The Turkish solar market is set to flourish. Attractive opportunities for investors and self-consumption are driving a boom in the license-free segment, and an overwhelming 8.9 GW of applications were received for the 600 MW of tendered capacity last year in the licensed segment. Turkey has the key ingredients for PV growth – a reliable regulatory framework, increasing power prices and decreasing PV system costs. The viability of PV has never been as good and is set to continue.
We interview Apricum Senior Advisor Deniz Polatkan, who is based in Turkey, on the latest developments and opportunities in Turkey’s solar market.
Mr. Polatkan, the Turkish solar market finally seems to be waking up. What is happening in the market at the moment?
A lot is going on these days in the Turkish solar market both in relevant market segments: utility-scale projects under license and license-free projects that are less than 1 MW.
In the licensed segment, we saw a rush for licenses last year with applications amounting to 8.9 GW in total for 600 MW of tendered capacity. This year, the projects are being allocated among bidders. This overwhelming response clearly shows the high interest of the private sector to get active in Turkey’s solar market.
Demand for projects in the license-free segment, representing installations of up to 1 MW, has essentially been created this year by power consumers and investors. Currently, we see a boom in new projects.
What is your estimate for the Turkish solar market by year end?
For the licensed segment, we expect licenses for the entire available capacity of 600 MW to be distributed by year end 2014. However, installations can hardly be realized in 2014 because of lengthy processes to obtain permissions and urban planning procedures; we will therefore see the majority of projects come online not earlier than next year.
In the license-free segment, already 20 MW have been installed by June this year. We expect installations to reach a minimum of 100 MW by year end 2014.
In 2015, we expect installation numbers to double or even triple compared to 2014. There is potential for the current cap of 600 MW for projects under license to be increased to 3 GW. In the license-free segment, we expect a minimum of 500 MW of PV projects to be installed and set in operation by the end of 2015.
Why do we currently see a boom in the license-free segment?
For several reasons: Firstly, regulation has become increasingly reliable, for example, regarding grid-feed of excess power – a FIT of 13.3 USD cent/kWh for ten years is guaranteed by the government under a PPA. This is the main motivation for investors to get engaged.
Secondly, the increasing power prices for consumers (currently, up to 20 USD cent/kWh) provide strong motivation for power consumers to save on their electricity bills today and have certainty for the future.
Thirdly, PV system costs in Turkey have significantly decreased, creating viable business cases for investors and power consumers.
How can solar companies best participate in the market boom?
PV companies positioned along the value chain can, in principle, participate in the boom, but team work is definitely needed. It is not only about bringing PV components or PV project experience to Turkey, it is also about having a business model tailored to the Turkish market and the right local partner. Having a trusted local partner, who can guide the project through the development stages especially with regards to grid and land investigations, is crucial.
A comparably easy way for investors to enter the market is to look for ready-to-build projects with urban planning and construction permits. As financing is largely bottlenecked these days, somebody that can provide funding at low interest rates for ready-to-build projects can tap into a large business potential.
Turkey has become a stronghold for manufacturing across industries in recent years. How about local manufacturing in the solar industry?
There really is enormous potential for local solar manufacturing, given the expected size of the Turkish solar market in the midterm and the ability to easily sell to Europe and the MENA region.
Some companies have already started local PV manufacturing activities, e.g., CSUN, Solarturk, Zahit Alüminyum, Alfa Solar and Bereket Enerji. However, we will see many more players in the future.
Having talked about PV, is Turkey also a market for CSP?
In the very south of Turkey, some locations are suitable for CSP, but not ideal. CSP would need to compete with PV’s cost in tenders, and that would be very difficult. Honestly, I don’t see a bright future for CSP technology in Turkey.
Turkey has, however, been a very big market for solar hot water generation for many years – the world’s second biggest after China in fact.
Finally, what is your vision for the Turkish solar market for the year 2020?
I expect the market to be large and sustainable, across market segments. I would be surprised if it would not be the largest solar market in the Mediterranean by 2020. With Turkey’s high electricity prices, regulatory framework, local willingness and Turkish business dynamics, the key drivers to achieve this are already here.
For questions or comments, please contact Apricum’s expert on the Turkish solar market, Hannes Beushausen, senior consultant: beushausen@apricum-group.com or +49 30 30 877 6224.
Would you like to learn more about Turkey’s renewable energy policies, solar market drivers and business opportunities? Request a free copy of Apricum’s Turkey country profile here.
