Turkey's relatively new wind power market is clipping along at a fine pace. So far this year, 231 MW has come on line, bringing total operating capacity to 421 MW. By year's end at least another 140 MW should be up and running, at a conservative estimate (table), nearly double the 109 MW of capacity added in 2007 and a big improvement on the 64 MW in 2006. The pressure is now on the Energy Market Regulatory Authority (EMRA) to start issuing new licences in time to prevent a slow-down once all the permitted projects still in the pipeline from previous rounds -- roughly 3400 MW -- have been completed. If growth continues at present rates, it is possible that much of this could be turning by 2012.
A huge volume of projects are lined up in the queue for contracts. On November 1 last year, EMRA briefly ended a 16-month ban on requests for production licences, the first stage in the permitting process, and was instantly deluged with applications. By the end of the day the authority was reeling under production licence requests for 750 projects totalling 78,000 MW. It has since eliminated around 8000 MW from the queue, mainly duplicate applications or for environmental reasons. For the rest, while EMRA is not giving any promises, the signs are that it is progressing quicker than expected. Some local observers predict the first licences could be issued next year, albeit a limited number.
Where several companies are competing for access to one substation, it is likely that EMRA will ask them to tender for the connection rights. Not only is grid capacity extremely limited in many of Turkey's wind-rich regions, but the Turkish Electricity Transmission Corporation (TEIAS) also imposes a conservative load ceiling of 55% for each transformer, though this may be raised in future.
Lack of transmission capacity is already proving a problem in some areas. In the Cesme peninsula, which boasts the country's highest wind potential, licences have been issued for 15 projects with a combined capacity of 426 MW. Nothing can happen, however, until a new transmission line is in place. Rather than TEIAS building the 53 kilometre, 400 kV line and substation, the present plan is for the licence holders to do it themselves, at an estimated cost of EUR 10 million. Given TEIAS's limited budget and the scale of the investment needed countrywide, such an arrangement is common in Turkey, where the law provides for the cost of the investment to be recouped over ten years from reduced transmission fees. A project of Nordex machines installed at Yuntdag near Izmir this year included construction of a 23 kilometre high-tension line.
If EMRA starts issuing licences in 2009, it is unlikely that many projects will start building before 2011, particularly if turbines are still in short supply. Tolga Bilgin of Bilgin Enerji, one of the country's leading owner-operators, remains nonetheless optimistic that development will continue pretty much at current rates. Looking forward, he predicts 15,000-20,000 MW could be online by 2018, if not before. The government's target is a more modest 12% of electricity consumption to be generated from renewable sources by 2020, with wind power expected to contribute at least 12,000 MW.
In addition to Turkey's generally very favourable wind regime -- with wind farms registering a high average capacity factor of 30-35% -- the main market driver is the high price paid for electricity on the wholesale market. Most wind power operators choose to sell their output directly on the open market, rather than accept the state-guaranteed purchase price for wind power, which is only just sufficient to make projects financially viable in certain locations in the windiest regions. At TRY 0.0913/kWh (EUR 0.0518/kWh) for a ten-year contract period and a guaranteed minimum and maximum price of EUR 0.05/kWh and EUR 0.055/kWh to limit the risk of currency fluctuations, the fixed price compares poorly with the average spot price over the last two years: around EUR 0.75/kWh.
Operators are also looking at selling carbon credits to boost revenues. Up to now these have taken the form of "voluntary emissions reduction" certificates, since Turkey is not a signatory to the Kyoto Protocol. As a result, companies are not eligible for the higher-priced Carbon Emission Reduction certificates. That could change as Turkey moves closer to joining the Kyoto signatories.
Turkey's biggest wind project to date is a 90 MW installation at Samli, in the northwest Balikesir region, being commissioned this month by Aksa Enerji, while in July, local owner-operator Sanko Holdings completed its 60 MW plant at Catalca, near Istanbul, also using Vestas turbines (page 8). Meanwhile, Nordex delivered its first machines in Turkey to Yuntdag, in difficult, mountainous terrain near Izmir, where DOST Enerji inaugurated a 42.5 MW station earlier this year.
Another new market entrant from the manufacturing side is Indian turbine maker Suzlon, which is installing 15, 2.1 MW units at Didim, in the Aydin region, south of Izmir. The project, developed and owned by Ayen Enerji, a medium-size local utility also dipping its toes in the market for the first time, should be connected by the end of October.
Falcon turbines, designed by Germany's Innovative Wind Power (IWP), a subsidiary of Dubai-based Innovative Energy Group (IEG), are also now being imported into the country. The first 19 Falcon 1.25 MW units will be delivered to a project at Turguttepe, also in Aydin, early next year under an engineering, procurement and construction contract with Sabas Elektrik; again, the project is Sabas' first venture in to wind energy. IWP also recently closed a deal for 24 MW to be completed late 2009, while its parent IEG has agreed to form a 50-50 joint venture with Turcas Electrik Uretim AS, a major Turkish energy company. They plan to develop and build up to 400 MW of wind power, with turbines from IWP.
Major German turbine supplier Enercon has played a lead role in Turkish wind power from the very beginning. It is now ramping up its rotor blade factory in Izmir to produce blades for its 2 MW machine, which it is now selling in Turkey. There are rumours that other big turbine manufacturers are sniffing around with an eye to building factories locally. Domestic companies are also said to be thinking of plunging in, either by developing their own turbines or, more likely, buying a licence from an already established player.
On the project investment front, Italgen, the energy arm of Italian cement producer Italcementi, bought a 142.5 MW project from Bilgin Enerji in July. Located at Kapsut in the Baleksir region, it is the country's largest project licensed to date. The move is part of Italgen's strategy to acquire a critical mass in its target markets, including Turkey, where it aims to build 150-200 MW of operating capacity, focusing on renewable resources and especially wind. According to CEO Giuseppe de Benti, Italgen is also keen on obtaining the associated carbon emissions certificates in order to offset its energy intensive cement facilities.
Cogentrix Energy, a wholly-owned subsidiary of American investment giant Goldman Sachs, recently announced that it, too, was entering the market, representing its first ever investment outside North America. Cogentrix has signed an agreement with local company Tayasi Enerji Group to set up a 50-50 joint venture to build and operate power generation projects in Turkey, "targeting the eventual completion of several thousand megawatts of clean, efficient domestic generation for the growing needs of the Turkish energy market." While the company will focus initially on hydroelectric generation, it also plans to develop thermal and wind power. The Turkish media report the company is considering as much as 1000 MW of wind, though this is unconfirmed.
A local company with its first wind power project under its belt is Lodos Elektrik, owned by textile and energy group Alto Holding. Last month it connected a modest 24 MW plant at Gaziosmanpasa, near Istanbul, consisting of 12 Enercon 2 MW turbines. Enercon also plans to install another 60 of the units for Lodos on the Karaburun peninsula, northwest of Izmir, by 2010. "We see excellent opportunities in the Turkish market," says Enercon's Holger Bohlen, summing up the decidedly optimistic mood among investors.