Turkey is not short of ambitions for infrastructure projects. In October 2018, it opened the world’s largest airport (“Istanbul Airport”). 2016 was marked by the unveiling of the world’s largest suspension bridge, connecting Asia to Europe and crossing the Bosphorus Strait.
Turkey is also planning to build a 45 km navigation channel parallel to the Bosphorus, which would rival the Panama and Suez canals.
According to the Ministry of Energy and Natural Resources, Turkey ranks only behind China in its thirst for energy. Energy demand has increased by 7% per year from 1990 to the present day. Despite an 80% increase in electricity production over the past decade, including a 90% increase in renewable energy capacity, Turkey is still struggling to meet its electricity generation needs.
Turkey is also working to reduce its dependence on $ 55 billion in fossil fuel imports, which account for 77.5% of its energy needs.
Natural gas from Russia and coal from various foreign sources contribute to a one-and-a-half times Turkey’s overall current account deficit, which points to a long-term economic vulnerability.
Renewable energies play an important role in Turkey’s energy independence. Earlier this year, Turkey announced a tendering process for the world’s largest offshore wind farm. The offshore plant, estimated at $ 2 billion, will have a capacity of 1,200 MW, about double that of the London Array, which holds a record, and will be located in the Aegean, Marmara or Black seas.
At the same time, Turkey plans to launch four 250 MW wind energy tenders by the end of the year for four plants with an investment volume of around $ 1 billion. This follows a 1,000 MW tender launched last year, which resulted in a record feed-in tariff of $ 3.48 per kilowatt-hour (kWh) proposed by the Siemens-Türkerler-Kalyon consortium highlighting the competitiveness of the wind energy sector in Turkey.
With the second largest solar potential in Europe behind Spain, Turkey also has impressive targets for photovoltaic capacity. The Turkish association for solar energy, Günder, predicts that photovoltaics will reach a cumulative capacity of 14 GW by 2023. This seems a steep slope to climb, with Turkey starting from an installed base of only 5 GW . However, the country added a solar capacity of 2.5 GW in 2016-2017; he organised a 1 GW solar auction in 2017; and announced a 100-day energy action plan in August, which included $ 3.8 billion of investment in solar tenders.
Aside from government-sponsored projects, the vast majority of solar capacity comes from unlicensed projects, that is, those with a capacity of less than 1 MW that are not the result of a competitive bidding process.
Private actors like Akfen Renewable Energies are also taking charge of the fate of renewable energies in the country. The company obtained $ 363 million from the EBRD, Germany’s KfW IPEX, and a series of Turkish banks to build nine new solar power plants with a combined capacity of 85 MW and four wind farms totalling 242 MW.
All of this is part of Turkey’s goal of producing 50% of its electricity from clean sources by 2023.
In August 2018, Turkey reached 31% of its renewable electricity production. However, this figure is only 3% higher than 2013, suggesting that the 50% target will take much longer to reach. Renewables’ intermittency makes coal a necessity.
The cost of managing the intermittence is one of the main obstacles to achieving an energy mix comprising 50% renewable energies.
Scientists have estimated that when intermittent sources reach 20 to 30 percent of the energy mix, balancing costs can add up to 30 to 50 percent to the cost of the renewable energy facilities themselves. As a result, non-intermittent sources of energy – fossil fuels, nuclear power, or hydro – will have to be used until energy storage costs drop significantly.
Turkey has also more or less exhausted its hydropower generation capacity and is not rich in oil or natural gas. Turkey plans to build three nuclear power plants, which aim to generate 15% of its electricity production, but these will not be ready until around 2030.
In the short term, it seems that Turkey has not no choice but to invest heavily in its only source of domestic energy – coal. The Afşin-Elbistan power plant, located in southern Turkey, in the Elbistan district of Kahramanmaraş, is expected to become the largest coal-fired power plant in the world. 80 new coal plants are under construction, which equates to the UK’s total capacity.
Only India and China, with a much larger population, match Turkey’s projected growth in coal production. Turkey already imports nearly 40 million tonnes of coal a year from, for example, the United States, China and Australia. Imported coal generally has a calorific value 20-30% higher than that of Turkish varieties. Therefore, in order to make national coal more competitive, it is heavily subsidized.
Coal projects regularly benefit from free public land, exemption from corporation tax and tariffs, a 50% reduction on electricity bills and public financing of salaries, bonuses and insurance and interest on investment loans.
To add to its sustainable energy challenge, Turkey’s recent economic problems could further limit the development of renewable energies.
The lira has fallen sharply in 2018 and may deter foreign investors who play a crucial role in the development of the sector. The state-owned public network TEIA grid announced in July only 18 MW of new unlicensed photovoltaic capacity. In comparison, 1.1 GW of new capacity was generated in the first months of the year. The government has authorized foreign currency loans for approved unlicensed photovoltaic projects of up to 1 MW.
However, if the volatility of the currency persists, it may not be enough to prevent a drop in foreign investment and to ensure that ambitious renewable energy targets are out of reach.
Turkey is emblematic of a larger enigma facing many emerging economies. Even when governments want to switch to renewable energy, they may still have to deploy polluting sources of energy such as coal to address intermittency problems.
For example, coal consumption in Asia increased by 3.1% per year from 2006 to 2016, accounting for almost three-quarters of global demand.
India, a signatory to the Paris Agreement on Climate Change, consumed an additional 27 million tonnes of coal in 2017, an increase of 4.8%, which helped boost global coal consumption the first time in four years.