CAPÍTULO 3. PRESENTACIÓN DE LA SOLUCIÓN PROPUESTA
3.2. Requerimientos del sistema
3.2.1. Requerimientos funcionales del sistema
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2 INTRODUCTION
The energy policy of the Turkish government is supported by several incentives to promote investments on RETs24; in order to mitigate dependency on natural gas for the generation of electricity. The major incentive is the technology specific feed-in tariff (FiT) scheme which is based on a fixed price per kWhel electricity generated by the corresponding technologies. In Table 2, the introduced FiT scheme is tabulated. Accordingly, a generator is entitled to benefit from the base tariff during the first 10 years25 of operation. In addition, local equipment bonus is granted for the domestically manufactured mechanical and/or electromechanical equipment during the first five years of operation.
Table 2- The FiT for RETs (own illustration according to the Ministry of Energy and Natural Resources, 2014, pp. 54-55)
The FiT is granted to those facilities which are commissioned until the year 2020. In NREAP26, it is mentioned that the council of ministers will determine the FiT applicable to facilities commissioned after December 31, 2020; however it is also emphasized that the FiT cannot exceed the rates represented above. In NREAP, it is pointed out that if the penetration target were fulfilled before the end of the period, a lower feed-in tariff scheme would be adopted for the rest of the period and the next. On the contrary, if the penetration target were not fulfilled before the end of the period, an equal or higher feed-in tariff scheme would be adopted for the rest of the period and the next. Note that the enrollment in the FiT scheme is not compulsory rather optional. In addition, a generator has also the right to sell electricity through a bilateral agreement or in the day-ahead market.
24 RET refers to the hydropower, wind power (on shore), solar pv power, geothermal power and biomass power plants.
25 The prolongation of FiT over 10 years is still unclear for RETs with installed capacities under 1 MWel.
26 National Renewable Energy Action Plan for Turkey Type of Technology Base Tariff
17 Other provided incentives for achieving renewable energy targets of Turkey are listed below:
Within the framework of “General Investment Incentive Program”, investments on RETs are entitled to exemption for value-added tax, customs duty and income tax withholding allowance (only for investments in Region 627).
Any type of RET with an installed capacity up to 1 MWel is exempted from the requirement to hold a generation license. Nevertheless, the board of ministers is authorized to increase it to up to 5 MWel for specific projects.
RET investors are required to pay only one hundredth of the license fee and are freed from the obligation to pay the annual license fee during the first eight years of operation.
The research and development (R&D) concerning the renewable energies is supported through income tax withholding allowance, social security premium allowance (employer's share) and stamp duty exemption.
The investor perspective on the incentives for promoting renewable energy investments has been investigated by Özcan (2014). The survey study is conducted through face-to-face interviews with 18 investors who have investments in RETs in Turkey. The survey participants are composed of 4 hydropower, 9 wind, 3 geothermal and 2 biomass power plant investors. The findings of the survey provide following insights into investor views:
The investors are motivated to make investments on RETs due to their profitability and environmental sustainability.
2 wind power investors, 2 geothermal power investors, and 2 biomass power investors benefit from the FiT. The majority of the participants stated that the earnings from FiT are low.
None of the investors benefits from bonus for domestically manufactured equipment, R&D income tax withholding allowance and social security premium allowance.
17 investors benefited from the VAT28 exemption and customs duty exemption.
All of the participants stated that their investment costs are high and foreign exchange risks substantially affect the profitability of their investments.
27 Except Bozcaada and Gökçeada (in the west of Turkey), the region six is composed of the cities in the east and south-east Anatolia (Ağrı, Ardahan, Batman, Bingöl, Bitlis, Diyarbakır, Hakkari, Iğdır, Kars, Mardin, Muş, Siirt, Şanlıurfa, Şırnak and Van).
28 Value Added Tax
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The foreign investors see the global economic situation and the position of the Turkish economy as the major risk for their investments.
The difficulties related to the grid connection have been experienced by all investors.
The grid contribution fees paid for getting the right to access grids are considered to be high.
The investors share the opinion that banks have a very positive point of view in terms of providing credit to RET projects.
The energy policy 2023 is an ambitious target to which the Turkish government has committed itself by providing incentives for its realization; however the downward trend in the wholesale market price of electricity may cause delays in reaching the target until the year 2023 (see Figure 5). It can be inferred from Figure 5 that the annual average wholesale market price of electricity decreased from 122 $/MWhel to 53 $/MWhel in the period 2008-2015.
Accordingly, enrolling in the base FiT scheme has become more profitable than the wholesale market price of electricity (see Table 2). One of the major reasons for the downward trend is the devaluation of the Turkish Lira (TL) against $ (also true for Euro) since the year 2008. In the year 2008, 1.3 TL equaled to about 1 $; however at the end of year 2015, 2.9 TL equaled to about 1 $. Further, the devaluation of TL can be considered to be continuing in the next decade; since the US central bank may continue to raise its interest rate for $ according to the announcements at the end of 2015. In addition, the decreasing global price for fossil fuels and the increasing penetration level of RETs can be considered as other reasons for the corresponding trend.
Figure 5- The development of the annual average wholesale market price of electricity in the period 2006-2015 (own illustration according to TEIAS)
40 60 80 100 120 140
2006 2008 2010 2012 2014
$/MWhel
Year
Past Wholesale Market Price of Electricity
19 The mentioned downward trend in the market price of electricity led to an increase in the number of RETs which are enrolled in FiT scheme as tabulated in Table 3. It can be inferred from the table that the number of enrollments for the year 2016 is the highest among the others. In the year 2015, the installed capacity of RETs amount to 28 GWel and more than half of that amount is enrolled in FiT scheme in the year 2016. Thus, the potential RET investments faces great uncertainty given the market conditions; since the FiT can be provided only for a limited time span (see Table 2) and the economic lifetime of RETs are in the range of 20-50 years.
Table 3- The development of the installed capacities of RETs enrolled in FiT scheme (own illustration according to EPDK29)
Considering the uncertainty in revenues, investors face the dilemma of investing immediately by enrolling in the FiT scheme or postponing investments by waiting until the resolution of the uncertainty. Once the uncertainty is resolved, an immediate investment decision may be advantageous for being able to owning a project which is rare in renewable energy resource quality (e.g. high wind potential). On the other hand, it may also be disadvantageous; since investments on RETs are irreversible (i.e. sunk cost) and investment opportunity in a later time is foregone (i.e. flexibility in investing).
Objective of the Study
compare it with the resource potential related to the FLHs of RETs in Turkey. Hence, the term29 Energy Market Regulatory Authority
30It can be calculated by dividing the average annual amount of electricity generation by the corresponding power plant’s installed capacity (i.e. rated power capacity).
2011 2012 2013 2014 2015 2016
Hydropower 21 930 217 598 2116 9960
Wind Power 469 685 76 825 2775 4320
Geothermal Power 72 72 140 228 390 599
Biomass 45 73 101 147 185 204
Total 607 1760 534 1798 5466 15083
Installed Capacity [MW]
Type of Power Plant