Turkey is one of the fastest growing economies among the
emerging markets. Its 4% average growth rate throughout the last
decade catapulted her in to a class of its own among the MENA
region. However the rapid industrial development and economic
growth have increasingly been putting forward an expensive energy
bill before the country. Energy related costs are estimated to
account for half of the current account deficit of Turkey which
stands around USD$ 52 billion. Moreover dependency on foreign
energy resources serves as a problem for Turkey as its neighbors
might find themselves in a situation not able to fullfil their
commitments to Turkey either due to their own domestic shortages or
political crisis. In order to reduce the energy bill and to
decrease the foreign energy dependency, the Turkish authorities
have started to take steps to transform the energy landscape of
Turkey from a fossil fuel based one in to a one based on renewable
Tariff Incentives for the Renewable Energy
The Renewable Energy Law that was adopted at the end of 2010 was
deliberately drafted to include several incentives for the
investors to promote the development of such kind of energy
generation in Turkey. By 2020 Turkey would like to generate
20.000MW of its energy from renewable resources. In order to do so
Turkish authorities decided to re-arrange the price mechanism to
reflect the new incentives for the investors. The new tariffs
include the following rates of feed in tariffs for the renewable
energy resources; USD$ 7.3 cent for the hydroelectricity, USD$ 7.3
cent for the wind, USD$ 10.5 cent for the geo-thermal, USD$ 13.3
cent for the biomass and USD$ 13.3 cent for the solar energy
production. For the holders of the renewable energy license
facilities which had obtained their licenses before December 31,
2015 the aforementioned tariffs will be in place for 10 years.
Non-Tariff Incentives for the Renewable Energy
Moreover, in order to shift the onus from foreign imports to
domestic production, Turkish authorities provided non tariff
incentives as well. If the production of the equipments that will
be utilized in the renewable energy facilities are produced in
Turkey subsidies will be granted to the producers. The
hydroelectricity facilities will be granted USD$ 1.3 cent/kWh if
the turbines are locally produced and USD$ 1.0 cent/kWh if the
generator and the power electronics are locally produced. The wind
energy generation facilities will be granted USD$ 0.8 cent/kWh for
the local wing production, USD$ 1.0 cent/kWh for the locally
produced generator and the power electronics, USD$ 0.6 cent/kWh for
the local turbine tower and USD$ 1.3 cent/kWh for the locally
produced mechanical parts for the rotor and nacelle groups. The
photovoltaic based solar energy facilities will be granted USD$ 0.8
cent/kWh for the domestic PV panel integration and solar structural
mechanical manufacturing, USD$ 1.3 cent/kWh for the locally
produced PV modules, USD$ 3.5 cent/kWh for the locally produced PV
module forming cells, USD$ 0.6 cent/kWh for the domestically
produced inverter and USD$ 0.5 cent/kWh for the equipment that
focuses sun rays on PV modules. And finally the geo-thermal
production facilities will be granted USD$ 1.3 cent/kWh for the
locally produced steam and gas turbines and USD$ 0.7 cent/kWh for
the domestic generator and power electronics.
As Turkey needs to reduce down its energy costs and its
dependency on foreign energy resources, it has adopted a positive
attitude towards the renewable energy resources. The recent
regulations provide not only lucrative feed in tariff incentives
for 10 years but also provides the additional benefits for the
investors looking to manufacture the parts that they will utilize
in energy production. From the perspective of the investors such
incentives will be seen as a great opportunity not only because of
the rates and durations offered but also because it is being
offered by an economy that has been recording a significant and
ongoing growth rate for more than a decade. As Turkey manages to
combine strong economic growth with an increasing industrial base,
such regulatory arrangements in renewable energy sector will serve
both for the benefit of the potential investors who will make their
investments in a better regulated atmosphere and for Turkey which
will eventually benefit from declining energy costs.
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