Renewable Energy Is More Than Clean Energy for Turkey New analysis shows widespread lack of confidence in Turkish coal investments among utilities

While Turkish government energy policies currently focus on domestic lignite, a more economically sensible pathway would focus on renewable energy resources, a new study shows. Investing in solar and wind could trigger Turkey’s industrial transformation to high-tech base and help the country overcome its structural current account deficit problem and its middle-income trap.

ANKARA - The Economic Policy Research Foundation of Turkey (TEPAV) has conducted a new analysis based on interviews with 70 companies holding energy utilities in Turkey and analyzed their energy investment decisions and perceptions behind these decisions about the investment climate.

Turkey’s growth is structurally linked to a high current account deficit, with the energy sector representing one of the nation’s leading import sectors. The Turkish government relies on domestic coal, and the government’s energy policies mainly focus on utilizing domestic lignite resources in order to tackle the deficit problem. However, this new study demonstrates that switching the focus from lignite to renewable energy sources could help Turkey overcome the economic fragility caused by its account deficit.

The financial dilemma about coal investments

Energy utilities are expecting problems in coal finance. According to 75 per cent of interviewed parties they will encounter financial difficulties about coal investments. However, 53 per cent of medium- and large-scale businesses have a hopeful outlook for the future regarding renewable energy.

“Since 2012, 14 GW of coal-fired power plant projects have been cancelled or postponed in Turkey. Moreover, the world as a whole is also shifting away from coal. The amount of coal power capacity under development worldwide dropped dramatically in the first half of 2016. China alone cancelled or postponed 114 GW of proposed coal plants. Chinese coal cancellations over this period were 1.5 times greater than the total installed capacity of Turkey” said Bengisu Özenç, Program Director of Macroeconomic Studies at TEPAV. According to Özenç, “If Turkey does not want to find itself faced with even tougher economic problems; it needs an energy policy that favors renewable energy resources over coal.”

TEPAV’s Managing Director Güven Sak emphasized the possible role of the renewable energy investment as a means of high-tech breakthrough for Turkish industrial policy. Hence, further incentives for domestic development and deployment of such technologies would also address Turkey’s current account deficit and middle income trap problems. But as the research showed, investors’ activities towards technology development and utilization is not at a desired level.

Solar energy particularly presents important opportunities for Turkey’s economy. However, only a small percentage of its potential was utilized. Officially, Turkey aims to reach 10 GW of solar-installed capacity by 2030, but so far the country has only deployed 0.5GW of solar power.  Considering its technical capacity that exceeds 27 out of 35 EU member and candidate states, Turkey clearly under utilizes its potential in solar.

Short-term and ever-changing policies are the main reasons why investors are hesitant to make renewable energy investments. A lack of long-term clarity regarding public subsidies also renders the payback period uncertain for those investments.

Özenç stated that “The face-to-face meetings showed that the State has an important role to play in unlocking the country’s renewable energy potential. Renewable energy has to be strongly supported with effective policies for tackling current account deficit problem and the middle-income trap.”

The TEPAV research also showed that costs are not among the utmost difficulties standing on the way of Turkey to utilize its renewable energy potential. Renewable energy is more cost-efficient than coal and other fossil fuels, meaning that once structural and bureaucratic obstacles are overcome, it will pave the way for the private sector to utilize more of the country’s solar and wind potential.

You may read "Energy Policies and Their Impact on Investments" from here.