Turkey: Meeting the demand
In the second of a series of four features on the Turkish power market, ICIS Heren looks at the country's current generation mix and how different types of capacity are developing.
ICIS Heren's first report on Turkish power market prices is published this Thursday.
Turkish demand is due to increase by up to 7.5% annually, leading to an urgent need for additional generation. To meet these steep increases, the country is considering a combination of options that include introducing nuclear generation, importing electricity from southeastern Europe and building capacity.
The Turkish power market has been largely dominated by publicly owned and vertically integrated companies. Following the enforcement of the 2001 Electricity Market Law, the incumbent TEAS was split into three companies - EUAS for generation, TEIAS as the grid operator and TETAŞ for wholesale generation sales and trading. The distribution monopoly TEDAS was formed in 1994, but restructured last year when the distribution side of the market was split into 20 grids and privatised.
Until 2001 the private sector was able to participate in generation, transmission and distribution through three different models - Build-Operate-Transfer (BOT), Build-Own-Operate (BOO) and Transfer of Operating Rights (TOR). These models were abolished through the 2001 law, but legal obligations still remain.
In 2010, 45.4% of Turkish generation was produced by EUAS, with 30% produced by privately owned generation under the BOT-BOO-TOR models, 19% by independent power producers and 5.6% by industrial consumers, primarily for their own needs but with surpluses sold.
Turkey relies on natural gas for an estimated 60% of its power generation. The country imports around 98% of its gas needs, principally from Azerbaijan, Iran and Russia. Gas imports were multiplied by 2.5 from 2000 to 2009 and imports are expected to increase by two-thirds from 2008 to 2020.
Gas is likely to retain its importance in the power market; along with hydro, it is the fuel of choice for power generation. An estimated 3.3GW of gas-based production will come on line by 2017, according to the "high demand growth" scenario from the Turkish energy regulator EMRA (see table).
Turkey produces both coal and lignite - holding considerable reserves of lignite estimated at 7.9bn tonnes - according to the International Energy Agency.
Around 87% of domestic lignite is used for generating electricity, with the rest split between heating needs and industrial processes.
In 2010, coal accounted for 7.7% and lignite for 17% of the total production.
Over the next six years, Turkish companies - public and private - expect to build 3.9GW of coal/lignite and thermal capacity.
While Turkey is looking to encourage domestic production of coal, it is also looking to promote clean technologies in the use of coal in thermal power plants, households and industry.
Although Turkey is considered a developed country under the Kyoto Protocol, under current arrangements it acts as a developing state, and is exempted from any emission reduction targets.
In practical terms, this means that if Turkey were officially recognised as a developing country, it would benefit from existing flexibility mechanisms that would allow it to attract fund and technology transfers from developed countries.
To compound matters, Turkey failed to clarify its position in the Copenhagen Accord in 2009, and is the only country not to have set mitigation targets for the post-2012 period, as required under the Copenhagen Accord.
By 2008, Turkey had some 9.8GW of installed lignite and coal-fired capacity, accounting for around a quarter of its total generation.
As a result, energy-related carbon emissions have more than doubled since 1990, and are likely to continue to increase quickly over the medium and long term, according to IEA predictions.
Despite the expected growth, Turkey is the only country in the Organisation for Economic Co-operation and Development (OECD) that does not have a national emissions target for 2020.
Hydro power has grown by around 13% over the last five years in Turkey and accounts for approximately 18% of the country's power generation, with more than 15GW of hydro power installed so far.
Ankara has one of the most ambitious renewable energy targets in Europe. Turkey's total hydro potential is pegged at 40GW, with hydro capacity expected to rise to 26GW by 2020.
Last year Turkey privatised 52 small hydro plants and is now in the process of divesting some of the facilities held by EUAS. However, larger units - such as the 2.4GW Ataturk in southeastern Turkey or the 1.3GW Keban hydro plants in the centre of the country - will remain state-owned for strategic reasons.
EUAS and the private companies are planning to construct 7.39GW of hydro capacity by 2017.
In 2009, renewable sources provided 37.8TWh of electricity, or 19.6% of the total power generation in Turkey.
Renewable sources include wind, solid biomass, geothermal, biogas and industrial waste.
The government predicts large increases in renewable electricity capacity by 2023. Renewable energy sources should generate at least 30% of all electricity by that year.
According to figures provided by the Turkish energy regulator EMRA, an extra 769MW of renewable capacity will be brought on line by 2017 under the "high demand growth" scenario.
The Turkish parliament also adopted a new set of green tariffs to encourage clean sources of energy.
Prices have been set at 7.3 US cents/kWh for wind and hydroelectric energy generated in licensed plants, 13.3 US cents/kWh for solar and 10.5 US cents/kWh for geothermal energy.
Additional incentives for using Turkish-produced equipment could add up to 2.4 US cents/kWh to the purchase price for five years, according to local reports.
The prices will cover energy firms established between May 2005 and 31 December 2015. Energy bought from companies established after that date will be sold at new prices revised by the cabinet.
In addition, the new law will limit the volume of energy that the state is allowed to buy. It also limits the total production of licensed solar energy companies to 600MW annually until December 2013.
Although not scheduled to come on line until the following decade, nuclear production is a priority on the government's agenda.
Last May, Russia and Turkey signed an intergovernmental deal that gave Russia's Rosatom the right to build, own and operate the 5GW Akkuyu plant in central Turkey.
Rosatom, through Atomstroyexport and Inter RAO UES, will finance the project and start off with a 100% equity stake. The estimated cost of the project is $20bn (€15.6bn) and will be Turkey's first nuclear power plant (see EDEM 12 May 2010).
TETAŞ, the trade corporation, will buy a fixed proportion of the capacity produced by the country's first nuclear power plant at a fixed wholesale price of €96/MWh over the next 15 years, according to a law, published in the Turkish official gazette on Wednesday.
The price could vary as a result of economic factors but will not exceed €120/MWh.
The Turkish electricity trade corporation will snap up 70% of the output of the first two 2.4GW blocks and 30% of the remaining two 1.2GW reactors for the next 15 years from the commercial operation of each. The remaining power is expected to be sold by Rosatom, the Russian company in charge of the project, on the open market.
Turkey is also courted by Japan's Toshiba and France-based EDF and GDF SUEZ for the construction of two more nuclear power plants over the next 10-12 years (see EDEM 8 November 2011).
The plant that Turkey seeks to build with Toshiba in the Black Sea Sinop region could bring another 5GW on line by 2023. AS
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