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The Investment Potential of the Turkish Energy Market

Turkey`s fast growing demand for energy especially in electricity which grew by 6.6% between 1995 and 2004 and is growing by 8,4 % since 2005 and seems like to grow like that until 2015.

Actual electricity consumption was 171 billion kWh in 2006. It will reach 500 TWH in the year 2020. The installed capacity is 40.000MW in 2006. It will have to be 96,000 MW by 2020 inorder to generate as much to meet the demand.

In terms of installed capacity and consumption. Turkey`s figures are more than the average of Europe. But Turkish per capita electricity consumption level is a signifier of the fact that there will be much room for investment in the electricity sector in the coming years.

Turkish energy sector requires a total of 128 Billion Dollars of investment in the next 13 years. The liberalization process makes it possible for the private sector to take a part in these investments. The energy sector currently generates approximately an economic value of 35 billion dollars and it will reach a level of 60 billion dollars 2015.

5 billion dollars is needed in the area of lignite and hardcoal exploration & extraction, 16 billion dollars is needed in oil exploration, extraction and facilities, 3 billion dollars is needed in other areas of natural resource/mining exploration and extraction, 6 billion dollars is needed in water related investments, half a billion dollars is needed in the area of electricity generation rehab, 90 billion dollars is needed in new electricity generation facilities, one billion dollars is needed for energy transmission investments and 6 billion dollars is need for energy distribution investments.

Motivators for investing in energy in Turkey are the following: 1) Turkish economy is growing, 2) Turkey`s location is strategic and convienent for pipeline projects, transit ports, docklands and shipping businesses, 3) small scale renewable energy and nuclear energy generation businesses is almost untouched, 4) distribution and distribution control technologies is going to be a very active area after privatization will be realized in the distribution side. There is almost a 120 billion dollars of commercial stock for inter-industry enterprises.

A total of 51 thousand MW new capacity investments have to be added to the system. The 7,385 MW of newly licensed projects which are being built are not included in this figure. State Planning Organisation`s recent prediction that there will be an imbalance between supply and demand in electricity in 2008 and urgent investment is needed and the public sector cannot do any more investments unless security of supply is in serious jeopardy.

General energy consumption grew three times in the 30 years since 1980. Oil consumption is expected to increase twice and gas consumption is expected to quadruple in the next ten years. Power station turbines and equipments will be like hotcakes in the next 20 years. The government may order the construction of a total of 4,500 MW nuclear power plants which will be made functional in five years time by a new financing methodology which is waiting in the Parliament as a draft law. It is definitely going to bring business to vendors in the nuclear energy construction business.

10.000 MW Lignite, 1500 MW Hard coal, 5000 MW Import coal, 14.000 MW Natural gas, 15.000 MW Hydro, 2000 MW Wind, 4500 MW Nuclear is the detailed composition of the electricity capacity with respect to the available resources in Turkey. Liberal market opened up the business possibilities in the following areas: electricity distribution (20 regions) and generation business privatizations, electricity system instruments and equipment manufacturing and trade, in city natural gas distribution network bids (by EMRA) and certificated network construction business in gas distribution and transmission, possible international natural gas and oil transit, ex-im and storage projects, bio-fuel agriculture and production and refining,

Domestic gas consumption is expected to be 60 bcm by 2015. BOTAS will expand its transmission network. BOTAS` Algeria, Iran, Nigeria and Russian sales and purchase contracts of gas for long term periods is now being retreated to the private sector by gas release auctions which has been finalized recently in 2006. Turkey will buy gas from Azerbaijan which will be exported to Greece by the SEE gas ring project.

The Turkish electricity systems’ 40,500 km of transmission lines, remote and automatic control systems, scada systems and 16000 MW (6 portfolios) of soon to be privatized thermal and hydro power plants all need to be rehabilitated and upgraded. Power plant works necessitate a figure of 600 million dollars. A transition period until 2010 is forseen in electricity whereby a tariff equalization method will be in use.

Large power plants like the Yenikoy and Kemerkoy power plants which are in the privatization portfolio are going to probably be privatized later on in 2008 because the distribution privatizations have been postponed until after the elections in Nov. 2007.

DSI (State Hydraulic Works) have listed almost 700 small HEPP projects, which the private sector can apply for and the private sector can also bring its own suggestions for HEPP projects. Lignite mines was and is more and more being opened to the private sector based on a royalty system and the so called rodovans system in which a licensees pay a royalty and/or provides parts of the output to the state on a per ton basis.

350,000 GWh (2015) will be Turkey`s demand for electricity. Small hydro power plants, wind power, solar energy, geothermal, biomass power generation and related technologies are going to be invested in deeply until than. 2,5 billion dollars is expected to be invested in wind projects. Renewables are given incentives by law and regulations of EMRA. Energy imports and carbondioxide, sulphur and other emissions will be brought down by renewables. Hydropower potential is 190 billion kWh per year in Turkey but this may go down by climate change to 130 billion KWh. About 30% of the hydroelectricity potential is being used in power generation. Hydropower plants with a possibility of 12 billion kWh generation per year is currently being built currently. Renewables projects are being encouraged by the energy market regulator Yusuf GUNAY as well.

Renewable potential in Turkey in MW terms is 10000 Wind, 35000 Hydro and 35000 geothermal. The potential for solar energy is 35 Mtoe per year. Hydrocarbons of the Caspian, middle east and central asia will need Turkey as an “energy corridor” towards the energy hungary West. Turkish electricity network join UCTE at the end of 2007.

The EU's gas import dependency is 43% will be 66% by 2020. EU official documents such as the recent green paper, external energy policy papers and TEN decisions cite that 70% of the incremental gas demand of Europe can come through Turkey. The USA wants to reduce dependence on middle eastern hydrocarbons with supply disruptions. Turkey will be fourth energy supply after Norway, Russia, and Libya.




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