The Turkish government’s goals for 2023, the centenary of the Republic, include several in the energy sector. With huge dependence on Russian gas and questions about the outlook for diversification (whether Azeri or Iranian gas would be more reliable is a question), the AK Government must exploit the country’s renewable energy resources, which are actually much greater than the 2023 targets, more than double.
Meeting those targets alone would shave up to 1 per cent of GDP off the current account balance, not to mention the stable capital flows that could finance it. Because Turkey’s structural energy problem is so large and so widely understood, strategic and institutional investors would embrace a more open and fast-paced approach to investment in it.
Turkey has the second biggest onshore wind and solar potential in Europe, and third biggest geothermal potential, but development has been slow. Despite several wind power licensing rounds in the past decade, the last in 2007, with a potential for close to 10GW of installed capacity, only 1.8GW have been installed so far. Indeed, the 10GW 2014 interim target for wind power in the energy ministry’s 2009 strategic plan is far out of reach.
There are a number of issues to consider. As mentioned by the Global Wind Energy Council, Turkey’s main obstacles for development are its complex and bureaucratic administrative procedures. But there are other issues as well.
Turkey’s industrial organisation is dominated by local oligarchic structures, where foreign strategic involvement is limited. The renewables sector is no different. Most licenses have ended up in the hands of non-strategic investors – many are a portfolio item for diversified holding companies or in the hands of smaller local concerns, without the expertise to develop sites or present bankable business plans, who are reluctant to collaborate with strategic partners. Licenses were sought as a “trade,” as if they were a security that could be flipped for a profit, before any thought of building a wind farm. The most basic of financial and technical analysis has not been undertaken on a large number of such licenses. A more aggressive approach by the government to facilitate a secondary market that allows the transfer of such licenses to committed renewable firms would be fruitful.
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Via Alejandro Pinero