FEATURE STORY

Flipping the Switch: Supporting Turkey's Growing Energy Sector

October 28, 2013

Izmir, on Turkey's west coast, glows at night. Turkey has invested billions in the energy sector to help provide cheaper, cleaner, and more reliable electricity to all.

STORY HIGHLIGHTS
  • Electricity consumption in Turkey has increased by close to 7% per year since 1990, and is expected to grow annually by around 6% in the next decade, meaning that greater investments are needed.
  • The government of Turkey is addressing this situation through an ongoing liberalization and privatization program in the energy sector.
  • In the last five years, more than $3 billion has been leveraged by IFC to support private-sector efforts designed to increase energy generation, improve energy efficiency, and mitigate the impacts of climate change.

 

The energy sector remains one of the most important sectors for the Turkish economy. Energy generation, energy security, energy efficiency, and climate change mitigation are just some of the many facets influencing the dynamic efforts being carried out by Turkish officials as they work to meet the country’s energy demands.

As the sector expands, policy makers in the country are working toward the complementary goals of increasing the energy production – and security – in the country, while simultaneously mitigating the potential impacts of climate change.

Faced with this challenge of providing more energy that is not only affordable and reliable, but clean as well, the country is looking at ways to further engage the private sector in meeting this challenge. In doing so, the country is also deepening its cooperation with international institutions such as the World Bank Group.   

Open Quotes

Power generation in Turkey has increased by 3,000 megawatts and 7.9 million energy consumers are being provided with improved service Close Quotes

Rapid economic growth, industrialization, and steady population growth in Turkey over the last decade are now combining to rapidly transform the country’s energy sector. Although this last decade of development has helped to increase electricity generation in the country by 80%, including an increase of 90% in renewable energy generation, an average annual increase in demand of close to 7% since 1990 has meant that further efforts to ensure the availability of clean and reliable electricity continue to be necessary.

In working to address this situation, the government of Turkey is working to achieve the complementary goals of improving energy security, increasing energy efficiency, and further developing renewable resources. As part of this effort, officials in Turkey have implemented a series of measures designed to spur investment and innovation in the energy sector - including an ongoing liberalization program that has ended electricity subsidies, improved the regulatory environment, and paved the way for the privatization of state-owned electricity distribution and generation assets.

Fundamental to these efforts has been an increased role for private companies looking to invest in the energy sector. In recent years, energy companies - with support from banks and investors - have invested billions of dollars in technologies, projects, and programs capable of increasing energy generation and decreasing energy intensity in the country.

As a further commitment to increasing the participation of the private sector in the sphere of energy in Turkey, the country is working with a number of international partners - including IFC, the International Finance Corporation - to overcome some of the commercial risks and regulatory uncertainty that are accompanying this transition in Turkey.

As part of this cooperation, IFC is supporting those private sector investments in power generation, where only 37% of the generation capacity is privately owned. During the last five years, IFC significantly increased its financing of renewable energy projects, and has invested $2.3 billion in 5 projects in the power generation sector. Through its investments in the power sector, IFC has reached 7.9 million customers. IFC has also invested about $700 million in 17 energy efficiency projects, of which more than half was channeled through commercial banks for on-lending to energy efficiency projects, including Is Bank, TSKB, Akbank, and Sekerbank.

These investments, which include the investment and largest syndication IFC has ever made - $700 million in Enerjisa for the development of one natural-gas fired thermal power plant and 10 hydropower plants - are already beginning to have an impact. Since the inception of this cooperation, power generation in the country has increased by 3,000 megawatts and 7.9 million energy consumers around the country are being provided with improved service.

Beyond just power generation, however, this cooperation is also emphasizing measures that can help increase energy efficiency in the country and reduce the climate impacts of the energy sector as a whole. Investments in companies such as Enerjisa and AkEnerji are focusing on renewable sources such as hydropower, while projects such as the TSKB Sustainable project work to improve the global environment through reduced emissions of greenhouse gases and other conventional pollutants.

This coupling of the immediate challenge of energy security with the long-term challenges of climate change mitigation exemplifies the multi-pronged approach policy makers in Turkey are taking to improve the energy situation in the country as a whole. By matching its deregulation and privatization efforts with coordinated investments with the IFC, officials are able to reduce and spur investment by the private sector. By focusing these investments on initiatives that simultaneously bolster energy production and mitigate the impacts of climate change, these companies are investing in today and tomorrow. And by doing all of these things, Turkey as a country is fundamentally transforming its energy sector and working to provide clean, reliable, and affordable energy for all.