Turkey’s biggest solar show closed its doors on Saturday and the overwhelming impression was of a PV market at a crossroads – if not in full blown crisis.
There is no doubting Turkey has the fundamentals and requisite drivers for rapid solar deployment, including established EPC providers and manufacturers which are all looking to Turkey’s neighbors for opportunities. However, from the highs of 2017, when the nation was Europe’s largest solar market – a frequently repeated phrase during Solarex 2019 – Turkey’s solar market is now in serious decline. There is genuine frustration at the lack of a stable policy framework to facilitate PV deployment.
The 2019 Solarex show was notably smaller than in previous years and big module suppliers were largely absent as a result of anti-dumping duties imposed on Chinese modules as well as other obstacles to panel imports. The show remained well attended, however, and homegrown players and innovations were on display. There is clearly no lack of will to see solar flourish on the Anatolian peninsula – but is there a way?
The larger Turkish producers tend to offer EPC services alongside module supply, and are looking to the establishment of net metering regulations to allow the distributed market segment to get established alongside utility scale PV. These companies are pursuing large scale opportunities in neighboring markets such as Ukraine, Macedonia and Iran – the latter on the ‘down low’ – and are having some success. Whether it will be enough to sustain all of them through the downturn, however, remains unclear.
Only the boldest exhibitors were willing to offer projections of what the Turkish PV sector could achieve by way of new installations this year, with multiple unknowns prompting more questions than answers.
The Yeka tender program, coupling PV manufacturing with large project auctions, looks to have failed. However there are hopes smaller Yeka rounds – in the 50-100 MW capacity range rather than the gigawatt scale of the first exercise – may be more successful if given the green light.
So what does the Turkish solar market want? Quite a lot it seems, and not without justification. The fundamentals for solar in Turkey remain as robust as ever: good irradiation, available land, active and competent solar developers and a manufacturing sector poised to deliver – with more expertise and quality than in the past. There is also a desperate need for domestic energy generation, with power imports continuing to weigh on the country’s current account.
Policy certainty required – rooftop potential
The introduction of a net metering program for rooftop PV appears imminent. “Tomorrow”, “in days” and “within weeks” were all responses given to pv magazine in answer to the question of when regulations were expected to be handed down. When it does happen, it won’t be a moment too soon.
The commercial and industrial (C&I) segment in particular looks attractive. Consultant Muren Guler said 3-4 GW of C&I demand could be created overnight through net metering. Module maker and building-integrated PV development company Schmid Pekintas believes C&I potential in Turkey tops 10 GW. “There’s enough [demand] for a significant market of the future,” said Schmid Pekintas CEO Özhan Olcay. He believes payback for larger C&I arrays would come in at around 6-7 years.
The net metering outlook for the residential market is a little more uncertain. Residential electricity tariffs remain low, at TRY0.46/kWh ($0.08). Analysis from business intelligence firm EuPD Research shows, despite such low rates, the levelized cost of electricity (LCOE) from residential rooftop PV will come in roughly at parity, pointing to a potentially bright future. However, as EuPD Research CEO Markus Hoehner noted, that solar LCOE is based on a low interest scenario – with a higher interest rate potentially blowing solar LCOE out to TRY0.74 ($0.13). Market insiders expect the residential sector would most likely see the biggest expansion around coastal cities such as Izmir where many wealthier Turks have holiday villas. As it happens, several solar companies base their operations in Izmir.
As EuPD’s Hohner indicated, the cost of capital and Turkey’s underlying macroeconomics will have a big influence on PV deployment. Unpredictable currency fluctuations and the high cost of capital are currently holding back solar developers unable to secure financing for large scale projects – where such schemes still exist.
A lack of established financial instruments, such as third party financing and ownership, which could see the C&I segment achieve its potential add to the problems, according to consultant Guler.
Financial limitations, as with policy frameworks, are largely beyond the control of solar sector participants and provide yet another reason for PV players to look to Ankara for solutions to their current woes.
Turkey’s first Yeka tender, for a 1 GW array coupled with domestic manufacturing, garnered a lot of attention when it was announced. South Korea’s Hanwha Q Cells and local firm Kalyon Enerji were awarded the tender but are now embroiled in a messy separation. “Nobody is happy,” remarked one Turkish PV insider.
It is understood Kalyon Enerji is seeking another foreign partner to execute the tender, which is planned for the central Konya region. Hanwha is backing out of the deal, a decision the company said was based on lack of long-term policy settings, and insisted it could have supplied the mega project if it had been able to establish an integrated manufacturing facility in the country. Given the project’s size, it is thought only large Chinese solar manufacturers could make that happen at this stage.
Local industry ready
Despite the challenges, Turkey has an established PV supply chain. It’s no China but there is considerable expertise, knowhow and a passionate commitment to making solar manufacturing and project development work. Alongside module producers – whose numbers have fallen from more than 40 a few years ago to between 20 and 25 today – Turkey boasts domestic inverter; monitoring; EPC; operations and maintenance; and battery integrators. Many of them are part of larger Turkish conglomerates, giving them the financial wherewithal to supply during a downturn – although not indefinitely.
HT SAAE is the most successful manufacturer with operations in Turkey at present, although its business is based in the country’s free trade zone and supplies primarily the U.S. and European solar markets. The company operates 600 MW of module and 300 MW of ‘cell production’ – although the cell line involves little more than metallization.
Some module makers have strong JV partners and OEM arrangements. HT SAAE, for instance, manufactures for brands such as AEG and Smart Energy, which is closely aligned with China’s Phono Solar. Smart Energy has plans, despite the market challenges, to establish 500 MW of cell production at its facilities.
There is little doubting Turkey’s PV industry is ready. But the wait for clear, long term and sustainable policy settings seems interminable. As a regional industrial powerhouse, its solar companies are providing genuine leadership as neighboring markets expand. The fundamentals are unquestionable, but fundamentals alone do not a solar market make.