Turkey - Newly reformed market spawns bullish prospects

TURKEY: There is optimism about the prospects for the Turkish wind sector in 2011, following two developments last year: parliament ratified long-awaited amendments to the renewable energy law and the energy market regulator, Emra, started issuing production licences for projects submitted in November 2007.

"2011 will be an exciting one for wind power in Turkey," says Gokhan Andi, senior wind developer at RES Anatolia. It will have to be, if Turkey is to grow installed capacity by 1.6GW a year - which is needed to reach a national target of 20GW of installed capacity by 2023. Last year saw 471MW of new capacity installed (see map), bringing the total to 1.28GW.

Under the new law, the guaranteed purchase price for wind power has been set at $0.073/kWh (EUR0.055). The price is set in dollars rather than euros - as it had been - and applies for the first ten years of operation for plants brought into service before December 31, 2015. The cabinet will set the tariff for plants commissioned after that date, which will be up to $0.073/kWh.

Before, all renewable power received EUR0.05-0.055/kWh for ten years. But with average wholesale prices in 2010 of TRY 0.14/kWh (EUR0.07/kWh), producers always opted to sell through bilateral contracts or on the open market.

Investors had been hoping the tariff would be closer to EUR0.08/kWh, but their disappointment was partially offset by new incentives for locally manufactured content. For wind, this ranges from an extra $0.006/kWh (EUR0.0045) for locally made towers to $0.013 for certain components in the nacelle. The incentives are payable for five years for plants commissioned before 2016. The energy minister will issue a regulation by April to define exactly what constitutes local content.

Since only towers and blades are manufactured locally at present, the highest tariff an operator can achieve is $0.087/kWh. But for Adil Tekin, Alstom's head of power in Turkey, the main thing is that the law is finally out: "This means investors can now make investment decisions with visibility until the end of 2015."

How the new law will affect manufacturing remains to be seen. For the moment, turbine makers are keeping a close eye on developments. "Our strategy is to produce where the market is," says Mete Maltepe, GE Energy's general manager for Turkey. "If we see increasing orders coming in, we will consider producing locally."

One domestic turbine manufacturer has already taken the plunge. Model Enerji originally announced the country's first locally made megawatt-class turbine in 2009, having signed an exclusive deal with American Superconductor Corporation to manufacture and sell its 1.65MW model. The factory at Dilovasi, near Istanbul, will start assembling turbines in the coming months.

Permitting progress

The other significant development was that Emra started processing applications for 78GW of wind power projects submitted in November 2007. In February, Emra said selection would be based on available grid capacity, with more than 7GW up for grabs. In September, it announced production licences for 63 projects, with a total capacity of 1.4GW, that did not compete for grid access and had a positive technical assessment.

The first licence was issued in December to a 25MW facility to be built in Adiyaman province, south-eastern Turkey, by Tektug Elektrik Uretim, a local provider of clean energy and carbon offset solutions.

Those projects that are competing for grid access - totalling around 30GW - will be asked to bid for connection rights in a series of auctions. The first took place on February 15 for 686MW. The Turkish Electricity Transmission Corporation, Teias, will award a 20-year grid permit to the highest bidder.

At the same time, lack of grid capacity remains a major barrier, with Teias imposing a limit of 5% of wind power on any one substation and an overall limit of 8.5GW on the system. The situation should improve, however, when a new interconnection with continental Europe starts commercial operation (see below).

On the development side, in December US energy giant AES Corporation announced it was teaming up with Turkish conglomerate Koc Holding to develop and own power generation projects, including wind. Other local companies are also diversifying. Transformer maker the Best Group took a stake in Karesi Enerji, which is building a 45MW wind power project due for completion in April and has more than 300MW under development. Turkey's leading petrochemical company, Petkim, and fuel retailer Turcas Petrolculuk have also announced plans to invest in wind energy.

TURKEY REAPS BENEFITS OF REFORM
New capacity online in 2010
Location Developer Turbine MW
Aliaga, Izmir Bilgin Energy Nordex 90.0
Bahce, Osmaniye Zorlu GE 77.5
Bandirma, Balikesir Borusan Enerji Vestas 12.0
Bandirma, Balikesir Makinsan Nordex 25.0
Belen, Hatay Guris Vestas 6.0
Belen, Hatay Bakras Enerji Vestas 15.0
Cesme, Izmir Bilgin Energy Nordex 7.5
Enez, Erdine Boreas Nordex 15.0
Kuyucak, Manisa Demirer Holding Enercon 25.6
Mut, Mersin Agaoglu Group Vestas 33.0
Soma, Manisa Bilgin Energy Nordex 90.0
Soma, Manisa Demirer/Polat Enerji Enercon 37.8
Samandag, Hatay Fina Enerji GE 35.0
Susurluk, Balikesir Demirer Holding Enercon 1.8
TOTAL 471.2

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