The future of solar PPAs in Turkey

Sep 23, 2020 12:35 PM ET
  • Both the existing standing, as well as the future of, solar PPAs in the Turkish market as a vital device for raising PV capacity has actually ended up being a commonly gone over subject. This is specifically because of the fact that after mid-2021, the future of YEKDEM (Turkey's neighborhood FIT routine) doubts. The motivations could be less than expected, or perhaps inaccessible for some innovations. This has actually elevated the question of alternative financing devices relative to brand-new investments.
The future of solar PPAs in Turkey
Image: IBC Solar

3 workshops were intended by TurSEFF (Turkey Sustainable Energy Financing Facility) and Solarbaba (a social venture in solar market) for 2020 in Turkey, with the major motif of "PPAs as a design to create new renewable resource set up capability". The objective of these workshops was to conceptualize together with various celebrations, present the suggestions as well as open the subject to broader public discussion. Each workshop was developed to focus on a various vital element of sustainable PPAs (power purchase agreements).

The very first workshop took place on February 22, 2020, along with the involvement of power business which are presently servicing this concern. It concentrated on "electrical energy generation as well as trading".

Local banks, energy companies as well as business consumers participated in the second workshop, on June 18, 2020, which concentrated on "money". The last workshop will certainly be kept in October 2020 and will certainly deal with the "customer" aspect with the involvement of even more company electrical power consumers from different fields.

Insights from the very first two workshops are given in this post from the viewpoints of three celebrations associated with Turkey's solar PPA market: (i) energy firms (electrical power producer/seller) who are the IPPs (Independent Power Producers) and also financiers of renewable resource projects; (ii) company electrical power consumers (purchasers) who purchase tidy power to be generated from these nuclear power plant in the long term; and also (iii) banks which will fund the projects.

Power manufacturer (vendor) perspective

According to the power business, there are a number of options for solar PPAs to end up being a sensible alternative company version in the Turkish power market as of 2021.

In the self-consumption model on the unlicensed side, power can not be offered according to the current legislation. In this design, investors can invest in solar by themselves roofs and also take in the electrical energy they generate. If electrical power created by unlicensed power plants might be sold on the controlled market via EXIST (Energy Exchange Istanbul), and also a security structure can be developed in this regard, energy business may invest in manufacturing facility roofs, mount RSPVs (Rooftop Solar PV) and sell the power to factory proprietors.

This will pave the way for Energy Service Company (ESCO) or Build-Operate-Transfer (BOT) models in the industry. This would certainly not negate the self-consumption principle; rather it would certainly be financing within the self-consumption model. This would speed up the application of self-consumption RSPV projects. Both commercial as well as energy companies would certainly win.

On the accredited side, the YEKDEM structure is coming to an end and also a brand-new mini-YEKA (Renewable Energy Resource Area) model has been presented. The current power market regulations does not position a challenge for the implementation of the renewable PPA version in qualified power plants. Nonetheless, contrasted to YEKDEM, which was a 10-year public power acquisition warranty (feed-in-tariff), PPAs were not an eye-catching business design. Nevertheless, it is forecasted that it may become attractive for solar PV power beginning with 2021.

Although there are energy business that will certainly make the financial investments, customer( s) who acquire the power, as well as banks that provide financing, under the present situation, it is really difficult to create new qualified solar capability, due to grid link capability limitations and long lasting application as well as tendering procedures. In the event where the electrical power producer, customer, and also investor sign a solar PPA, specifying the technique of the grid connection ability allocation to establish the PPA framework, option to the mini-YEKA design, would certainly serve.

Another option is to issue a brand-new regulation specific to sustainable PPAs that covers renewable energy financial investments of all dimensions, without making any kind of difference, such as unlicensed or accredited. As an example, a manufacturer may mount 2 MW on their roof, acquire the equivalent in created electrical energy from a 20 MW nuclear power plant, or come to be a 2 MW shareholder of a 20 MW nuclear power plant and receive the energy. On the other hand, it is very important to include smaller sized scale (unlicensed) energy generation centers out there controlled by EXIST.

Electrical power customer (buyer) point of view

The European Green Deal is a forthcoming topic and also brings obvious opportunities and threats. There are significant possibilities specifically in regards to brand-new renewable resource capability boosts and also decarbonization of the commercial facilities in Turkey. With great administration of the process, it is feasible to transform the prospective threats right into chances.

The most critical heading in the European Green Deal for electricity consumer industrial business in Turkey is "Border Carbon Adjustment" related to "Carbon Leakage", since Turkey is among the biggest vendors of the European Union and also most of Turkish items are exported to the EU countries (41.1%, according to the Jan-- May 2020 information from the Turkish Ministry of Commerce).

As soon as this mechanism is developed, industrial companies in Turkey wanting to export their products to the European Union will certainly need to birth an additional expense for both carbon emissions from the eaten electricity supplied by the grid as well as from their very own procedures. It would certainly be wise for all firms to seriously think about these two aspects and also begin servicing them. In this context, renewable PPAs might end up being an excellent option for electricity customers to acquire power from renewable sources at a more affordable price.

Although the Green Tariff-- an electrical power tariff from renewable resource sources presented in August 2020 by EMRA (Turkish Energy Market Regulatory Authority) is an additional option for this, it is observed that it brings an additional price to the customer. In addition, developing a Carbon Emission Trading infrastructure and advertising and marketing it according to sustainable PPAs will be a positive advancement on the consumer side.

Worldwide business with considerable financial investments and/or supply chains in Turkey currently produce considerable demand in the Turkish market for supplying their electricity usage from renewable energy in accordance with their decarbonization objectives. Also, several energy business with global investors and also which are active in the Turkish market have been dealing with PPAs to be able to meet the demands of the above-mentioned customers' worldwide represent their operations in Turkey. Several of the worldwide power companies are waiting for the advancement of sustainable PPA mechanisms to go into the Turkish market.

Banks viewpoint

The banks in Turkey have achieved significant development in renewable resource funding. The crucial element of this growth was the YEKDEM device-- a feed-in-tariff scheme introduced by the Turkish Government in 2010. YEKDEM has actually used elements that reduce the risk of banks with a fixed price and also public electrical energy acquisition warranty. The truth that the financing provided was mostly in US Dollars enabled banks to get rid of the exchange rate danger.

The financial institutions concur that a brand-new market may be formed after YEKDEM with eco-friendly PPA versions. The reality that financial institutions have not had much experience so far suggests the needs will be determined more plainly in time. However, all financial institutions aspire to join this new market.

One of the most essential problems are exactly how the lawful structure will certainly be created, what the agreements will cover and also just how the dangers will be lessened. The involvement of financial institutions in the financing procedure before the contract, agreeing on pricing, maturity, settlement terms as well as other scopes of the agreement, as well as adjusting the financing problems appropriately, are amongst the aspects that will boost the ease of access of projects to finance as well as reduce the danger for all parties.

The exceptional terms are that: the maturity of the contract need to work with the payment plan/terms; the agreement ought to be last and irreversible with the penal sanctions for termination, which may happen under extremely minimal scenarios; the contract price must be foreseeable at a fixed price with acceleration if required; and also the contract currency might remain in United States dollars or Turkish Lira, while rates might be indexed with a TL recommendation rates of interest (TLREF).

Taking into consideration risks, both project danger and also purchaser side danger need to be addressed. There is not a problem in examining the project dangers with the experience of financial institutions in this regard. Nevertheless, the buyer's capability to pay the quantity specified in the agreement throughout the term of the contract is one of the most crucial risk for banks. The financial stamina of the buyer as well as the lasting sustainability of their organization tasks are various other crucial criteria of danger dimension. New monetary danger elimination devices and also products are required for renewable PPAs in the Turkish market.

In Turkey, there is no sophisticated annual report danger evaluation mechanism like in advanced economic situations to evaluate the threat of the customer side. Consequently, long-term O&M (Operation as well as Maintenance) agreements with EPCs (Engineering Procurement Construction Companies), performance bonds, and also construction duration insurance policies will certainly be the risk mitigating tools.

Establishing just how the customer's payments will certainly be made, checking the repayments, as well as guaranteeing them to the financial institution are other vital elements of risk administration. Because the PPA version seems risky from the viewpoint of economic industry representatives, banks may ask for added collateral.

Conclusion

In conclusion, solar PV financial investments have actually ended up being very eye-catching from the technology as well as costs point of view as a result of the decrease in renewable energy expenses over the last few years. In addition, it is anticipated that PV module efficiencies will boost, as well as expenses will better reduce with brand-new module modern technologies. The decline in the payback duration of investments will both boost the interest of investors and assist in the work of financial institutions with shorter-term eco-friendly PPAs. Furthermore, the development of storage technologies and also the decrease in prices will certainly make it possible for new, much more versatile business designs on the market.

It is the right time to specify on solar PPA-based company and also monetary models in the Turkish market to develop new solar energy set up ability. The connection in between power consumers and manufacturers ought to be enhanced to share expertise to all degrees of customers. Furthermore, financial institutions are anticipated to be happy to leave their convenience areas to fund new frameworks and also company models, such as sustainable PPAs for the marketplace, to develop the needed economic frameworks to fund those models in a manner that will bring the least problem to all celebrations.

Source:
pv-magazine.com

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