Green electricity tariffs, 1 GW solar tender ‘light at the end of the tunnel’ for Turkish PV

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Turkey’s Ministry of Energy and Natural Resources has officially published the details of its 1 GW solar auction. The smallest project allowed under the tender is 10 MW in size, while the largest is 20 MW.

According to the announcement published in today’s issue (03/07/2020) of the Official Gazette, the auction will be held over a four-day period between October 19-23, 2020, for projects located in 36 cities, and across 74 grid connection points.

The starting ceiling price in the auctions will be TRY0.3/kWh ($0.044/kWh), and the winners will receive a 15-year power purchase guarantee. All projects must use locally produced modules.

The following cities have been allocated projects under the tender: Adıyaman, Ağrı, Aksaray, Ankara, Antalya, Batman, Bayburt, Bilecik, Bingöl, Bitlis, Burdur, Bursa, Çankırı, Çorum, Diyarbakır, Elazığ, Erzurum, Eskişehir, Gaziantep, Hakkari, Iğdır, Kahramanmaraş, Kars, Kırşehir, Kilis, Malatya, Mardin, Mersin, Muş, Nevşehir, Osmaniye, Siirt, Şırnak, Uşak, Van and Yozgat.

This 1 GW auction is like the light at the end of the tunnel for the Turkish solar industry, which had been in decline even before the effects of Covid-19 were felt.

In the first five months of 2020, total installed PV capacity for the year stood at just 157 MW compared to last year’s almost 1 GW for the full year. This was a decline from 1.6 GW in 2018. Turkey’s solar industry has been desperately looking for planning security in the times of Covid-19. Such auctions are more than welcome, since roof top self-consumption models are apparently not moving forward fast enough.

While the auctions are a positive step, financing projects will still remain challenging. As mentioned, the auction will be held in Turkish lira and ceiling price is already as low at $0.044/kWh. Considering that locally-manufactured modules must be used, and that they are around 30% more expensive than those produced elsewhere, project developers and participating parties will have difficulties in defining the right pricing. On the other hand, since the auction is in Turkish lira, fundraising will be in Turkish lira. Due to the high inflation rate – currently running at 10-12%/a – financing costs will be higher than if the auction was in euros or U.S. dollars.

Additional policy measures to introduce “green tariffs” for electricity consumers may deliver another boost to solar developers – potentially driving demand.

Within the framework of reforms to Turkey’s electricity market, there has been a need to amend the Regulation on the Renewable Energy Resource Guarantee Certificate in the Electricity Market and the Regulation on the Documentation and Support of Renewable Energy Resources. For this purpose, a draft was published on July 1, 2020, amending the legislation in question. The Draft Regulation will be open to public opinion and evaluations until July 28.

The tariff regulatory reform seeks to introduce an electricity tariff for Turkish consumers based on renewable energy sources. It introduces a legal framework for a “green tariff”, allowing electricity consumers the opportunity to purchase certified clean energy. It draws on similar moves in other countries.

To introduce such tariffs, new regulations are required. Accordingly, the “Draft of Renewable Energy Resource Guarantee Certificate Regulation in Electricity Market” (REC Regulation) has been prepared. In terms of compliance with this new regulation, some amendments were made in the Regulation on Certification and Support of Renewable Energy Resources.

Meanwhile, Turkey’s Ministry of Energy is preparing a “Green Tariff” – expected to be announced next month – which will be a new end-user tariff for those seeking to source their electricity from 100% renewable sources. Suppliers of this tariff will be required to issue and retire RECs for each MWh to be sold in accordance with the REC Regulation.

As is known, Turkey’s current feed-in-tariff program (YEKDEM) ends at the end of 2020. It is not certain what shape YEKDEM’s replacement will take – although the 1 GW auction provides some certainty. The Green Tariff and RECs appear to be the main instruments to be utilized by the ministry for fostering renewable development.

It is clear that the Turkish government does not want to continue with the state supported YEKDEM scheme, instead looking to divert demand-side measures in the market. Participation to both Green Tariff and RECs are voluntary as for now, thus interest of the public to these new instruments is in question. However, the Energy Ministry may impose some REC quotas on electricity suppliers or provide some incentives for the REC users in future – which may then be an effective boost for renewable energy investments in Turkey.

The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.