New law in Turkey sets market rolling -- Nearly 100 MW building

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Turkey's installed wind power more than doubled in June with the commissioning of the 30 MW Bares-II plant at Bandirma on the Marmara Sea coast, 100 kilometres south of Istanbul. Bares-II represents a milestone on several levels. Not only is it Turkey's largest wind development to date, it is also the first under private ownership and the first for owner-operator Bilgin Energy Investment Holdings, a power production, transmission and distribution company previously specialising in hydro generation. Bilgin Holdings developed and built the plant using 20 GE 1.5 MW turbines. It is the first power plant in Turkey to be granted a carbon emission certificate, issued by Germany's TÜV-Süd.

Prior to this, Turkey had just 20.1 MW in operation, a total that had hardly budged for six years. Now another 99.6 MW is under construction, projects totalling 1286 MW have been licensed and 4076 MW are in the permitting process according to the Turkish Wind Energy Association.

Renewables law

The reason for this surge in activity is largely due to the 2005 renewable energy law (Windpower monthly, June 2005). Under the law, from January 1, 2007, state distribution companies are obliged to buy electricity from renewable sources at a fixed price for the first seven years of operation. The price is set annually by regulatory authority EMRA, based on the average wholesale price of electricity the previous year. It currently stands at TRY 0.0834/kWh (EUR 0.0416/kWh).

There is widespread expectation the price will increase next year as Turkey urgently needs new generating capacity in the face of an anticipated electricity deficit in 2008. It is also thought that the timeframe of contracts to be lengthened from seven to ten years. The obligation ceases to apply once 8% (around 10,000 MW) of Turkey's electricity needs are met from renewables.

While in the past critics maintained the fixed purchase price was too low to attract investors, Tolga Bilgin of Bilgin Holdings argues it depends on the project and the location. "If the wind is good, the price is okay," he says. Much of Turkey has strong, steady winds, giving an average capacity factor of 30-35%, while Bares-II boasts 47.2%.

Reference point

Nevertheless, as long as electricity prices remain higher on the wholesale market, Bilgin Holdings will continue to sell its pooled hydro and wind output direct to private industry. But the renewable energy law did help get the project off the ground, Bilgin admits. "It is a good reference point for banks and the guaranteed price has made financing easier." For Bares-II, Bilgin Holdings put up 30% equity, with 60% of the debt coming from the World Bank and 40% from the French development agency under the auspices of TSKB, a Turkish investment and development bank.

Önder Demirer of Turkish wind pioneer Demirer Holding agrees that the law's main benefit has been the easing of credit. But the fixed price purchase obligation also provides producers with a useful alternative and gives them "a good bargaining position" when negotiating on the open market. Having a legal framework is also important, adds Mehmet Hanagasioglu of engineering consultant company and Turkish wind developer Interwind, based in Zürich. "The law is not everything, but it is a workable law on which we can build," he says.

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