Saturday, December 09, 2017

Turkey: Future of Solar Energy

Total installed power in our country is 82GWe by the end of 2017. We expected that the share of renewable energy plants in total production would increase over time. The share of imported and fossil fuels would decrease, and the import and fossil fuel dependency would decrease. That was not so.
It is estimated that the total installed capacity of solar power generating power plants will reach 2400 MWe by the end of 2017. Total licensed Solar projects during the year was 52 MW.
This amount could be taken into operation as 13 MW, the remaining are on hold. Non-Licensed projects are too many in numbers, whereas the licensed projects are very few. We have made the license procedures so hard that nobody wants licensed business. The investors prefer that it is better to form dozens or even hundreds of companies each with 1-MWe capacities and connect them.
Solar investment costs are now very low. In 2005, incentives were introduced by Law No. 5346. Guaranteed sale prices then were at 5.00-5.50 EuroCent per KWhour in 2005, while it is at $Cent 13.30 per KWhour in 2010. Solar maps were released. Transmission capacities were determined. In 2014-2015, 6 different tenders were released and 600 MW new solar capacity was created. In year 2017, a new Solar capacity of 1000 MWe was created through the competitive renewables tender.
Solar cells and panel prices have been excessive cheaper. in time. By the end of 2017, 24-25 $ Cent per Wp prices were received. Import incentives given by the Ministry of Economy to Solar panel imports in 2012 were deleted in 2016. In 2016, domestic production could be replied in the amount demanded by the internal market. With Anti Dumping and additional VAT application, foreign panel import prices have reached to 60 $ Cent per Wp level. Then Domestic producers have increased their prices to 50 $ Cent per Wp to take advantage of the market prices.
In 2014-2015, transmission authority opened 6 tenders and allocated Solar projects to 49 companies with a total capacity of 600MW. Companies have committed to pay TL 1.23 billion of contribution to the allocation. The two companies have completed their operations and have been operating the Solar investments at a capacity of 13 MW. The other companies received the incentive certificates at a capacity of 120 MW, but due to cost increases, the remaining 480 MW capacity projects were locked and are on hold. Because the conditions before the tender were changed after the tender. Initially there was incentives, then incentives were unfairly removed.
In 2010, the new renewables law set the electricity purchase price for Solar investments as 13.30 $Cents per KWh for 10 years.
The winner of the 1000 MWe renewable Solar bid in 2017 reduced this price to 6.99 $Cent per KWh.
The winning group accepted local investment for 500 MWe per yr production capacity and 500 million US$ investment- budgeted production facility in the country.
On the other hand, in 2017 we observed similar tenders abroad.
In Saudi Arabia, the price is 1.79 $cents per KWh, in Germany 4.30 EuroCent, 2.10 $Cents in Chile and 1.77 $cents in Mexico. We are observing big discounts on Solar tenders. However, the Ministry of Economy tax collection efforts deter our investors.
On the other hand, we have gone so difficult as to license the work, that everyone is trying to invest under unlicensed 1-MW projects. In 2005, unit MW cost Solar investment was 4,000 US Dollars, while in 2017 Solar investment cost per unit KW decreased to 700-800 US Dollars. In 2017, market observes only 13 MW licensed Solar, whereas unlicensed Solar at 2400 MW. Public regulatory authorities were a bit indifferent at the beginning. But when they enter the system, the investor feels to regret their applications.
For example, they may ask to use 50% of the electricity produced in investors auto consumption. Continuous storage may be required. They may limit the possession of company shares.
Solar sector currently employs around 20-thousand workers. Currently, 26 different enterprises assemble with Solar PV panels. The majority of fabricators are undergoing simple construction, cabling, framing work, whereas 75-80% of total investment is still imported. The actual production renewable coverage will be made at the last 1000 MW renewable facilities. Others will finish their work in their hands and close their businesses. Then 20-thousand people could be unemployed.
On the other hand, in the recent Solar facilities in operation, installed power loss is observed to be 20-25% within a few months.
At home scale Roof-top Solar installation should be well examined. House sizes are limited to 10kW capacity, that is not feasible. On top roof of existing structures, an additional load of 25 kg per square meter is to be added. The current roof structures are not enough to carry this additional load. The duration of use of summer houses are 3-4 months, and the roof Solar investment return is not enough for this period. Billing is difficult to deduct. There is a high risk of fire, so insurance coverage is difficult.
There are those who bring the fertile agricultural land to the barren land by saying that they will build a solar energy plant. Let them God to show them the right way.
There are three different associations in the local Solar market, GÜNDER, GENSED, GÜYAD. Why are there three separate associations? Why is not there one single association to cover all interest groups? This is another important question.
We started with good intentions, but we have a lot of work to do.
Haluk Direskeneli, is a graduate of METU Mechanical Engineering department (1973). He worked in public, private enterprises, USA Turkish JV companies (B&W, CSWI, AEP), in fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant/ energy analyst with thermal power plants basic/ detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of ODTÜ Alumni and Chamber of Turkish Mechanical Engineers Energy Working Group.
This article is written for the "EurasiaReview" news web site.

Ankara, 10 December 2017

Monday, December 04, 2017

TURKEY: Energy & Infrastructure Forecast 2018

Risks and Opportunities

Economies and businesses are always shaped by expectations, just as market expectations are important in economic forecasts themselves. Within our professional capacity, we have tried to outline a draft forecast for the upcoming days. While it may not necessarily foresee the future in all its detail, it is better to have one, rather than none. Here are our short term new year predictions:

Energy supply security is within our prime concerns. Our installed capacity has reached to 82 GWe, and peak demand at 45 GWe in August 2017. Our local lignite production was about 50+ million metric tons in 2017. Hard coal production was 2 million metric tons. Imported hard coal was 30 million metric tons.
Earlier, S&P and then Moody's rating agencies have lowered our financial credibility to junk level, the other international rating agency (Fitch) is clever to postpone their Turkish ratings, however we all know that their late declaration is also meaning low rating for our investment environment. Rating agencies ask for transparency, rule of law, fair competition in our local market.
European Union has frozen accession meetings completely for participation since all remedy requests are returned with futile responses. Luxemburg, Germany, Austria, Sweden, Denmark have already voiced necessary applicable counter measures. Death penalty, unavoidable bribery and public corruption, sexual abuse under 15 are unacceptable for Europeans.
The recent tax as imposed on imported coal was a deterrent figure for future investments for imported coal firing thermal power plants. Anyhow the latest thermal power plants are exclusively built by Chinese companies due to their ultra low lump sum turnkey prices, covered by cheap PBoC project financing. However these plants have poor design, they have low spares, short life span. If you desperately need electricity generation, then price is not so important. The tax will be collected by our Treasury, and end price is also taxed so our Treasury will get all money from both ends, all other parties are intermediaries in the long run.
On the other hand, 5-6 US cents per kwh electricity purchase guarantee by public enterprises for local coal firing energy generation is a good booster for newcomer investors. However it is not so pleasing to place power plant construction orders to Chinese contractors just because of their ultra cheap turnkey prices for new local coal firing thermal power plant investments. These plants do not meet national standard, norms, rules, regulations, laws. They have poor design which are not applicable for local coal, they have limited or almost no spares and high breakdown, low availability and low life span during operation.
New tenders for local coal firing thermal power plants are in Cayirhan-2, Eskişehir Alpu, Konya Karaman, Trakya Saray. Soma and Çan thermal power plant investment projects are ongoing. Local people are not so comfortable with new local coal investments. There will be growing public reactions expected to stop these investments.
There are still imported coal firing investment projects in Çanakkale, Aliağa, Amasra, Iskenderun bay although imported coal is not encouraged any more..
On the other hand, 1000 MWe each wind and solar tenders were completed. We expect to have more of these investments in future.
Common consensus as created by independent foreign military commentators openly and frankly say that USA (and Nato forces) should leave Incirlik air base for the long term and they should move to relatively more secure or tranquil place such as Southern Cyprus, Northern Iraq, wherever they would feel more comfortable, more independent, more free to maneuver in the Middle East. USA will follow their indifference policy towards international events due to transfer of power after US Presidential elections.
On negotiation table behind closed doors in Moscow and Ankara (and Sochi), there were negotiations for new prices on natural gas sales, more concessions on 63 bcm capacity Turkish Stream underwater pipeline construction project and better terms for 4800 MWe nuclear contract etc. We should note that in the long term Mersin Akkuyu nuclear project may also serve as a new Russian military seaport on Mediterranean coast to reinforce Russian presence on hot seas.
Arab countries are completely ignorant of the events which took place at our environment since they have worse incidents they face every day. We have good deals with Iran due to our favorable gas purchase agreements. However due to their increased internal gas demand, they stopped sending gas to our system as of December. We have gas supply and energy generation drop in our energy markets.
National Security is to be reinforced since SouthEast insurgency may get worse. As seen everywhere in the world, such as in Ireland, Scotland, Bask in Spain, if minorities are not fairly represented in the national parliament, then they may look for their alternative solutions.
Bankruptcy postponement epidemic in the local markets spreads to low capital- small companies. that will be a high impact on our economy despite of unrealistic pictures as pronounced by public officials. People has lost confidence to public declarations. Foreign exchange rates may dive low in time.
There is a wide range consensus for low profile public appearance. People deactivate their accounts in social media. They are not interested in any public expression. Newspaper columns are repetition of earlier articles. People are indifferent to every event since so many nasty things have happened in the near past with no reasoning no meaning we can name. Immigration applications among academics and young professionals are on high rise. Similarly capital move from local to international markets are getting increased.
We believe that these are a few warning indicators, of which you will seldom read such candid forecast from a local source for our home environment anywhere else. We would be pleased to receive your comments and feedback over the course of the upcoming year.
Happy New Year and Merry Christmas to you all !!

Haluk Direskeneli, is a graduate of METU Mechanical Engineering department (1973). He worked in public, private enterprises, USA Turkish JV companies (B&W, CSWI, AEP), in fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant/ energy analyst with thermal power plants basic/ detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of ODTÜ Alumni and Chamber of Turkish Mechanical Engineers Energy Working Group.

This article is written for the "EurasiaReview" news web site.

Ankara, 04 December, 2017
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