“Turkey's PV market has grown rapidly in the last couple of years. Latest official figures suggest that the total installed capacity reached 833 MW at the end of 2016 from below 100 MW in 2014. We expect this momentum to build up in 2017 and expect over 1GW of capacity to be connected. It is worth noting that the driver behind this growth is mainly the unlicensed segment which was initially designed to stimulate the sub 1 MW projects built for self-consumption. Despite its purpose, developers have found loopholes through which they can surpass the requirements around maximum capacity and on-site consumption which led to Turkey’s solar boom.
Tightened unlicensed regulations
In response to the flurry of activity in the sub 1 MW segment, the government tightened the unlicensed regulations in March 2016 which will put a dent in the new applications. There is, however, enough stock of approved projects for the boom to continue from this segment for the next couple of years. In the meantime, the government has been trying to gear up the licensed sector to take over the growth of the sector.
High contribution fees for developers
Turkey’s first auction announced in 2013 for 600 MW was over-subscribed 15-fold however only 13 MW of this has been commissioned so far. The rate at which these projects come online have been hampered by the high contribution fees that the developers had to pay which were as high as $1/W in some instances. Many of these projects will be financially unfeasible due to these fees however the recent reduction in module costs might mean that some projects still pull through. Even then, we expect only a small proportion of the 600MW to come online in the next few years.
High investment hurdles
Given the limited success of the first auction, stakes were high for the second one which was announced for a 1 GW site at the end of 2016. This time, the government tried to use investors’ appetite to develop projects in Turkey as a hook to build local PV manufacturing capacity. Amongst others, the conditions include building an R&D centre focusing on PV production technology and a manufacturing facility with 500 MW capacity that covers all stages apart from polysilicon production. These are challenging requirements to meet, especially considering the ceiling price of $ 80/MWh that developers will only be able to claim for 11-12 years. We therefore expect limited interest in the auction and it is unlikely to replicate the record prices we saw in places like Dubai and Chile." (HCN)
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