What is the state of Turkish energy market?

Turkey is a major energy importer. More than 75 per cent of the energy is supplied by imports, mainly from Russia. The use of natural gas - newly introduced into the Turkish economy - has grown rapidly with an average increase of 14 per cent annually.

The Turkish energy system is heavily dependent on fossil fuels. Their share in the total energy consumption increased from 72 per cent in 2000 to 82 per cent in 2007. Renewable energy sources make up about 18 per cent of the total primary energy supply.

One major concern is the increasing energy intensity of Turkey. In 2008, Turkey was twice more energy intensive than the average OECD countries. Metal production is the most energy intensive industry, followed by the production of refined petroleum and non-metallic mineral products such as cement, lime, glass and ceramics.

Electricity consumption in Turkey has decreased by 4 per cent in the last six months due to the global financial crisis. But the energy demand forecast from 2008 to 2017, based on the low demand scenario, is estimated to reach more than 350 TWh/year, a serious increase from 198 TWh in 2008 and 151 TWh in 2004.

Turkey is now facing the threat of electricity shortage and it is vital that the country boosts its production capacities by using national resources, including renewables, and managing its energy demand. On the other hand, there is international pressure on Turkey to engage in the fight against climate change and this is another reason for the country to invest in renewable energy sources and energy efficiency.

What role can renewable energy play in the country's future?

Turkey has great potential for developing renewable energy investment projects. There is already an appetite for such investments. For example about 250 license applications for renewable energy projects have been submitted in the last two years to the country’s Energy Market Regulatory Authority (EMRA).

The Turkish government has ambitious plans to develop about 60 GW in renewable energy by 2023. The main sources are hydro, wind and solar energy. Energy legislation is also more advanced than in the neighbouring Western Balkans.

In the short to medium term, the potential market for approved projects to finance is up to €2.6 billion in hydro and up to €2.9 billion in the wind sector. Turkey has potential in small hydropower development, even if its growth suffers from administrative weaknesses and planning. There is also wind power potential; in particular, large plants are economically and financially sustainable. But two important bottlenecks are the lack of local technology to develop such projects and a slow response from EMRA in reviewing applications for licenses.

What financing is already available for renewable energy and energy efficiency investments?

The local banking sector has financed renewable energy projects for over five years. Some banks provide financing from their own resources and others from financing facilities provided by international financial institutions (IFI) such as the World Bank and the European Investment Bank.

Hydroelectric and wind power projects are two sectors with growing demand for financing. The market leader in financing such projects is the German Commerzbank, which is now financing 167 megawatts of wind-generated electric power in Turkey, with lending totalling some €190 million. Out of 45 existing banks in Turkey, eight are involved in renewable energy financing, with investments of over €5 billion since 2005.

The Turkish government has developed some incentive schemes for energy efficiency measures, such as grants for energy efficiency consultancy services and investments. However there is little progress in energy efficiency investments in Turkey because local banks lack the know-how for such investments and consumers are not yet aware of the benefits.

What recommendations did you put forward to the EBRD?

Several international institutions are already financing renewable energy investments in Turkey. The EBRD could coordinate investments with these IFIs but more importantly take the lead in creating a market for energy efficiency investments as well as unexplored renewable energy sources such as landfill gas recovery.

In particular, the EBRD should be active on different levels. On the local level, by increasing the awareness and information about energy efficiency in all sectors, through direct marketing activities, targeted donor funding to municipalities, businesses and local banks, and financing directly or indirectly green projects and pilot projects, through direct lending facilities, equity and credit lines. On the national level, the EBRD should support the process of regulating the energy market in line with the EU.