Incentivizing Solar Power: A Case Study of the Turkish Solar Market
“The Republic of Turkey has been presenting a very attractive investment environment for the investors for a long time. Foreign direct investments are crucial for Turkey’s economic development. In this context, Turkey has taken the necessary measures to improve the conditions for the investors in the energy area.
Turkey has also adopted concrete targets to increase the share of renewables as well as introduced progressive legislation to set up a favorable legal and regulatory framework that would eventually pave the way for an increased utilization of renewables. The new regulations include a differentiated tariff support system for different renewable energy resources. Such tariff support is taken under guarantee by law in terms of US-cent and per KWh electricity generated. Basically, in addition to the guaranteed tariff countervailing the electricity generated, in case the equipment used in the establishment of the generation facilities based on renewable energy resources are domestically produced, some additional tariff supports are provided to the RES certificate holding generators.
The investment opportunities created by the reform process is too attractive for the potential investors to ignore. In addition with the steady growth, solar investors are competing very harshly in order to take a place in the Turkish Solar Market.
On the other hand, the above mentioned incentivize and the attractive environment brings some new problems such as excess supply. Turkey decided to make auctions for the solar power generation due to the capacity limits. The competitors are bidding for the license fee in order to generate electricity from a solar electricity generation plant.
The first stage of the auctions were surprised the market players because the final bids reached to more than 1 million USD/MW installed capacity in some regions. 240 MW was auctioned and an average bid was 0.6 million USD/MW. Turkish policymakers and regulators are worried about the realization of the constructions due to the high license fees. On the other hand new 300 MW auction was announced by the authorities.
In this paper the bid results will be reviewed financially. The effects of the auction rate of return will be calculated and the advantages and disadvantages of this incentivization process will be evaluated.”