Turkey has become one of the fastest growing energy markets in the world, paralleling its economic growth over the last 15 years. The success of a privatization program that has been ongoing since 2002 has resulted in power distribution now completely in private sector hands, while the privatization of power generation assets is set to be completed within the next few years. This privatization program has given the country’s energy sector a highly competitive structure and new horizons for growth.
Economic expansion, rising per capita income, positive demographic trends, and the rapid pace of urbanization have been the main drivers of energy demand, which is estimated to increase by around 6 percent per annum through 2023. In order to satisfy the increasing demand in the country, the current 80-GW installed electricity capacity is expected to reach 120 GW by 2023 through further investments to be commissioned by the private sector. As part of its efforts to provide sustainable and reliable energy to consumers, Turkey offers investors favorable incentives, such as feed-in-tariffs, purchase guarantees, connection priorities, license exemptions, etc., depending on the type and capacity of the energy generation facility.
In the last 15 years, the Turkish government has made significant reforms in the provision of energy. Turkey has moved forward the participation of private entities, and thus created a more competitive energy market. The privatization of energy generation assets, coupled with a strategy to clear the way for more private investments, has resulted in an increased share of private entities in the electricity generation sector, from 32 percent in 2002 to 75 percent in 2017. Another step taken by the Turkish government towards a more competitive energy sector is the establishment of an energy stock company, EXIST, which is responsible for managing and operating energy markets, including power and gas commodities.
In addition to having a huge domestic market, Turkey occupies a strategic location between a number of major energy consumers and suppliers, and thus serves as a regional energy hub. The existing and planned oil/gas pipelines, the critical Turkish straits, and promising finds of hydrocarbon reserves within the country itself give Turkey increased leverage over energy prices and reinforce its gateway status.
Opportunities for renewable forms of energy production – hydro, wind, solar, and geothermal – are abundant in Turkey, and encouraging policies backed by favorable feed-in tariffs are expected to increase their share in the national grid in the coming years. The Turkish government has made it a priority to increase the share of renewable sources in the country’s total installed power to a remarkable 30 percent by 2023. This will run in parallel to the government’s commitment to energy efficiency, whereby it is enacting laws that set principles for saving energy, at both individual and corporate levels, as well as providing incentives to energy efficiency investments. For example, the Turkish government introduced the new Renewable Energy Resource Zone (YEKA) model in 2016 in order to commission large-scale renewable energy projects through utilization of locally-manufactured components in the renewable power plants. Under the model, the largest-ever solar power auction in Turkey's history took place on March 20, 2017, while a similar tender for 1-GW wind power plants took place in August 2017 with local manufacturing and R&D requirements.
As important as the renewables are for Turkey’s energy strategy in the coming years, technologies in such fields as waste processing and greenhouse gas reduction are also often cited together with this new form of power generation as critically important supplementary practices. Sustaining the environment by resorting to renewable resources is accompanied by a number of measures and regulations that are either currently in effect, or will soon be in effect. Some of these regulations deal with lowering carbon emissions, increasing generation/transmission efficiency, and promoting the use of waste management technologies.
The sum of these factors has had a profound effect on Turkey’s energy sector, turning it into one of the most attractive investment destinations in the world. In line with the implementation of investor-friendly regulations and the high increase in demand, the Turkish energy sector is becoming more vibrant and competitive, attracting the attention of more investors for each component of the value chain in various energy sub-sectors.
The total investments required to meet Turkey’s expected energy demand in 2023 is estimated to be around USD 110 billion, more than double the total amount invested over the last decade.
Turkey’s vision for 2023, the centennial foundation of the Republic, envisages targets for the energy sector in Turkey that include:
Raising the total installed power capacity to 120 GW. Increasing the share of renewables to 30 percent. Maximizing the use of hydropower. Increasing the installed capacity based on wind power to 20,000 MW. Installing power plants that will provide 1,000 MW of geothermal and 5,000 MW of solar energy. Extending the length of transmission lines to 60,717 km. Reaching a power distribution unit capacity of 158,460 MVA. Extending the use of smart grids. Raising the natural gas storage capacity to more than 11 billion m3. Commissioning nuclear power plants (two operational nuclear power plants, with a third under construction). Increasing the coal-fired installed capacity from the current level of 17.3 GW to 30 GW.