Occasional Papers Series - No.10/2009 (June 2009)
Renewing energy and
investments: the role of Turkey*
| Luca Battiato June 2009 The effects of global warming and pollution created by industrial wastes have raised a big debate about the use of renewable energies and the investments to be developed in Turkey in this promising sector. Turkey has a diverse range of energy resources but remains an importing State: more than half of its energy needs come from other countries. The same process of saturation of internal energy resources involves the realization, in a foreseeable time, of a transition process toward the use of renewable sources. |
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The energy
market
The type of energy which is considered the renewing source per excellence is Hydroelectric. It is inexhaustible and not polluted, plus it has the most economic advantages. In Turkey just one third of suitable sites have been exploited. Apart from being a non-polluted resource, hydroelectric dams are very important for controlling water floods and the regulation of water supply, especially in the Black Sea region which is rich in regards to rivers and altitude.
The number of private hydroelectric power plants is increasing progressively (electricity demand increases 8/9 percent every year), thanks to the trust the government has shown to private actors through regulations that help and ease private investments in this sector. The Energy Market Regulation Agency has said, underlining that Turkey’s target will be making the private sector the only player in terms of electricity distribution by 2020.
Secondly Turkey is among the richest countries in terms of Geothermal potential, since it is located on one of the biggest geothermal fields: the Mediterranean volcanic belt.
In Turkey, more than 1000 sources of geothermal energy have been identified. The actual usage of geothermal energy is low compared to its potential. A complete cover would make Turkey achieve 12,7% of its energy needs.
Six geothermal fields have been recently spotted in the southwest area of the country that are proper for power production: the Germencik-Aydin fiel in Aydin Province, the Canakkale-Tuzla, the Izmir-Sefirihiser field and the Dikili-Bergama field in Izmir, the Aydin-Salvatli field in Aydin Province, the Kutahya-Simav field in Kutahya Province.
A very important aspect of Turkey’s Energy Market is Solar Energy, thats energy potential corrisponds to the equivalent of 1,2 milions of tons of petrol. Apart form reducing the emission of CO2 in the atmosphere, this kind of energy improves the quality of water thanks to its low environmental impact.
Wind energy and foreign investors over the territory
The most important aspect linked to the energy situation in Turkey is the fact that the country does not have domestic suppliers. Moreover, Being a dependent State is aggravated by financial crises that the Country has to face.
A second interesting point concerns the security of suppliers. For example, the fact that Iran, second supplier to Turkey, has recently closed one of its natural gas pipelines puts the energy autonomy of the Country at risk and points out the need of renewing sources of energy to be exploited over the territory.
The French Company “Akuo Energy” has announced that will carry out a project that plans the construction of an aeolian plant by the end of the year, after receiving the license from the “Energy Market Regulatory Authority”, in the central zone of Anatolia. The French Company has underlined that will offer 2 million dollars to be invested in renewing energy in Turkey.
Another European company, German based“Epuron”, is interested in investing in the construction of 10 aeolian plants in the Country. After receiving permission from the Energy Market Regulatory Authority, they will start buiding in Izmir, Balikesir and Bursa; All areas where the presence of wind creates big investment possibilities in the region.
An event to be noted is the agreement signed in 2007 with the State by the American Company “General Electric” for the installation of 52 aeolian turbines. The government has carried out a policy of regulation regarding the debate of renewing energy in line with the requirements of European Union. The renewableEnergy Market has a potential of more than 300 million dollars, due on the one hand to the constant decline of sources like petrol and gas, on the other hand to the necessity to face the big problem of global warming. The Country Energy need, in fact, increases every year by 7-8%.
Among the biggest companies aiming to invest in the renewing energy sector there is “Statkraft”; Norwegian firm which one month ago has invested in about 1,2 million dollars in Hydroelectric plants. We should note also the agreement fulfilled by “TPAO”, the turkish oil corporation, the “ExxonMobil” and “EOG”, regarding the possibility to increase the exploitation of hydrocarbons reserves. Plants will be set in the south-east region of Turkey and close to the Black Sea where other plants are already present.
Turkish Government, from this viewpoint, seems to be inclined to boost the investments in this sector and to reduce the energy dependence from abroad. This explains the decision to achieve a policy of liberalizion in order to enhance the production of energy through private investments. This would improve first of all the efficiency of companies and second the benefits of consumers thanks to the droop of prices.
When first prime minister Erdogan declared that 2008 would have been the “Year of the Energy”, some important rules have been introduced to face this problem, like the “transportations law” in order to reduce pollution, and the heating in the houses, since that more than 70% of the energy used in buildings has been spent for heating.
Government reaction
Regardless of the financial crisis, Turkey has not hesitated in undertaking a nuclear programme. The Country has declared that in September 2009 there will be the first bid for the construction of a nuclear plant, to be built in Akkuyu on the Mediterranean coast. Nuclear power would bring benefits to the country in terms of energy demand, reaching the 20% by 2030.
From a political point of view, the appointment of Ahmet Davutoglu as minister of foreign affairs must be noted.His attention to the Middle East rather than Western Countries has not stopped the attention from european and american investors to Turkey. If in the past, islamic tendencies inside the government have created big financial problems and the reduction of direct investments over the territory, the actual situation regarding the energy market does not result altered. Turkey keeps accruing a regulating policy in line with Europe, encouraging private investors with strong tax breaks. From the other hand Turkey keeps dialoguing with eastern states like Syria and Iran. From a point of view tightly linked to the renewing energy debate, the role of Turkey as a “bridge” between East and West does not create ant kind of risk for profitable investments on the territory.
Government has allowed loans to the energy sector that will amount to approximately 130 million dollars in 2020.With these incentives and the support of banks, foreign companies are able to fulfill new projects for improving the renewing energy market. “Garanti Bank” for example has given 1,5 billion of dollars for energy projects. The national “Bank of Turkey” said that the amount of money provided for this kind of market reached 800 million dollars for more than 20 projects linked to the wind energy.
In general, today, loans are basically distributed for hydroelectricity projects and second for wind power, since the last one has to be developed regarding the geographical area where wind is stronger. In line with this is “Yapi Kredi” that is giving 1,3 million dollars in loans for energy projects. Besides the fact that industrial production is blunting progressively due to the crisis, domestic and foreign banks keep providing loans for these types of projects, underlining the fact that investments in the energy market have been lightly affected with the economic situation.
Conclusion
As we have noted throughout this paper, the energy market in Turkey is developing rapidly. At the present moment we can spot three main aspects that make Turkey a promising country regarding renewing energies. First af all the strong necessity to become an independent State in terms of suppliers, by reducing the support from foreign countries. Second, Turkey is geographically suitable for developing an energy market in line with European standards. Third, the political situation does not influence the growth of this market since the government and banks are showing themself very open by encouraging foreign investments to the Country.
*Le opinioni espresse nel presente saggio rappresentano l'interpretazione dell'autore e non riflettono necessariamente quelle di ICTS.
E’ vietata ogni riproduzione totale o parziale del testo non espressamente autorizzata.
The type of energy which is considered the renewing source per excellence is Hydroelectric. It is inexhaustible and not polluted, plus it has the most economic advantages. In Turkey just one third of suitable sites have been exploited. Apart from being a non-polluted resource, hydroelectric dams are very important for controlling water floods and the regulation of water supply, especially in the Black Sea region which is rich in regards to rivers and altitude.
The number of private hydroelectric power plants is increasing progressively (electricity demand increases 8/9 percent every year), thanks to the trust the government has shown to private actors through regulations that help and ease private investments in this sector. The Energy Market Regulation Agency has said, underlining that Turkey’s target will be making the private sector the only player in terms of electricity distribution by 2020.
Secondly Turkey is among the richest countries in terms of Geothermal potential, since it is located on one of the biggest geothermal fields: the Mediterranean volcanic belt.
In Turkey, more than 1000 sources of geothermal energy have been identified. The actual usage of geothermal energy is low compared to its potential. A complete cover would make Turkey achieve 12,7% of its energy needs.
Six geothermal fields have been recently spotted in the southwest area of the country that are proper for power production: the Germencik-Aydin fiel in Aydin Province, the Canakkale-Tuzla, the Izmir-Sefirihiser field and the Dikili-Bergama field in Izmir, the Aydin-Salvatli field in Aydin Province, the Kutahya-Simav field in Kutahya Province.
A very important aspect of Turkey’s Energy Market is Solar Energy, thats energy potential corrisponds to the equivalent of 1,2 milions of tons of petrol. Apart form reducing the emission of CO2 in the atmosphere, this kind of energy improves the quality of water thanks to its low environmental impact.
Wind energy and foreign investors over the territory
The most important aspect linked to the energy situation in Turkey is the fact that the country does not have domestic suppliers. Moreover, Being a dependent State is aggravated by financial crises that the Country has to face.
A second interesting point concerns the security of suppliers. For example, the fact that Iran, second supplier to Turkey, has recently closed one of its natural gas pipelines puts the energy autonomy of the Country at risk and points out the need of renewing sources of energy to be exploited over the territory.
The French Company “Akuo Energy” has announced that will carry out a project that plans the construction of an aeolian plant by the end of the year, after receiving the license from the “Energy Market Regulatory Authority”, in the central zone of Anatolia. The French Company has underlined that will offer 2 million dollars to be invested in renewing energy in Turkey.
Another European company, German based“Epuron”, is interested in investing in the construction of 10 aeolian plants in the Country. After receiving permission from the Energy Market Regulatory Authority, they will start buiding in Izmir, Balikesir and Bursa; All areas where the presence of wind creates big investment possibilities in the region.
An event to be noted is the agreement signed in 2007 with the State by the American Company “General Electric” for the installation of 52 aeolian turbines. The government has carried out a policy of regulation regarding the debate of renewing energy in line with the requirements of European Union. The renewableEnergy Market has a potential of more than 300 million dollars, due on the one hand to the constant decline of sources like petrol and gas, on the other hand to the necessity to face the big problem of global warming. The Country Energy need, in fact, increases every year by 7-8%.
Among the biggest companies aiming to invest in the renewing energy sector there is “Statkraft”; Norwegian firm which one month ago has invested in about 1,2 million dollars in Hydroelectric plants. We should note also the agreement fulfilled by “TPAO”, the turkish oil corporation, the “ExxonMobil” and “EOG”, regarding the possibility to increase the exploitation of hydrocarbons reserves. Plants will be set in the south-east region of Turkey and close to the Black Sea where other plants are already present.
Turkish Government, from this viewpoint, seems to be inclined to boost the investments in this sector and to reduce the energy dependence from abroad. This explains the decision to achieve a policy of liberalizion in order to enhance the production of energy through private investments. This would improve first of all the efficiency of companies and second the benefits of consumers thanks to the droop of prices.
When first prime minister Erdogan declared that 2008 would have been the “Year of the Energy”, some important rules have been introduced to face this problem, like the “transportations law” in order to reduce pollution, and the heating in the houses, since that more than 70% of the energy used in buildings has been spent for heating.
Government reaction
Regardless of the financial crisis, Turkey has not hesitated in undertaking a nuclear programme. The Country has declared that in September 2009 there will be the first bid for the construction of a nuclear plant, to be built in Akkuyu on the Mediterranean coast. Nuclear power would bring benefits to the country in terms of energy demand, reaching the 20% by 2030.
From a political point of view, the appointment of Ahmet Davutoglu as minister of foreign affairs must be noted.His attention to the Middle East rather than Western Countries has not stopped the attention from european and american investors to Turkey. If in the past, islamic tendencies inside the government have created big financial problems and the reduction of direct investments over the territory, the actual situation regarding the energy market does not result altered. Turkey keeps accruing a regulating policy in line with Europe, encouraging private investors with strong tax breaks. From the other hand Turkey keeps dialoguing with eastern states like Syria and Iran. From a point of view tightly linked to the renewing energy debate, the role of Turkey as a “bridge” between East and West does not create ant kind of risk for profitable investments on the territory.
Government has allowed loans to the energy sector that will amount to approximately 130 million dollars in 2020.With these incentives and the support of banks, foreign companies are able to fulfill new projects for improving the renewing energy market. “Garanti Bank” for example has given 1,5 billion of dollars for energy projects. The national “Bank of Turkey” said that the amount of money provided for this kind of market reached 800 million dollars for more than 20 projects linked to the wind energy.
In general, today, loans are basically distributed for hydroelectricity projects and second for wind power, since the last one has to be developed regarding the geographical area where wind is stronger. In line with this is “Yapi Kredi” that is giving 1,3 million dollars in loans for energy projects. Besides the fact that industrial production is blunting progressively due to the crisis, domestic and foreign banks keep providing loans for these types of projects, underlining the fact that investments in the energy market have been lightly affected with the economic situation.
Conclusion
As we have noted throughout this paper, the energy market in Turkey is developing rapidly. At the present moment we can spot three main aspects that make Turkey a promising country regarding renewing energies. First af all the strong necessity to become an independent State in terms of suppliers, by reducing the support from foreign countries. Second, Turkey is geographically suitable for developing an energy market in line with European standards. Third, the political situation does not influence the growth of this market since the government and banks are showing themself very open by encouraging foreign investments to the Country.
*Le opinioni espresse nel presente saggio rappresentano l'interpretazione dell'autore e non riflettono necessariamente quelle di ICTS.
E’ vietata ogni riproduzione totale o parziale del testo non espressamente autorizzata.