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Turkey

Turkey

Licences for Turkish wind farms may result in high bid prices

TURKEY: The robustness of the economic case for some of the bid tenders has been called into question by the country's wind energy association.

The first auction for substation capacity took place in February, followed by two more in March and one in mid-April. The Turkish Energy Market Regulatory Authority oversaw the process, which began in 2007 and initially saw 78GW worth of applications from 751 participants - representing twice the entire installed capacity of Turkey.

The system was later adjusted in line with the capacity of Turkish transformer substations, leaving in the running just over 31GW worth of applications for 8.5GW of transformer capacity.

The Turkish Electricity Supply Company, Teias, set up an auction process under which the applicants bidding the highest contribution fees per kilowatt hour, to be paid to the transmission system operator for 20 years after the wind farm becomes operational, will be granted licences.

Double capacity

Government plans to more than double Turkey's installed capacity, by adding 1.7GW, may also be hit by low feed-in tariffs (FITs), industry experts have observed.

Turkey's renewable-energy law passed in December set the FIT price for energy generated from wind power plants at $0.073/kWh.

The price paid can increase to $0.087/kWh if the blades and tower are manufactured in Turkey. Developers have complained that these prices are low and will put the feasibility of projects at risk.

In the first three auctions, most of the contribution fee bids were below TRY0.0005/kWh ($0.0003/kWh). This is widely considered to be low enough to make the projects viable. Only four bids were quite high, at above TRY0.01/kWh.

With electricity retail prices at fairly low levels, questions were raised about the accuracy of the feasibility studies underpinning these high bids.

"Though I find most of the prices acceptable," says Mustafa Serder Ataseven, chairman of the Turkish Wind Energy Association (Tureb), "there are some high bids for some projects."

Speaking after the first three auctions, Ataseven said: "I don't think these high bids were submitted as a result of detailed feasibility analysis studies." He believed this might be because the requirement to take measurements before submitting licence applications had only just entered the licensing regulations. It is quite possible, he argued, that these high bids were for projects for which insufficient calculations were available.

Ataseven predicted that the number of participants would affect the bids more than the wind potential. While the earlier auctions concerned transformer substations with a small number of applicants, he said he expected higher prices to emerge from the next round of auctions, in which a higher number of competitors would take part. The latest developments have proved him right.

High bids

In the April 14 auction, for the Can Havza transformer substation in the high-wind-potential area of north-western Turkey, 22 project developers bid for 175MW of substation capacity. According to Tureb figures, the three highest bids came in at TRY0.0343, 0.0328 and 0.0312/kWh. It is not known at this stage whether these projects will be economically viable.

Sule Erkoc, who heads GL-Garrad Hassan Turkey, was not surprised to see such high bids. "The fourth auction was the most crowded and so high prices were expected," he says.

More importantly, he points out, calculating the total costs of these projects is rather complex. The contribution fees to be paid to Teias, which can be considered as a licence-purchase cost, are not fixed. They are going to be recalculated every year in line with inflation. "This is what makes the 'licence cost' unknown for the coming years," Erkoc adds.

But even though higher bids have come in and the feasibility of projects is uncertain in the long term, he is pleased with the latest events.

"The licences have at least been granted after three years; this is a positive development for the industry," he concludes.

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