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Turkey's Energy Reforms Make Way for Renewable Future

March 29, 2010

  • In last decade, Turkey’s energy sector has evolved from a state-run entity into a commercial, liberalized market.
  • Blackouts have decreased by more than half; an additional 4.6 million households have improved access to power.
  • Through renewable energy generation, Turkey averts emissions of about 1.01 million tons of carbon dioxide per year.

Over the last decade, with the support of the World Bank, Turkey’s energy sector has transformed from a monolithic, state-run entity to a commercially-run, liberalized market, with significant private investment and ownership.

Today, the electricity supply is more reliable. For example, from 2004 to 2007, blackouts decreased by more than half, from 26,675 hours to 10,280 hours. More people have access to secure energy; transmission expansion and upgrades have enabled an estimated additional 4.6 million households to receive improved power supply. And an international transmission link has been established with Greece, enabling the exchange of electricity.

In the last ten years, Turkey has also improved the efficiency of its electricity market while increasing private sector participation in power distribution and generation. In the wholesale market, more than 100 private generation companies have been registered.

Four distribution companies have been privatized so far, out of a total of 20. Now, around 40 percent of consumers can choose their supplier – something that was scarcely available in 2002.

New Market Established

“Over the last few years, we have achieved significant results in terms of reforming the sector,” said Budak Dilli, General Manager of Energy Affairs at the Ministry of Energy. “An electricity market has been established; distribution companies have been privatized; several important legislations – on the electricity market, renewable energy, and energy efficiency – have been enacted and are now being implemented.”

What Turkey now faces is an increase in domestic energy demand and rapidly growing greenhouse gas emissions, a large portion of which come from energy production and usage. To meet energy demand with the least negative environmental impacts, the country seeks to increase its reliance on renewable energy while promoting energy efficiency among power consumers.

The energy efficiency market is also expected to deepen further, with increasing private ownership and investment. It is expected that the sector will rely more and more on clean, renewable resources.

With financing support from the World Bank through the Industrial Development Bank of Turkey (TSKB), small business owner Ali Kantur managed to convert a landfill into a garbage recycling station that creates heat and energy for local greenhouses.

“Two years ago, it was difficult to drive past this place because of the noxious smell and the unpleasant view,” he said. “Today it is an industrial facility that processes the garbage and produces energy from it in a completely environmentally sustainable way. It is hard to believe that the bitter odor is gone, the environment is protected, and on top of this we get energy out of this process.”

Today, the power and heat produced at the station is enough to power 31,000 households in Turkey.

Bank Supports Reforms

The Bank has supported Turkey’s energy reforms through lending and technical advice, in ways that reinforce the goals of each. The Bank’s program includes energy restructuring, liberalization, and privatization; introduction of competitive markets; financing of key rehabilitation and expansion works; and promoting private investment.

A new Development Policy Loan is under consideration to support Turkey’s energy sector reforms and their link to environmental improvement.
The Bank’s work in renewable energy has demonstrated the viability of financing private renewable projects, which have grown in Turkey from negligible levels in 2004 to about 1500 megawatts today. As a result of privately sourced renewable energy generation, the country has been able to avoid emissions of about 1.01 million tons of carbon dioxide a year.

The Bank has also helped Turkey attract large-scale private investment, particularly in renewable resources. New investments have targeted energy generation and privatized distribution.

Based on country priorities, the Bank and the Turkish government are expected to continue their partnership, with the International Bank for Reconstruction and Development (IBRD) providing policy advice as well as investment financing for renewable energy, energy efficiency, infrastructure, climate change, and overall supply security.

Turkey’s Ministry of Energy and Treasury will take the lead in determining overall strategic direction.