Turkish minister praises local content

TURKEY: Turkey needs major investments in wind and other renewable-energy sources in the next decade as it seeks to double power generation amid strong growth in energy demand, said Turkish deputy energy minister Hasan Murat Mercan.

Non-domestic: Nordex blades ready to be shipped from Rostock, Germany, to Turkey
Non-domestic: Nordex blades ready to be shipped from Rostock, Germany, to Turkey

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Mercan told the European Wind Energy Association annual conference last month that the country must spend some $10 billion annually through to 2023 to boost overall power capacity from 55GW to 110GW, with wind capacity targeted to rise nearly tenfold to 20GW. (For more, see 'manufacturers take pragmatic view'.

Mercan added that "the (Turkish) wind industry must be as domestic as possible" as it grows. One way Turkey's government has sought to encourage this is by offering a higher feed-in tariff (FIT) of up to $0.11/kWh for five years if the entire turbine is manufacturerd in Turkey.

Tower production

Turkey already has a thriving tower production business, and blades can also be sourced locally. The highest FIT theoretically now available using these components is $0.087/kWh.

But there has not yet been a rush to produce other turbine parts locally. Local content legislation is not yet crystal clear, and some investors say it makes more financial sense to import machinery to Turkey and take advantage of export credit financing benefits this may bring.

Most industry participants believe more needs to be done, including the development of a more bankable incentive mechanism, if Turkey is serious about attracting investments and reaching its ambitious wind targets.

Low tariff

Turkey's wind energy sector has grown despite the lack of a strong incentive system. A FIT - set at $0.073/kWh, available for ten years and not adjusted for inflation - has been used rarely as market prices for power have been higher. On the downside, this means banks have shied away from project finance and the field of investors has been limited.

"A higher feed-in tariff is critical to establish a healthy financing market and meet the 20GW target," said Ibrahim Erden, business development manager at Turkish utility Enerjisa, who also stressed the importance of other issues, such as streamlining the permitting process, providing clarification on local content subsidies, granting additional wind licenses and strengthening national infrastructure.

"Our company does not directly rely on a feed-in tariff because we have a large portfolio with hydroelectric power and gas, which we can use to balance," Erden said. "But being open to these balancing risks can be a problem if your portfolio is not large and flexible enough."

Obtaining a higher tariff may be difficult in the near term after some developers agreed to pay exorbitant fees for grid connections. However, the general consensus is that these particular projects are economically unfeasible and will not be built. Meanwhile, a tender for additional capacity is expected to be launched later this year.

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