Analysis: 1 GW Konya deal in Turkey could mark beginning of new manufacturing landscape

Once Turkey has built the manufacturing plant and the Konya PV plant, what do you expect will come next?
Götz Fischbeck: I believe that after another period of perhaps two to three years – during which time large-scale PV deployment in Turkey will be regulated/limited through auctions – the Turkish PV market will see a strong uptake of C&I installations with LCOEs in the range of 4-6 U.S. cents/kWh, unless Turkish grid regulation explicitly hinder this market segment from developing.

Given the electricity demand in Turkey, the solar resources there and the economic potential of the country, Turkey should be a 1.5 GW+ market going forward: 3 GWp annually would easily make sense at today’s prices, even more so when we consider where prices will be in two to three years’ time.

If the aim of this tender is to export modules, then why would, say, a Nigerian investor choose to buy modules made in Turkey and not modules made in China? The latter will likely be cheaper anyway, right?
I would assume the primary focus of the fab would be the Turkish market. With the 15 year take-off tariff I could very well imagine that for an extended period there will be regulations in place that favor the use of domestic content, thus making sure that the investment into the production value chain does not become obsolete within two to three years.

When it comes to export markets, one should rather consider that countries like Azerbaijan, Turkmenistan and other nations in that region that have close cultural ties to Turkey and well established business relations in the country to be the primary markets.

Perhaps the Chinese would offer their modules cheaper in those countries than the JV in Turkey could, but doing business is not only about price. It has a lot to do with trust and feeling comfortable with your business partner. So for a number of countries a supplier from Turkey backed by a global leader in the PV world like Hanwha Q Cells seems like a sensible combination that has a good chance of thriving in specific other countries outside of Turkey.

If the presence of a Korean brand is key, then why would investors not simply buy modules made in Korea?
My understanding is that the decision in favor for the Hanwha Q Cells JV is that the Turkish government tends to have more trust in a Korean company than in a Chinese investor. As for the export perspectives of the Hanwha Q Cells JV, then as mentioned, the cultural ties between Turkey and close neighbors could be key.

For Turkey in general, can this tender – if successfully completed – help to kickstart further confidence in the country’s ability to not only install large amounts of PV, but also export solar components?
As of now I believe the key issue of this investment  from the government’s perspective is to establish state-of-the-art PV manufacturing know-how in Turkey with the hopes of this being the nucleus to further growth of PV manufacturing in the long run. If we foresee global annual PV demand as greater than 100 GWp by 2020 and greater than 150 GWp by 2025, I do not expect that +90% of these volumes will only originate from fabs in China and Taiwan.

Through a combination of import duties or local content requirements/incentives we will eventually see a manufacturing landscape emerge where we will also have a number of GW-fabs outside of China/Taiwan. What portion of global PV production will be outside of the traditional production hubs in the future very much depends on future developments in international trade relations. Right now we experience a time where more nationalistic and protectionist policies are gaining popularity in many countries around the globe. How far this will go I have a hard time to predict at this time.

Just because the domestic production might not be able to reach the same low costs compared to the leading global manufacturers doesn't mean that solar electricity from local producers would not still be the most affordable source of electricity in comparison to other technologies. If you then factor in the benefit of local jobs, tax revenues, own competencies etc., I can see why politicians have a high interest in pushing such deployment models (i.e. forcing foreign companies to share their technological and manufacturing know-how). After all, China has very successfully employed this model in many industries over the past 20 years.

Considering the proposal is for the complete value chain, right from ingots and wafers through to modules, how will the plant alter the manufacturing landscape of Turkey?
To my knowledge Turkey today only has cell manufacturing capacities through the CSUN fab and no further upstream production capacities. Also, the current scale of the module manufacturers does not make them cost-competitive in export markets. With this planned investment into the integrated value chain I believe Turkey hopes to spark a development that would see further investments in production capacities in the future which might not even require (any meaningful) governmental support.

Despite all the current arguments with the Turkish government I expect the international relations to ease once the referendum is over in a month’s time. And before anyone would consider an investment into a PV production in Iran, Iraq, Syria or Afghanistan (just to name a few potential export markets for a PV production from Turkey) Turkey appears to be a much safer place to invest.