Wind farms in Turkey, a deliberately lost opportunity?

Recently, the two-year anniversary of the Energy Market Regulatory Authority (EPDK) accepting applicants for wind farms came to pass. On Nov. 1, 2007, the EPDK issued a call for license applications for wind farms and quickly stopped accepting them less than 24 hours after the call was made. The EPDK received license applications totaling 78,000 megawatts (MW), nearly twice the amount of the total electricity produced from all sources. None of these applications have yet to be approved, in a two-year delay that has frustrated many but also given hope to new investors. At RENEX 2009, a renewable energy fair held in İstanbul on Nov. 5-8, many new domestic and international entrants to the Turkish wind energy sector were excited to start investing in Turkey.

“Turkey has 50,000 MW of wind potential, more than the total amount of electricity produced from all sources in Turkey,” said Zafer Hamamizade from Türkwind, a newcomer to the field looking to produce small-scale wind power projects for factories. İlknur Türkeli Civelek, a partner in the firm İhsan Türkeli, which is a partner of the Germany-based BBB Umwelttechnik, a wind energy consultancy firm, expressed her enthusiasm for the Turkish wind energy sector, noting that “Turkey is not rich in fossil fuels or other nonrenewable energy sources, but it is rich in renewable energy, especially wind.”

Speaking to Sunday’s Zaman, Tanay Sıdkı Uyar, vice president of the World Wind Energy Association and professor of energy technologies at Marmara University, expressed his views about the current state of wind energy in Turkey and revealed that the delay has much deeper roots than just bureaucracy.

Law No. 5346, dealing with electricity production from renewable sources and enacted in 2005, is still in effect. This law guarantees electricity producers who produce from renewable sources that the government will buy the electricity generated at 5.5 euro cents per kilowatt-hour. This implies that if they cannot find buyers in the market, the government is willing to present itself as a buyer. However, this law “didn’t make practical sense, as you could sell electricity on the free market for 7.5 cents. Since wind producers were presented with guarantees under the free market price, banks found them to be risky investments without a strong government backing. So they had difficulty obtaining credit from banks,” noted Uyar. Even given this potential difficulty “the bill focused mainly on wind because of its inexpensiveness and efficiency. Wind farms run at 30 percent of capacity, which means they can sell electricity for less than 5.5 cents and still make a profit. This does not, however, solve the problem of obtaining credit.”

Currently, an updated version of the bill with new guarantees is making the rounds in Parliament. The new regulation would guarantee 8 cents per kWh for electricity produced from wind, a guarantee comparable to electricity prices in the free market. However, the revisions have been floating around Parliament for months without any concrete steps toward their realization. This delay, on top of the two-year delay since the call for applications on Nov. 1, 2007, will continue “for at least another two years,” according to Ata Ceylan, head of the İstanbul Chamber of Commerce (İTO) Energy Committee. He notes that “the lack of a technological or methodological roadmap” along with “a need to define how this wind farm network will connect to the infrastructure” is delaying the process even further. According to Ceylan, although the current administration is working to put forth a roadmap that will sift through the more than 70,000 MW of applications and lay the foundations for future licensing requests, the relatively recent handing of the torch to Hasan Köktaş in the beginning of 2008 meant a reorganizing of the EPDK that halted the already delayed process of distributing licenses.

Uyar points to deeper reasons for these delays, and one that is especially relevant to the recent energy policies in Turkey and in the region. Speaking on the reasons behind the government’s delay in supporting wind farms, Uyar pointed to the binding long-term natural gas, coal and petroleum contracts. Since contracts are based around the purchase-or-pay standard, which requires the resource-buying party to pay for the goods, regardless of whether or not they are consumed or even delivered, it makes it incredibly expensive to go outside of the contract limits. Recently, state-owned Turkish Pipeline Corporation (BOTAŞ) paid $704 million to Iran for undelivered natural gas, which went unused because of the plummeting demand due to domestic price hikes reaching 75 percent in 2008. If consumption does not increase this year, BOTAŞ expects to pay an additional $2 billion. On the same note, due to a revision demanded by Azerbaijan to the natural gas agreement between the two countries, Turkey could be forced to pay even more for natural gas that has already been consumed. Even with these new cost hikes, BOTAŞ still managed to post TL 3 billion ($2 billion) in profits in the first 10 months of 2009, shattering its 2009 expectations twofold.

According to Uyar, contracts like these lock the government into purchasing dirty fuels for long periods of time, sometimes more than 20 years. Moreover, Turkey’s business activities in nonrenewable resources like natural gas meant that various parties have vested interests in furthering the status quo.

Europe, on the other hand, has shut down many polluting energy plants, with Germany completely halting the construction of thermal power plants. Although this is great progress, it does have its disadvantages for Turkey. Uyar notes that countries which are abandoning such dirty technology are “dumping them” on countries like Turkey, which has credit and treasury guarantees in place for energy produced from such outdated dirty technologies. Uyar continued by stating that “these kinds of arrangements are actually in line with the privileged status that Turkey has with European nations. If we don’t buy and consume these pollutant fuels, then we will have to pay for them anyway due to the long-term purchase-or-pay contracts that we’ve signed. There is a Mobil power plant in Samsun that was shut down because it was causing great harm to its environment, causing death, in fact. Even though it’s closed, we still paid for electricity not produced.”

Uyar said that as soon as we stop using the “trash technology” of other countries and realize that the future lies in using energy from 100 percent renewable sources, then wind energy will start to spread. Uyar concluded by saying: “The best part about renewable energy sources is that you can’t privatize the wind or the sun. They are distributed amongst us equitably.”