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Turkey

Turkey

Partnership prepares as Turkey debuts new auction system

TURKEY: A consortium comprising GE and local power producers has signed a memorandum of understanding (MoU) ahead of the launch of a new auction system.

Turkey is preparing to launch a new tender-based system (pic: GE)
Turkey is preparing to launch a new tender-based system (pic: GE)

GE, wind-power producers Borusan EnBW Enerji and Fina Enerji, and project developer Ozgul Holding have signed the MoU to make preliminary preparations to finance, construct and operate a large-scale wind project should their bid be successful.

It comes despite a lack of firm details on the "renewable-energy designated area" auction — known by its Turkish acronym, Yeka — including the location of the capacity to be tendered.

Currently, market participants are expecting tender documents to be published within weeks, with the energy ministry due to tender 1GW in wind, in line with capacity offered in the first solar PV Yeka auction in Central Anatolia's Karapinar area. Local production is expected to be a key requirement.

Ruhan Temeltas, general manager for GE's Middle East, North Africa and Turkey onshore wind energy business, anticipates the auction to draw significant competition.

"Turkey is a major energy market, has rapidly growing demand for energy, and all our competitors are here," Temeltas said. It would be premature to estimate the size of a potential investment, she added.

"I believe they will broaden the number of players in the market if they do these large-scale projects," said Ian McGrath, a partner at the Istanbul office of law firm Dentons.

"What might have an impact on bidding is the appetite for getting involved in local manufacturing," he added.

The tender is expected to require the winning bidder to establish a factory in Turkey to build a sizeable portion of turbines used in the project.

Price adjustment

One major reason for the new tender system — which will see a 15-year fixed tariff awarded to a consortium through a reverse auction — is Turkey's increasingly expensive feed-in-tariff system, explained Ibrahim Oezarslan, managing director of Nordex Turkey.

Spot power prices have fallen to the equivalent of about $0.04-0.045/kWh, well below the base ten-year feed-in-tariff price of $0.073/kWh, which may be supplemented for five years, depending on the degree of local content.

"The Ministry of Energy has come up with the Yeka concept to increase competition on price, have much more local content production and to assign a big volume to allow it to reach its 2023 targets," said Oezarslan.

The Turkish government is targeting 20GW of wind by 2023, from 6.1GW at the end of 2016. Oezarslan expects Turkey could increase wind capacity by 700-800MW this year, after adding more than 1.3GW in 2016.

According to Turkish Wind Energy Association figures, 862MW in wind farms were under construction this January, down from 1,869MW a year earlier, amid a declining number of licensed projects.

Indeed, as investors await the Yeka tender, some are disgruntled by the lack of news on long-delayed grid capacity auctions for 3GW, the final step in a 2015 tender.

A further 2GW previously set to be tendered this year has now been postponed until 2018, amid speculation the government is waiting to see whether the Yeka system proves successful.

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