Ayhan Goek, managing director of Nordex in Turkey, says he expects an additional 800MW to 1GW in wind capacity to be installed in the country this year. This will all come from roughly 9GW in production licenses that is for wind farms already issued by the regulator.
However, without higher incentive prices Goek believes any Turkish wind boom could quickly die out. The country's ambitious 2023 target of 20GW in installed wind capacity would become increasingly difficult to achieve.
Many investors with production licences still need to obtain other permits, stresses Kor Ozay, assistant general manager at Turkish developer Agaoglu Energy Group. "I don't think 2012 will be a great year in terms of new plants going into operation but there will be lots development activity," says Ozay. He expects this activity could push Turkey to around 2.5GW installed capacity, but only in 2013.
A thorny issue for many investors is Turkey's incentive scheme, which comprises a feed-in tariff of US$0.073/kWh for ten years. Given the low incentive price, investors have tended to forego the FIT and sell electricity directly on the market but this is clearly a riskier strategy.
While a higher FIT of up to $0.11/kWh is theoretically available for turbines with local manufacturing content, the local-content law approved in 2010 is seen as excessively rigid. No one has yet managed to be able to receive even the minimum bonus payment.
"The wind industry is working to get a more flexible law that would allow companies to import components from other European countries and assemble them here," says Goek, who is also a member of the board of the Turkish wind energy association. A more flexible approach could also make good economic sense for the government. "Turkey will be a big market in the future and there would also be the possibility of exporting to countries in the east," notes Goek.
Complicating matters is the fact that some investors have been paying excessively high production licensing fees for planned wind farms. "Market players want a higher FIT," says Ugur Isik of Res-Anatolia, "but the government says, 'If the FIT is not high enough why are you paying so much for licences?'." Project sponsors believe the government will be forced to adjust the tariff upwards once it becomes clear that numerous licensed projects will never be built because they are economically unfeasible.
Ozay says one important source of activity should be extensions to existing plants, following the publication of a new law facilitating them in early 2011. "The law says you can add as many turbines as you like to existing capacity but that you simply cannot exceed the production output indicated on your license," explains Ozay. "Expanding your capacity by as much as 10-15% is possible and makes sense if there is a site with a lot of space and very good wind potential."
Continuing to play a crucial role in Turkey's development are multilateral finance institutions and export credit agencies (ECAs), which are routinely involved in the country's wind project-financing deals and are particularly critical as the financing environment has worsened. "Local banks have much higher rates and almost no project is financed for more than ten years," says Ozay. "ECAs and multilaterals offer the best financing terms and can finance for up to 15 or even 18 years. They are critical."