What barriers would wind investors find in Turkey?

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Ilaria Valtimora
July 30, 2018
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What barriers would wind investors find in Turkey?

The Ancient Greeks were the first to recognise Turkey’s strategic commercial position. This is why they founded Byzantium – which then became Constantinople, and finally Istanbul – on the European side of the Bosporus. Greeks and Romans made of Istanbul a focal point of their empires because of its strategic position, ideal for commerce and trading.

That’s it. This is the only use that I can make nowadays of my studies of ancient Greek and Latin.

However, the reasons that could enable the development today of a winning offshore wind industry in Turkey are not very different from the ones that brought the Greeks there centuries ago.

In June, the Turkish ministry of energy launched a competitive tender to build 1.2GW of offshore wind capacity. This would be the first step to unleash Turkey’s huge offshore wind potential: Philip Totaro, founder and CEO of US consultancy Totaro & Associates, has estimated that the total market potential for offshore wind in Turkey sits at approximately 41GW. This also includes its potential to build floating offshore wind projects in the southern coastal regions of the Mediterranean Sea.

The launch of an offshore wind auction fits into Turkish government’s plan to promote wind as part of a major expansion of the country’s energy infrastructure. In particular, Turkey has established a target of 20GW of wind capacity to install by 2023, up from its current 6.8GW. Challenging.

As part of this strategy, the country held its first onshore wind tender last year, where a consortium led by Siemens Gamesa and including Turkish firms Kalyon Enerji and Türkerler Holding won the right to build a 1GW onshore wind farm at a strike price of $34.80/MWh.

The government hasn’t provided much detail yet on how it intends promote offshore wind, but an approach similar to the one adopted for onshore wind seems likely. This includes building wind turbine factories in Turkey, a local content of 65% and a requirement to cover at least 80% of expenses for research and development within the country.

To achieve this, the Turkish government would be willing to provide incentives for local manufacturing, including tax breaks, interest rate support, customs duty exemption and social security support.

The government has laid out a very ambitious plan, which is already attracting investors’ interest on the offshore side: “EnBW, who has already been active in onshore development in Turkey, is already poised to get involved in offshore. Siemens Gamesa, Vestas, and General Electric have had contact with domestic onshore developers about the possibility of domestic production and supply of offshore turbines”, Totaro has said. For example, in March Turkish developer Fina Enerji picked GE Renewable Energy as preferred turbine supplier for onshore wind projects of 410MW in the country.

This sounds promising but there are still barriers to overcome.

First, the country needs to be smart about local content. If the government is to require for offshore wind a local content as high as it has requested for onshore wind, it risks to considerably slow down project development.

The country benefits from a geostrategic position, which would make commercial links and imports from Europe easy. This would make Turkey an attractive target for European manufacturers, developers and investors. For the government, it would make sense to take advantage of that to kickstart its offshore market.

Also, a long-term commitment is key. The government needs to lay out a clear plan for following tenders in order to attract European companies’ interest, Totaro has argued.

Finally, Turkey needs to ensure a stable financial environment in order to attract investment. A series of shocks, including the failed coup in 2016, numerous terrorist attacks and political instability have damaged investors’ confidence and affected foreign investment over the last couple of years.

In addition, Totaro has said domestic banks may not be fully resourced to accommodate a significant built-out of the offshore wind market, which could cost up to €185.7bn to fully build its 41GW potential. Of this, capital investment of a minimum of €347m would be necessary in the very short term to build the needed domestic infrastructure to handle offshore wind development.

If the country wants to make a success out of its offshore wind industry, European investors’ support would be key. Without that, Turkey’s plan doesn’t look feasible.

The Ancient Greeks were the first to recognise Turkey’s strategic commercial position. This is why they founded Byzantium – which then became Constantinople, and finally Istanbul – on the European side of the Bosporus. Greeks and Romans made of Istanbul a focal point of their empires because of its strategic position, ideal for commerce and trading.

That’s it. This is the only use that I can make nowadays of my studies of ancient Greek and Latin.

However, the reasons that could enable the development today of a winning offshore wind industry in Turkey are not very different from the ones that brought the Greeks there centuries ago.

In June, the Turkish ministry of energy launched a competitive tender to build 1.2GW of offshore wind capacity. This would be the first step to unleash Turkey’s huge offshore wind potential: Philip Totaro, founder and CEO of US consultancy Totaro & Associates, has estimated that the total market potential for offshore wind in Turkey sits at approximately 41GW. This also includes its potential to build floating offshore wind projects in the southern coastal regions of the Mediterranean Sea.

The launch of an offshore wind auction fits into Turkish government’s plan to promote wind as part of a major expansion of the country’s energy infrastructure. In particular, Turkey has established a target of 20GW of wind capacity to install by 2023, up from its current 6.8GW. Challenging.

As part of this strategy, the country held its first onshore wind tender last year, where a consortium led by Siemens Gamesa and including Turkish firms Kalyon Enerji and Türkerler Holding won the right to build a 1GW onshore wind farm at a strike price of $34.80/MWh.

The government hasn’t provided much detail yet on how it intends promote offshore wind, but an approach similar to the one adopted for onshore wind seems likely. This includes building wind turbine factories in Turkey, a local content of 65% and a requirement to cover at least 80% of expenses for research and development within the country.

To achieve this, the Turkish government would be willing to provide incentives for local manufacturing, including tax breaks, interest rate support, customs duty exemption and social security support.

The government has laid out a very ambitious plan, which is already attracting investors’ interest on the offshore side: “EnBW, who has already been active in onshore development in Turkey, is already poised to get involved in offshore. Siemens Gamesa, Vestas, and General Electric have had contact with domestic onshore developers about the possibility of domestic production and supply of offshore turbines”, Totaro has said. For example, in March Turkish developer Fina Enerji picked GE Renewable Energy as preferred turbine supplier for onshore wind projects of 410MW in the country.

This sounds promising but there are still barriers to overcome.

First, the country needs to be smart about local content. If the government is to require for offshore wind a local content as high as it has requested for onshore wind, it risks to considerably slow down project development.

The country benefits from a geostrategic position, which would make commercial links and imports from Europe easy. This would make Turkey an attractive target for European manufacturers, developers and investors. For the government, it would make sense to take advantage of that to kickstart its offshore market.

Also, a long-term commitment is key. The government needs to lay out a clear plan for following tenders in order to attract European companies’ interest, Totaro has argued.

Finally, Turkey needs to ensure a stable financial environment in order to attract investment. A series of shocks, including the failed coup in 2016, numerous terrorist attacks and political instability have damaged investors’ confidence and affected foreign investment over the last couple of years.

In addition, Totaro has said domestic banks may not be fully resourced to accommodate a significant built-out of the offshore wind market, which could cost up to €185.7bn to fully build its 41GW potential. Of this, capital investment of a minimum of €347m would be necessary in the very short term to build the needed domestic infrastructure to handle offshore wind development.

If the country wants to make a success out of its offshore wind industry, European investors’ support would be key. Without that, Turkey’s plan doesn’t look feasible.

The Ancient Greeks were the first to recognise Turkey’s strategic commercial position. This is why they founded Byzantium – which then became Constantinople, and finally Istanbul – on the European side of the Bosporus. Greeks and Romans made of Istanbul a focal point of their empires because of its strategic position, ideal for commerce and trading.

That’s it. This is the only use that I can make nowadays of my studies of ancient Greek and Latin.

However, the reasons that could enable the development today of a winning offshore wind industry in Turkey are not very different from the ones that brought the Greeks there centuries ago.

In June, the Turkish ministry of energy launched a competitive tender to build 1.2GW of offshore wind capacity. This would be the first step to unleash Turkey’s huge offshore wind potential: Philip Totaro, founder and CEO of US consultancy Totaro & Associates, has estimated that the total market potential for offshore wind in Turkey sits at approximately 41GW. This also includes its potential to build floating offshore wind projects in the southern coastal regions of the Mediterranean Sea.

The launch of an offshore wind auction fits into Turkish government’s plan to promote wind as part of a major expansion of the country’s energy infrastructure. In particular, Turkey has established a target of 20GW of wind capacity to install by 2023, up from its current 6.8GW. Challenging.

As part of this strategy, the country held its first onshore wind tender last year, where a consortium led by Siemens Gamesa and including Turkish firms Kalyon Enerji and Türkerler Holding won the right to build a 1GW onshore wind farm at a strike price of $34.80/MWh.

The government hasn’t provided much detail yet on how it intends promote offshore wind, but an approach similar to the one adopted for onshore wind seems likely. This includes building wind turbine factories in Turkey, a local content of 65% and a requirement to cover at least 80% of expenses for research and development within the country.

To achieve this, the Turkish government would be willing to provide incentives for local manufacturing, including tax breaks, interest rate support, customs duty exemption and social security support.

The government has laid out a very ambitious plan, which is already attracting investors’ interest on the offshore side: “EnBW, who has already been active in onshore development in Turkey, is already poised to get involved in offshore. Siemens Gamesa, Vestas, and General Electric have had contact with domestic onshore developers about the possibility of domestic production and supply of offshore turbines”, Totaro has said. For example, in March Turkish developer Fina Enerji picked GE Renewable Energy as preferred turbine supplier for onshore wind projects of 410MW in the country.

This sounds promising but there are still barriers to overcome.

First, the country needs to be smart about local content. If the government is to require for offshore wind a local content as high as it has requested for onshore wind, it risks to considerably slow down project development.

The country benefits from a geostrategic position, which would make commercial links and imports from Europe easy. This would make Turkey an attractive target for European manufacturers, developers and investors. For the government, it would make sense to take advantage of that to kickstart its offshore market.

Also, a long-term commitment is key. The government needs to lay out a clear plan for following tenders in order to attract European companies’ interest, Totaro has argued.

Finally, Turkey needs to ensure a stable financial environment in order to attract investment. A series of shocks, including the failed coup in 2016, numerous terrorist attacks and political instability have damaged investors’ confidence and affected foreign investment over the last couple of years.

In addition, Totaro has said domestic banks may not be fully resourced to accommodate a significant built-out of the offshore wind market, which could cost up to €185.7bn to fully build its 41GW potential. Of this, capital investment of a minimum of €347m would be necessary in the very short term to build the needed domestic infrastructure to handle offshore wind development.

If the country wants to make a success out of its offshore wind industry, European investors’ support would be key. Without that, Turkey’s plan doesn’t look feasible.

The Ancient Greeks were the first to recognise Turkey’s strategic commercial position. This is why they founded Byzantium – which then became Constantinople, and finally Istanbul – on the European side of the Bosporus. Greeks and Romans made of Istanbul a focal point of their empires because of its strategic position, ideal for commerce and trading.

That’s it. This is the only use that I can make nowadays of my studies of ancient Greek and Latin.

However, the reasons that could enable the development today of a winning offshore wind industry in Turkey are not very different from the ones that brought the Greeks there centuries ago.

In June, the Turkish ministry of energy launched a competitive tender to build 1.2GW of offshore wind capacity. This would be the first step to unleash Turkey’s huge offshore wind potential: Philip Totaro, founder and CEO of US consultancy Totaro & Associates, has estimated that the total market potential for offshore wind in Turkey sits at approximately 41GW. This also includes its potential to build floating offshore wind projects in the southern coastal regions of the Mediterranean Sea.

The launch of an offshore wind auction fits into Turkish government’s plan to promote wind as part of a major expansion of the country’s energy infrastructure. In particular, Turkey has established a target of 20GW of wind capacity to install by 2023, up from its current 6.8GW. Challenging.

As part of this strategy, the country held its first onshore wind tender last year, where a consortium led by Siemens Gamesa and including Turkish firms Kalyon Enerji and Türkerler Holding won the right to build a 1GW onshore wind farm at a strike price of $34.80/MWh.

The government hasn’t provided much detail yet on how it intends promote offshore wind, but an approach similar to the one adopted for onshore wind seems likely. This includes building wind turbine factories in Turkey, a local content of 65% and a requirement to cover at least 80% of expenses for research and development within the country.

To achieve this, the Turkish government would be willing to provide incentives for local manufacturing, including tax breaks, interest rate support, customs duty exemption and social security support.

The government has laid out a very ambitious plan, which is already attracting investors’ interest on the offshore side: “EnBW, who has already been active in onshore development in Turkey, is already poised to get involved in offshore. Siemens Gamesa, Vestas, and General Electric have had contact with domestic onshore developers about the possibility of domestic production and supply of offshore turbines”, Totaro has said. For example, in March Turkish developer Fina Enerji picked GE Renewable Energy as preferred turbine supplier for onshore wind projects of 410MW in the country.

This sounds promising but there are still barriers to overcome.

First, the country needs to be smart about local content. If the government is to require for offshore wind a local content as high as it has requested for onshore wind, it risks to considerably slow down project development.

The country benefits from a geostrategic position, which would make commercial links and imports from Europe easy. This would make Turkey an attractive target for European manufacturers, developers and investors. For the government, it would make sense to take advantage of that to kickstart its offshore market.

Also, a long-term commitment is key. The government needs to lay out a clear plan for following tenders in order to attract European companies’ interest, Totaro has argued.

Finally, Turkey needs to ensure a stable financial environment in order to attract investment. A series of shocks, including the failed coup in 2016, numerous terrorist attacks and political instability have damaged investors’ confidence and affected foreign investment over the last couple of years.

In addition, Totaro has said domestic banks may not be fully resourced to accommodate a significant built-out of the offshore wind market, which could cost up to €185.7bn to fully build its 41GW potential. Of this, capital investment of a minimum of €347m would be necessary in the very short term to build the needed domestic infrastructure to handle offshore wind development.

If the country wants to make a success out of its offshore wind industry, European investors’ support would be key. Without that, Turkey’s plan doesn’t look feasible.

The Ancient Greeks were the first to recognise Turkey’s strategic commercial position. This is why they founded Byzantium – which then became Constantinople, and finally Istanbul – on the European side of the Bosporus. Greeks and Romans made of Istanbul a focal point of their empires because of its strategic position, ideal for commerce and trading.

That’s it. This is the only use that I can make nowadays of my studies of ancient Greek and Latin.

However, the reasons that could enable the development today of a winning offshore wind industry in Turkey are not very different from the ones that brought the Greeks there centuries ago.

In June, the Turkish ministry of energy launched a competitive tender to build 1.2GW of offshore wind capacity. This would be the first step to unleash Turkey’s huge offshore wind potential: Philip Totaro, founder and CEO of US consultancy Totaro & Associates, has estimated that the total market potential for offshore wind in Turkey sits at approximately 41GW. This also includes its potential to build floating offshore wind projects in the southern coastal regions of the Mediterranean Sea.

The launch of an offshore wind auction fits into Turkish government’s plan to promote wind as part of a major expansion of the country’s energy infrastructure. In particular, Turkey has established a target of 20GW of wind capacity to install by 2023, up from its current 6.8GW. Challenging.

As part of this strategy, the country held its first onshore wind tender last year, where a consortium led by Siemens Gamesa and including Turkish firms Kalyon Enerji and Türkerler Holding won the right to build a 1GW onshore wind farm at a strike price of $34.80/MWh.

The government hasn’t provided much detail yet on how it intends promote offshore wind, but an approach similar to the one adopted for onshore wind seems likely. This includes building wind turbine factories in Turkey, a local content of 65% and a requirement to cover at least 80% of expenses for research and development within the country.

To achieve this, the Turkish government would be willing to provide incentives for local manufacturing, including tax breaks, interest rate support, customs duty exemption and social security support.

The government has laid out a very ambitious plan, which is already attracting investors’ interest on the offshore side: “EnBW, who has already been active in onshore development in Turkey, is already poised to get involved in offshore. Siemens Gamesa, Vestas, and General Electric have had contact with domestic onshore developers about the possibility of domestic production and supply of offshore turbines”, Totaro has said. For example, in March Turkish developer Fina Enerji picked GE Renewable Energy as preferred turbine supplier for onshore wind projects of 410MW in the country.

This sounds promising but there are still barriers to overcome.

First, the country needs to be smart about local content. If the government is to require for offshore wind a local content as high as it has requested for onshore wind, it risks to considerably slow down project development.

The country benefits from a geostrategic position, which would make commercial links and imports from Europe easy. This would make Turkey an attractive target for European manufacturers, developers and investors. For the government, it would make sense to take advantage of that to kickstart its offshore market.

Also, a long-term commitment is key. The government needs to lay out a clear plan for following tenders in order to attract European companies’ interest, Totaro has argued.

Finally, Turkey needs to ensure a stable financial environment in order to attract investment. A series of shocks, including the failed coup in 2016, numerous terrorist attacks and political instability have damaged investors’ confidence and affected foreign investment over the last couple of years.

In addition, Totaro has said domestic banks may not be fully resourced to accommodate a significant built-out of the offshore wind market, which could cost up to €185.7bn to fully build its 41GW potential. Of this, capital investment of a minimum of €347m would be necessary in the very short term to build the needed domestic infrastructure to handle offshore wind development.

If the country wants to make a success out of its offshore wind industry, European investors’ support would be key. Without that, Turkey’s plan doesn’t look feasible.

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Full archive access is available to members only

Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.