Turkey is increasingly turning to renewable energies, with wind power targeted to reach 20GW by 2023. The government passed a renewable energy law in 2005, introducing state-guaranteed prices. While the tariff is less than the price available on the open market, it is still important in helping to secure financing. For a while, investors were queuing round the block and, in 2007, submitted applications for a staggering 78GW.
Since then, however, the shine has faded somewhat. The market regulator is still working out how best to process those applications and the long-promised revisions to the law, which at one point offered higher and differentiated tariffs, are on hold. The other major question is grid capacity. Substantial investment is needed to allow 20GW online by 2023, let alone projections beyond that date.
This uncertainty, coupled with the low tariff, has put some investors off and made financing more difficult. Nevertheless, well-designed projects on windy sites continue to be built. Local banks are becoming more comfortable with wind power and multilateral finance institutions are also playing an important role.
For example, Turkey's biggest plant, a 135MW facility at Osmaniye, was funded with a mix of equity and loans from the International Finance Corporation, European Investment Bank and European Bank for Reconstruction and Development (EBRD). The World Bank is also helping Turkey to make better use of its grid capacity.
Another important factor is that projects in Turkey cannot generate carbon revenue from certified emission reduction credits (CERs) issued under the UN framework, partly because it is not classified as a developing country. However, it can generate verified emission reduction credits (VERs), which are still a significant income source. The Osmaniye project, for example, would not have been viable without carbon-credit financing, says Ireland-based EcoSecurities, a leading carbon credit firm that guides companies through the process of generating and selling credits (Windpower Monthly, December 2009).
While there is a definite sense of frustration in the Turkish industry, it would not take much for the log jam to be resolved and the market to take off. All the ingredients are in place. It now just needs the government to act.