Turkey: A New Era for Coal-Fired Power Plants in Turkey

The importance of coal energy in Turkey

Turkey’s energy needs are growing daily due to its growing population and developments in national industry. Coal is clearly the main local energy resource, and since its reserves consist almost exclusively of lignite (also known as brown coal) and small amounts of hard coal, the country is currently dependent on imports of oil, gas and hard coal. According to worldwide statistics, Turkey is ranked at a medium level in terms of reserves and production of lignite and at a low level in terms of hard coal.

Incentives for local coal-fired energy investment

Turkey’s new investment incentive system, launched in April 2012, became effective by Council of Minister’s Decree No. ²⁰¹²⁄₃₃₀₅ on Government Subsidies for Investments (Yatırımlar Devlet Yardımları Hakkında Karar) on 15 June 2012 (the “Decree”). The Decree aims to encourage investments with the potential to reduce dependency on imports of intermediate goods vital to the country’s strategic sectors.

In order to reduce dependency on imports of energy resources, through an amendment to the Decree on 28 January 2013, power plants generating electricity based on local coal resources may benefit from incentives granted to 5^th region investments, including, but not limited to (i) governmental support in social security premium payments; (ii) increased support for corporate and income tax reduction to be applied on investment expenses; and (iii) exemption from payment of the Resource Utilisation Support Fund (Kaynak Kullanımı Destekleme Fonu).

In line with the government’s plans, 90 coal-fired power plant projects are under construction to produce an additional 18,500 MW installed power capacity by 2023.

Government commitment on purchase of electricity and tenders

The Turkish government is planning to invest heavily in coal facilities. It has announced that high-scale coal energy tenders will be announced in the upcoming months. A major incentive is that the energy produced by coal-fired power plants will be purchased by El-ektrik Üretim A.Ş. (Electricty Generation JSC) or Türkiye Elektrik Ticaret ve Taahhüt A.Ş. (Turkish Electricity Trade JSC) for a certain period. The terms, conditions and beneficiaries will be determined through a tender held by the relevant authorities.

In line with the government’s aim to reduce the country’s dependency on imported energy sources, more incentives for coal-fired power plants in Turkey to attract local and international investors may be expected.

New incentives and opportunities are in place for coal-fired power plants to attract local and international players in the energy market.

author: Murat Kutluğ