Rising Industry of Turkey's Energy Field, From Renewable to Oil
Turkish government's (invest.gov.tr) recent energy data indicate that Turkey is a net energy importer country, depending on such imports for 73% of its energy needs. This high rate of energy dependence has been the main driving force behind the formulation and implementation of new policies to commission local and renewable energy resources. Turkey announced the National Energy and Mining Strategy in 2017 which identified security of supply, localization, and predictable market conditions as the main pillars to follow in the energy sector. Under the plan designed in 2017, localization and import dependence reduction through domestic resources stands as a top priority for Turkey. The company aims to generate 2/3 of its electricity from local and renewable resources by 2023.
Key Points
Turkey’s electricity industry has been robustly growing over more than a decade with more than 5% CAGR (Compound Annual Growth Rate).
Increasing investments and energy infrastructure remains a priority, due to the country's strong demographic growth and the government's commitment to enhance energy supply security.
Strong macroeconomic growth with increasing income per capita and a growing middle-class.
Favorable demographics with a dynamic, young, and skilled labor force supporting the industry
Strong government support through incentives and tax benefits
Lucrative investment areas addressing different scales of energy investors
Strategic position of being an energy corridor for transporting energy resources from the Middle East and Central Asia regions to Europe.
Pipeline and electricity transmission interconnections with neighboring countries allowing for electricity and conventional resources trade.
Strong commitment to support domestic coal, oil and natural gas exploration, and production operations
Firm commitment to utilizing local and renewable energy resources in electricity generation to reduce reliance on import fuels.
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Which Regions for Benefits?
While the majority of the western provinces will receive less interest rate support (up to 700k TRY) since they are more competitive, the inner eastern provinces of Turkey have much higher competition. The investor will receive up to 900k TRY in interest rate, a 10-year Income tax withholding eligibility for 10 years, and 2.2 reduced tax rate.
Marmara Region
Shores of Istanbul's Black Sea, Gelibolu, and Çanakkale's Saros is the top investment zones for renewable wind energy. These regions offer various support for potential investors. Below were the support criteria for the 2018 investment year.
2.5-3 bn USD Investment
Min. 60% Localization / Min. Turbine Capacity of 6MW
1.2 GW Capacity Wind Power Plants Installation
80% Local Employment
50 TWH to be Procured under PPA
Ceiling Price of 8 USD cent/kWh for Reverse-Auction
Financial criteria for investors: Total sales revenues or turnover for 2015, 2016, and 2017 ≥ 1,000,000,000 (one billion) TRY (or it's equivalent in foreign currency) or Total assets’ value as of the end of 2017 ≥ 400,000,000 (four hundred million) TRY (or it's equivalent in foreign currency)
Which Industry Receives Benefits?
Mining Investments
Coal operations and power generation investments where domestic coal is used as input. Energy efficiency investments that would reduce energy consumption (minimum of 20% increase for at least 5 years in 500 TOE consumption and above)
Investments for electricity generation through waste heat recovery (excluding natural gas PPs)
LNG investments and underground gas storage investments (minimum 50 million TL)
Production of turbines and generators used in renewable energy generation
Production of blades used in wind energy generation
Production of solar panels
Renewable Energy
Turkey has a substantial amount of renewable energy potential, and utilization of this potential has been on the rise over the last decade. As of the end of 2018, hydro, wind, and solar resources constitute the vast majority of the country’s renewable energy resources, accounting respectively for 28,291 MW, 7,005 MW, and 5,068 MW of the total installed capacity of more than 88,526 MW. However; biomass/biogas and geothermal energy resources are also expected to comprise a considerable portion of the rapid growth in the utilization of these resources in the market.
Most of the power plants, including renewable energy ones, are constructed and operated under a licensed model, which deals with the types of investments over 5 MW installed capacity. In the case of solar and wind power investments, the investors apply to EMRA for pre-license in the first stage (based on the provincial capacities announced beforehand by the Electricity Transmission Company of Turkey-TEIAS).
Fuel Source Total Investment Per TRY/Mwm
Coal 1,500,000
Natural Gas / LPG 1,000,000
Fuel Oil / Nafta 1,000,000
Hydro 2,000,000
Wind 2,500,000
Geothermal 2,100,000
Biomass 1,900,000
Solar 3,000,000
Nuclear 6,000,000
Process waste heat 700,000
Others 1,400,000
Law No. 5346 also provides for local content support for domestically manufactured equipment used in the relevant licensed generation facility. The current legislation calls for at least a 55% local content ratio to be granted an incentive for a component of the generation facility. However that doesn’t mean full granting of the incentive; if the investor complies with the minimum threshold of 55% for a component, it is granted only 55% of the incentive. For every part above the 55% local content ratio, the investor is granted multiple incentives.
Electricity
For the facilities generating electricity from the local natural resources and the renewables, the license holders are not required to pay the yearly license fees for the first eight years following the date of completion of the power plants. Yearly license fees are calculated based on the following formula: total electricity generated in kWh X 0.003 cent/TRY. Furthermore, pre-license and license application fees for these facilities are discounted by 90% as well.
Successful Investors
In 2016, Turkey made a deal with Russia on Russia's natural gas sale and distribution across Europe. The two giants signed on a project titled "The Turkish Stream". The megaproject included two natural gas pipelines that can transport 63 billion SI, where Turkey can keep the 16 billion cubic meters of it for consumption. The project used the preexisted pipelines on the Black Sea that the two countries shared before, and sparked a $35 Billion USD per year investment from the countries.
Shell has celebrated its 96th year in Turkey by 2019. The oil giant is one of the prominent companies in Turkey in terms of investments. Since the very first day of its activities in Turkey, Shell has improved industry standards as the pioneer of the Turkish fuel sector. The company's oil and gas exploration activities include the completion of two exploration campaigns in partnership with the Turkish Petroleum Corporation (TP): the Konacık-1 and the Akçay-1 wells.
The now telecommunication giant Siemens has been operating in Turkey since 1856 with the first installed telegraph. The company develops solutions in the energy, infrastructure, electrification, automation, digitalization, and healthcare sectors in Turkey. In 2009, Siemens invested in the Gebze Organized Industrial Zone for production geared towards the energy sector. In 2011, the company opened its 14th R&D facility in the country.
