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Turkey. An interesting PV market.

/23rd July 2013, Hans-Christoph Neidlein, PV MagazineTM/ With its booming economy and growing energy demand, Turkey is one of the most promising new PV markets, but financing and bureaucracy hurdles remain. Almost 9 GW of projects have applied for the first licensing round for large-scale installations, but commercial rooftop installations of up to 1 MW offer the best opportunities.

“The growing energy demand of the country’s booming economy and the high electricity prices are the main drivers behind Turkey’s PV market,” stressed Matthias Kittler from consulting firm Apricum. Currently, one kilowatt-hour of electricity costs around US$0.14 (TRY 26) for the industrial sector and US$0.16 (TRY 32) for private households. Electricity prices have increased by an average of 11% per year since 2006.

In order to meet the growing demand for electricity (which rises 6% annually), the country would need new power plants with a capacity of 29 GW by 2021, while also replacing outdated plants with a generation capacity of 20 GW, said Kittler. The political desire for greater independence from Russian and Iranian gas imports coupled with the sharp fall in prices of photovoltaic systems offer enormous potential for solar power in Turkey.

The annual average solar irradiation in the country is 1,527 kWh per square meter, although there are strong regional differences between the north of the country, with some 1,400 kWh per square meter annually, and the south with around 2,000 kWh per square meter per year.

“The interest in photovoltaics is growing rapidly,” said Kittler at Solarpraxis’ and pv magazine ’s inaugural PV Turkey investment workshop that took place in Berlin at the beginning of June.

The time is now ripe for solar power in Turkey to grow beyond a mere niche market. Indeed, by the end of 2012, Turkey had less than 10 MW of installed PV systems.

Kittler expects the number of PV systems in the country to double annually through to 2020: an increase in installed capacity of between 500 and 800 MW in 2015, and a rise of between 3.8 and 6.5 GW by 2020. He also predicts average PV electricity production costs of less than US$0.15 per kilowatt hour as achievable. Commercial rooftop systems of up to 1 MW and ground-mounted facilities of more than 1 MW will be the country’s main growth areas.

Turkey’s current feed-in tariff is US$0.133 per kilowatt hour guaranteed for a duration of 10 years. For a five-year term, a surcharge of US$0.067 is paid for electricity from PV systems with a high proportion of locally-produced components.

Plants with a capacity of up to 500 kW can be operated without a license. According to Engin Yaman of China Sunergy (CSUN) Europe, the government is expected to approve legislation that will increase this licensing limit to 1 MW soon.

The first round of licensing for large systems, which took place in the second week of June, is limited to 600 MW. Initial inquiries from 496 companies have been received with a total of 8.9 GW, according to Ertug Babatas, business developer at Germany’s Enerparc AG.

Sobering experience

It will be interesting to see how the Turkish regulator deals with the flood of applications and how quickly they are processed, said Niels Kröner of AEE Renewables Group. The experience with Turkish bureaucracy has been “very sobering” up until now and the responsible government agencies have often been very slow to implement new laws. Even for the smaller license-free PV systems, the necessary permits can often take up to nine months. A further obstacle for the PV market in Turkey, according to Kröner, is the complicated issue of land rights, the low cultural understanding of long-term contracts, and especially the difficult financing.

New territory

First, photovoltaic projects are new territory for the banks. In addition, expected returns for such projects are often in the double digits. AEE Renewables has had its best experience with pilot projects that have had no participation of local banks, such as a 10 kW rooftop system atop the Honda factory in Gebze.

Stefan Müller, CEO of Enerparc, had a similar experience with the financing of rooftop installations in Turkey. The Hamburg-based company recently developed a 500 kW rooftop system at Prokon Manufacturing in Ankara as an EPC project. The power will be used for self-consumption. A decisive factor in the project was the commitment of the owner, who wanted to become more independent from his energy supplier.

“The entrepreneurial potential, especially in the small and medium enterprise (SME) sector, is very high in Turkey,” Müller said, adding that this would spur the further expansion of PV. In particular, Müller sees great potential in the development of commercial rooftop systems for self-consumption, financed by Turkish companies themselves. Moreover, the diverse economic and cultural relations between countries like Germany and Turkey are seen as very conducive to the involvement of foreign companies in the country.

More information about this promising market you may read here: Turkey Photovoltaic Market Outlook 2013 - 2018