Turkey ticks the right boxes for growth -- Strong winds, high prices and positive policy

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Once again Turkey, doubled its installed wind capacity year on year to reach 383 MW at the end of 2008, adding 191 MW to the existing 192 MW. The country's good winds and the high price of electricity on the wholesale power market are the main growth drivers. Turkey is targeting 20 GW of operating wind capacity by 2020. If all goes well, 2009 could see over 600 MW brought online (table), although developers predict a slowdown towards the end of the year as the global credit squeeze hits projects without financing in place.

Investor interest in Turkish wind power is huge. Last time the Energy Market Regulatory Authority (EMRA) briefly opened its door for applications for production licences, on November 1, 2007, it found itself flooded with 750 requests totalling 78 GW. Turkey's total generation capacity currently stands at around 42 GW. The applications have now been whittled down to 69 GW, either because the projects were in environmentally sensitive areas or because the developers withdrew.

The government is processing the rest. First, the Electrical Power Resources Survey and Development Administration will evaluate the applications on a technical basis. Of those that remain, EMRA will start issuing licences for projects that are not competing with others for land or grid access. Where projects are in competition, the Turkish Electricity Transmission Corporation (TEIAS) will auction the connection rights, awarding them to the highest bidder.

While acknowledging that auctioning grid access permits is the easiest way for EMRA to resolve the "chaos," Christian Johannes of Turkish wind firm Re-consult considers the approach a "great danger" to the sector. Few applicants have "enough quality wind data in order to properly assess the feasibility of their projects," he warns. Tolga Bilgin of Bilgin Enerji, one of the country's leading owner-operators, agrees. "Some speculative and inexperienced companies have not taken proper wind measurements or even know what the operation and maintenance costs will be, so will be bidding in the dark," he states. "If they bid low and are awarded the licence, it will block the system again."

One benefit of the auction, however, is that it will give TEIAS much-needed funds to build out the grid. In September, the system operator submitted a draft investment plan amounting to EUR 2 billion, of which over EUR 200,000 is for disbursement this year. The rate at which that happens will determine to some extent whether Turkey achieves its 2020 target. Wind project developers also argue that TEIAS could manage the grid better, such as raising the conservative load ceiling of 55% for each transformer.

As demand for electricity grows in Turkey, a supply shortage looms. Among various options under discussion is an amendment to the 2005 renewable energy law to raise the guaranteed minimum price that state distribution companies must pay for green power from EUR 0.05/kWh to perhaps EUR 0.06/kWh or more for the first five years of operation, after which it would drop back to EUR 0.05/kWh for the next five years. At the same time, a price cap of EUR 0.055/kWh would be removed and replaced with the previous year's average wholesale price. The measure would apply to all plant brought into operation before 2016.

But most wind plant owners do not sell their power at that price, preferring to chance their luck on the wholesale market. Although market prices have dropped from a high of EUR 0.09/kWh last year, observers say they are unlikely to drop below EUR 0.07/kWh. In addition, owners can augment that income by selling their carbon emission reduction certificates under the UN's Clean Development Mechanism (CDM), now that Turkey has signed up to the Kyoto protocol. Previously, owner-operators were limited to selling "voluntary emissions reduction certificates," which attract lower prices than CDM units.

A further market improvement is that developers are being given more time in which to build their projects. Previously, site permits expired a year after they had been issued for projects of 10-50 MW and 16 months for those over 50 MW. The time period is increased to two years and 32 months, respectively, with projects over 100 MW now given 40 months.

More and bigger

Turkey's two biggest wind power plant to date were installed in 2008, a 42.5 MW plant of Nordex 2.5 MW turbines built by DOST Enerji at Yuntdag, near Izmir, followed by a 60 MW project at Catalca, near Istanbul, using Vestas 3 MW turbines for Ertürk Elektrik Üretim, owned by local owner-operator Sanko Holdings (Windpower Monthly, September 2008). A 90 MW project was also due to come on line at Samli in the Baleksir-Bandirma region, south of the Sea of Marmara, but owner-producer Aksa Enerji only managed to complete 21 MW by year-end.

But all these will be put in the shade by a 135 MW installation being built this year at Bahce, in Osmaniye province, by domestic owner-operator Zorlu Enerji, marking its first wind power project. The 54 GE 2.5 MW turbines will be commissioned in stages from April through September if all goes to plan. Zorlu has permission to build another 110 MW nearby. Also this year, the Agaoglu Companies Group, active in construction, tourism and the service sector, hopes to complete its first installation, a 34 MW project at Mut, on Turkey's south coast.


Plenty of foreign investors have also been jostling for a slice of the Turkish action. Last summer, Italgen, the energy arm of Italian cement producer Italcementi, bought a 142.5 MW wind power project at Kapsut, in the Balikesir region, while Cogentrix Energy, a subsidiary of American investment giant Goldman Sachs, set up a joint venture with the Tayasi Enerji Group to build and operate power plant in Turkey, including wind plant. And at the end of the year, EDF Energies Nouvelles, the renewables unit of French utility EDF, bought a 50% share in local production and distribution company Polat Enerji, which owns half-shares in 45.5 MW of operating capacity and a pipeline of 285.7 MW for building over the next two years.

In addition to Nordex, Indian turbine manufacturer Suzlon also broke into the Turkish market last year. The company delivered 15, 2.1 MW turbines to Didim, on the Aegean coast, for Ayen Enerji, a medium-size local utility just starting out in wind energy. The project was commissioned in January. Later this year, Germany's Innovative Wind Power (IWP) should supply the first Falcon 1.25 MW wind turbines to a 19-turbine project at Turguttepe, in Aydin, under an engineering, procurement and construction contract with Sabas Elektrik for commissioning in 2010; again, this is Sabas' first wind power venture. IWP's parent, Dubai-based Innovative Energy Group, has agreed to form a joint venture with Turcas Electrik Uretim AS, a major Turkish energy company, to develop and build up to 400 MW of wind power, using Falcon turbines.

For the moment, however, German turbine supplier Enercon remains the market leader, responsible for around 40% of installed capacity. Last year, the company ramped up its rotor blade factory in Izmir to produce blades for its 2 MW machine, which it now sells in Turkey. Rumours of another manufacturer setting up locally proved true when Istanbul-based Model Enerji, founded by veterans of Turkey's energy sector, announced it had signed an exclusive contract with American Superconductor Corporation (AMSC) to manufacture and sell AMSC's 1.65 MW model in Turkey. Model Enerji is building a factory in Ankara and plans to have its first two prototypes up and running by the summer, with commercial production following soon after.

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