24 Ocak 2011 Pazartesi

Turkey alternatives: A flawed renewables law

The Economist Intelligence Unit 

Turkey's new renewable energy law aims to boost renewable energy use and the domestic sector, but critics say it has a number of flaws.

Turkey's new renewable energy law - details of which were published on January 10 has replaced a flat rate tariff of between 5 euro cents and 5.5 euro cents with a range of tariffs tailored to the expected requirements for the development of different types of renewable energy (see table 1 at bottom).

As had been widely expected, the new tariffs were far lower than those included in a previous draft of the law sent to parliament in late 2009 (see table 1) and blocked by the Turkish treasury for fear that they would have an inflationary effect on retail power prices.

What had not been expected though was that the currency in which the tariffs are quoted would be changed from Euro cents to US cents; that a lengthy list of additional tariff increments would be made available to developers who choose to use locally made Turkish equipment in their plant; and that limits would be introduced on the volume of solar plant which can be licensed.

The resulting law has surprised most developers but provoked mixed responses, with wind and hydro power developers unhappy that not enough is being done to promote new projects, while those developing geothermal and bio-fuel projects are already announcing new investment.

The change from euro cents to US cents has not been officially explained, but is thought to have been made to bring renewable costs in line with thermal plants whose fuels are priced in US cents.

However both developers and financiers have criticised the move as an unnecessary complication. They point out that projects which have already been drafted will need to be re-drafted in US cents, a process which will be complicated by the fact that much specialised equipment for renewable plant is sourced in Europe and sold in euros � meaning projects would also require currency hedging.

Home supporters
There was further surprise by the inclusion early in the legislative process of subsidies aimed at boosting the amount of locally-manufactured equipment, with support varying from half a US cent up to 9.2 US cents.
Reactions to proposed tariffs have been mixed. Companies developing biomass and bio-fuels plants, which can be built largely from locally-made equipment, should have a particular advantage if they also can access their own fuel sources. Turkey's huge poultry sector, for example, could see substantial development of plant powered from methane sourced from chicken droppings.

Similarly, positive responses have come from developers of geothermal plant. One company, BM Muhendislik, which holds the largest acreage of drilling rights for geothermal resources in Turkey, has already confirmed that it will commission its first 15MW geothermal plant this year. BM also reports that it is also close to a final investment decision on the world's first hybrid geothermal-concentrated solar plant, which will take water at 70C from a geothermal well and heat it to 120C using solar reflectors, generating power from the steam produced.

However, responses from companies looking to develop photovoltaic solar plant have been less enthusiastic. They point out that much of the equipment they need is not produced in Turkey, forcing them to use imported equipment, and that the limit of 600MW set on the volume of solar plant which can be awarded licenses by 2013 will not encourage the development of local production.

Further criticism has come from developers of wind and hydro plant who complain that the basic tariffs for their plant have not been raised from the previous 5.5 euro cents, which is below the price of power on Turkey's open market for all but two months of the past five years. So far, no developers have actually applied to be paid the guaranteed tariff.

According to wind developers the additional increments available (four increments up to a total max of 3.7 US cents) - offer little extra help. They point out that much of the equipment that constitutes a wind plant is not produced locally, and without which the total available tariff will not exceed the existing market price � currently 6.5 euro cents.

Developers concede that any increase in the available guaranteed tariff will help them raise commercial credit but they're not optimistic that terms and conditions will improve.

While there does seem a good chance that international turbine producers will invest in local production, it may be two years at least before any turbines are available, a delay that could seriously affect Turkey's chances of meeting its planned targets of having 10,000MW of installed wind capacity by 2020 and of meeting 30% of power demand from renewables by 2023.


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