Executive Summary
The Turkish Government has made decreasing the current account deficit a priority. One way to achieve this goal, the government is using domestic resources increasing renewable energy capabilities. Turkey spends approximately $40 billion on energy resource imports such as oil, natural gas and coal. For that reason, wind, solar, hydro, geothermal and biomass energy have been prioritized over combined cycle power plants in the last five years. Renewable energy investments up to 5 MW do not require a power generation license from the Energy Market Regulatory Authority (EMRA). For renewable power generation, net-metering is also allowed. In recent years, the Ministry of Energy and Natural Resources (MENR) issued Renewable Energy Resource Zone (YEKA) tenders for 1000 MW solar and 1000 MW wind projects. Each initiative required that most of the equipment to be locally manufactured. However, following these two large-capacity tenders, large-capacity YEKA projects were unable to attract new investors due to the financing requirement. Therefore, MENR decided to break future tenders into smaller sizes such as 10 MW, 15 MW and 20 MW. These tenders for solar power generation will be conducted on January 18-21, 2021, if not postponed due to Covid19 pandemic.
Current Market Needs
Although the decrease in demand for power generation affected the new renewable energy investments due to the COVID-19 pandemic, the growth in demand for additional power generation capacities is expected to pick up over the following years. This predicted demand growth is based on a 5% growth rate Turkey typically experiences. Turkey’s current installed capacity of 93.2 GW is expected to double by 2050 and 50% of the power generation is expected to come from renewable energy in 2050. With a population of over 82 million, and over $750 billion in GDP, Turkey’s demand will continue to grow with the increasing population and economic growth. Although the Turkish economy is currently going through a period of recession, the growth rate is expected to pick up in the second half of 2021 and beyond. Thus, both solar energy and wind energy installed capacities are expected to reach 10 GWs each over the coming years.
Recent Market Trends
Although progress on YEKA projects has been slow, most investments in solar have been made through unlicensed solar (less than 1 MW). These smaller investments in total have reached an output of 6.3 GWs, as of the end of September 2020. Wind energy installed capacity reached 8 GWs, while geothermal and biomass energy reached 1.5 GWs and 1.2 GWs, respectively. Renewable energy generation, including large hydroelectric power plants, met 44.2% of total demand as of the end of September 2020. Share of renewable energy in power generation is expected to have steady growth over the years. Renewable energy is a priority for the Turkish Government to decrease the current account deficit, evolving mostly from energy resource imports such as oil, natural gas and hard coal. The government will continue to encourage renewable energy investments.
Competitive Landscape
Major competition comes from German, Chinese, Korean, Italian and local companies. Price, quality and financing plays an important part in the selection of equipment and technology suppliers.
Best Prospects for U.S. Exporters
Energy storage (grid size and home size), rooftop solar, grid-sized solar, onshore and offshore wind, bio-mass and geothermal energy. Electric car charging stations will be in big demand in a few years.
Market Entry
Finding a good local partner and cooperating with local EPC contractors are important.
Regulations / Registration Process
EMRA issues licenses in accordance with existing regulations, available at EMRA’s website. Electricity generated can be traded on Day-Ahead and Intraday markets: https://www.epias.com.tr/en/. A new regulation for energy storage is drafted and pending approval.
Technical Barriers & Tariffs
Incentives provided for localization are a major financial barrier. Fixed feed-in tariffs are provided to YEKA projects with 15-year term power purchase guarantees, with a license to be valid for 30 years. These tariffs are set on a competitive basis and can go low.
Procurement & Tenders
Turkish Ministry of Energy and Natural Resources (MENR) will conduct site allocation and license tenders for solar power generation in 2021 for already designated locations. Each bid will need to be for 10 MW, 15 MW and 20 MW solar power generation license. These tenders will be conducted on January 18-21, 2021, if not postponed due to Covid19 pandemic. In YEKA license tenders, MENR selects the bidder offering the lowest feed-in-tariff rate against the power purchase guarantee provided by MENR for a certain number of years specified in the tender documents.
Getting Paid / Trade Finance
Financing is rather important for establishing large facilities. Investors always look for long-term financing at low interest rates. Generated electricity can be delivered either to large clients or to the grid and payments are made on monthly basis. The European Bank for Reconstruction and Development (EBRD) is rather active in Turkey, and provides financing for renewable energy projects. U.S. firms are eligible for EBRD financing and a U.S. Commercial Service Officer at EBRD assists U.S. firms seeking financing (www.ebrd.com, https://www.ebrd.com/turkey.html). EBRD has financed 282 projects in Turkey with a cumulative 11 billion-euro EBRD investment, and currently has an approximately 6.9 billion-euro portfolio of projects. The World Bank’s IFC also provides financing for projects in Turkey. (www.ifc.org)
Upcoming Trade Events
All trade events are currently held as virtual. However, all certified events in Turkey can be found at this link for future reference: https://www.tobb.org.tr/FuarlarMudurlugu/Sayfalar/Eng/AnaSayfa.php
U.S. Commercial Service Contact Information
For additional information, please contact:
Serdar Cetinkaya
Senior Commercial Specialist - Energy Lead
U.S. Commercial Service Ankara, Turkey
Serdar.Cetinkaya@trade.gov
