Turkey Considers More Coal-fired Power

On November 7, Turkish Minister for Energy and Natural Resources Berat Albayrak, who is the son-in-law of Turkey’s powerful President Tayip Erdogan, announced that $5 billion had been invested in building 158 electricity generating plants during 2016. The government of Turkey is pursuing an aggressive industrial growth strategy that it is attempting to fuel local resource use, thus a large number of these plants are being built to run off indigenous coal. “As long as we use our renewable resources and our coal resources efficiently, we will be able to open new horizons for our country by closing the account deficit,” he said.

According to the 2016 Budget Presentation of the Ministry, Turkey can save around $7.2 billion from its annual energy bill as long as the country’s coal reserves are fully realized. The three stateowned coal companies in Turkey, together produce more than 90% of the country’s coal—though often using contractors— have embarked on an exploration program that has revealed 7 billion metric tons (mt) of reserves over the past 10 years. Most of this coal is, however, low quality lignite, and only 6% of reserves have a heat content of more than 3,000 Kcal/Kg.

Turkey must still, therefore, import considerable amounts of hard coal to supply its steel industry as well as those coal-fired power plants that rely on hard coal, more of which are currently being built. Imports of hard coal have been increasing and reached 17.6 million mt in 2015. Even as Turkey attempts to exploit its domestic resources, imports of hard coal are expected to continue to rise to reach 24 million mt by 2026.

A levy of $15/mt on imported coal was introduced in August of this year, only to be revised in October to a lower rate related to the ICE Rotterdam Futures Index. Imported coal currently covers 15% of Turkey’s energy requirements, while local lignite covers 13%. Gas is the principle energy source. Turkey imports gas from Russia and Iran, countries upon which Turks are determined not to depend. Turkey’s energy deficit stood at 6% of GDP in 2014. To curtail this, the government plans to increase electricity produced from lignite from 31 TWh to 57 TWh by 2018. There are currently 71 new projects for coal-fired power plants in Turkey, though many may never be realized.

The new fleet of lignite-fueled power stations is not without its critics. There have been numerous protests involving local communities in the areas of the proposed new coal mines and power plants, as well as objections from environmental groups. Their combined pressure forced the cancellation of a project led by the Azerbaijan National Energy Co. (SOCAR) to build a 672-MW integrated coal-fired power plant near Aliaga in Izmir province last year.

Such interference seems less likely to be tolerated following the controversial government decree, Article 80 of August 20, passed during the State of Emergency that was declared following the recent failed coup attempt and that remains in place. The decree aims to fast-track mining and energy projects by exempting them from various licenses and permissions, as well as allowing for appropriations where “strategic investments” are concerned—a clear sign of this government’s determination to develop its domestic resources, which is further backed by a suite of incentives particularly favoring coal miners, including cheap electricity and wage subsidies.

Turkey’s fast-stream coal mining development drive needs to be tempered with caution. Accidents in Turkish coal mines are much too frequent and the tragic loss of more than 300 lives at the Soma pit disaster of 2014 is still fresh in the collective memory.

In the short-term, enticing regulations and an enormous spend on constructing coal-fired power stations bodes well for Turkey’s coal sector, and both local producers and foreign imports will see growth. But whether or not this will prove sustainable depends on how tolerant Turkey’s population will be to the associated costs. By Mungo Smith, Editorial director for Global Business Reports.

As featured in Womp 2016 Vol 12 - www.womp-int.com