 2.5 C - 4 C, reaching up to 5 C in inner regions and up to 4 C in the Aegean and Eastern Anatolia. The IPCC report and other national and international scientific modelling studies demonstrate that Turkey in near future will get hotter, more arid and unstable in terms of precipitation patterns. Turkey s First National Communication on Climate Change prepared in 2007 indicates the impacts of climate change in Turkey as; increasing summer temperatures, decreasing winter precipitation in western provinces, loss of surface water, increased frequency of droughts, land degradation, coastal erosion and floods. Although the impacts of climate change in Turkey seem to pose a serious threat in the future, it is also envisaged that these impacts will bring with them some opportunities if planned carefully. It is crucial that this situation is addressed in terms of the pressures on natural resources and water resources in particular and in terms of the bottlenecks or opportunities in the development of climate-dependent sectors. The Climate Change Department was established in 2009 under the General Directorate of Environmental Management, which is subordinate to the Ministry of Environment and Urbanization and it tackles all issues concerning climate change. First established in 2001 and restructured in 2004 the Coordination Board on Climate Change" (CBCC) that is responsible to take necessary measures to prevent adverse effects of climate change, ensures coordination and distribution of tasks between public and private sector institutions and organizations, and determines domestic and foreign policies considering the conditions of our country regarding this issue were restructured in The Ministry of Environment and Urbanization is responsible for the Secretariat of CBCC. One of the 11 Technical Working Groups functioning under the CBCC is the Working Group on Climate Change Adaptation for which the General Directorate of State Hydraulic Works is responsible. In the context of adaptation to climate change, the General Directorate of State Hydraulic Works holds duties and authorities focusing on the management of water resources and it conducts research on relevant issues and works in cooperation and coordination with other authorized institutions. A Division on Adaptation to Climate Change has been established under the Ministry of Forestry and Water Works General Directorate of Water Management Department of Flood Planning and has 20 Renewable Energy Support Mechanism in Turkey: Financial Analysis and Recommendations to Policymakers / Electricity Market Department, Energy Market Regulatory Authority, Ankara, 2014 Renewable Energy in Turkey December

42 been assigned with the issues of the impacts of climate change on water resources and floods and necessary precautions. 21 National Climate Change Strategy for Turkey was approved by the Higher Planning Council and took effect on May 3, Table 6: Legislation directly related to climate change adaptation The National Vision in this strategy is defined as follows: Turkey s national vision within the scope of climate change is to become a country fully integrating climate change-related objectives into its development policies, disseminating energy efficiency, increasing the use of clean and renewable energy resources, actively participating in the efforts for tackling climate change within its special circumstances, and providing its citizens with a high quality of life and welfare with low-carbon intensity. Basic Principles of the National Climate Change Strategy are defined as follows: Turkey s primary objective within the scope of global combat against climate change is to participate in the global efforts that are carried out to prevent climate change, which is the common concern of humanity, and that are determined with common mind in cooperation with international 21 Turkey s National Climate Change Adaptation Strategy and Action Plan by The Ministry of Environment and Urbanization 40