Under its National Renewable Energy Action Plan, Turkey is aiming to increasetotal capacity from renewables to 61,000 MW by 2023. 34,000 MW of this total installed capacity will be composed of hydropower; 20,000 MW of wind power, 1,000 MW of geothermal, 5,000 MW of solar and 1,000 MW of biomass energy. The total predicted cost of this goal is nearly 60 billion dollars.

In light of these targets, the share of renewable energy (excluding hydro) in electricity production is planned to be 30 percent in 2023. Although this share is only 10 percent today, the annual growth rate shows that the targets for 2023 may be achieved. The predicted electricity demand for Turkey is going to double by 2023. Under this assumption, the target of a 30 percent renewables share in total electricity generation is going to be a necessity for Turkey.

On the 100th anniversary of the founding of the Republic of Turkey, the forecasted gross electricity production for hydropower will be 91,800 GWh, for wind power 50,000 GWh, for geothermal 5,100 GWh, for solar power 8,000 GWh and for biomass 4,533 GWh. In total, the gross electricity production using renewable energy sources will reach nearly 159,433 GWh. This quantity will be 37 percent of the predicted electricity consumption in 2023 (424 TWh). The target of net electricity production by renewables will be 127,324 GWh (30 percent).

With electricity demand doubling in Turkey by 2023, the use of local, renewable and alternative energy resources should be encouraged by the government. This is very important for countries like Turkey in order to decrease foreign energy dependency.

In addition, the efficient use of energy plays a key role. According to the government’s Energy Efficiency Strategy Paper 2012-2023, by the year 2023, the amount of energy consumed per GDP in Turkey is expected to decrease at least 20 percent from the base year 2011. This means that Turkey has a target to save at least 20 percent of its energy consumption by 2023.

Turkey is a suitable place for using almost all of the renewable energy sources in terms of its geographical location as well as geological structure, and the government has noticed this. On the other hand, technological improvements in the field of renewable energy need to be considered as soon as possible. In addition to this, there are financial constraints in the way of increasing production from renewable energy sources. To overcome these difficulties, the government has developed a number of policies, including a guarantee of a fixed price, investment incentives, support from important international institutions, financial guarantees for renewable energy projects, advisory support, and a tax exemption for bio-fuels.

For the upcoming period, Turkey is following a multi-pronged approach in its strategy for renewable energy. Turkey seeks to encourage the production and consumption of renewable energy sources in order to decrease dependency and risk from using fossil fuels. The goal is to increase the share of renewables to at least 30 percent in the production of electricity. To do this, current production capacity from renewable sources will be expanded, and new sources such as bio-fuels will be encouraged in order to utilize more of the agricultural sector’s potential.

Meeting its energy needs will be crucial for Turkey to meet its broader 2023 goals, and this means the country needs to diversify its energy sources and encourage the use of renewable energy.

Turkey is implementing many energy policies within its economic development strategy, which is called Vision 2023. In its energy policy targets include the promotion of indigenous energy resources such as coal (lignite), a 30 percent share of renewable energy in the electricity mix, the reduction of energy consumption by 20 percent below 2010 levels through improved efficiency, and the construction of two to three new nuclear power plants.

For implementing mentioned goals, the government accepted several strategies and roadmaps particularly in the last ten years. The “2009 Electricity Market and Security of Supply Strategy” is one of them, which covers increasing competition in the electricity markets and natural resource utilization. Another one is the “2012 Energy Efficiency Strategy,” which built on the indicative target of Vision 2023 − reducing Turkey’s energy consumption by at least 20 percent by 2023 − and detailed energy saving targets.

More recent policy outlines, like the “10th National Development Plan (2014-2018)” have also emphasized energy issues. As part of this plan, the government set out a number of general key targets in the energy sector, including the increasing domestic supply sources and decreasing import dependence, diversifying supply sources and routes, implementing oil and natural gas pipeline projects, increasing energy efficiency and renewable energy, decreasing consumption of fossil fuels, improving competitiveness on electricity and natural gas markets, expanding and constructing natural gas storage facilities, and starting up the operation of nuclear power plants.

In order to supply affordable energy to its citizens and to sustain economic growth, Turkey needs to implement energy policies in a timely manner, and incentivize ample investments in energy infrastructure.

Another strategic plan was accepted by The Republic of Turkey Ministry of Energy and Natural Resources and covers the 2015-2019 years. This included 16 goals and 62 objectives. The main objectives from this plan were to ensure a strong and reliable energy infrastructure, increase investment in reliable natural gas storage facilities, ensuring the diversity of the fuel mix by limiting the use of imported natural gas in power generation to a share of 38 percent, and increasing the use of domestic coal (to 60 TW by 2019) and renewable energy sources, and to manage demand peaks effectively.

The increasing role of LNG in the global natural gas market creates significant opportunities for Turkey, which meets its energy demand externally. Turkey is a natural bridge between the East, which has energy resources, and the West, which is the largest energy import market. Turkey has not been able to exploit this position for many years, and now wants to have power in the global energy market. So, it is making new agreements to become a central country rather than a bridge in energy trade.

In order to become a central country in energy trade, it is first necessary for Turkey to reduce natural gas import dependence on a handful of countries. With LNG trading, Turkey will be able to achieve this independence. But the share of LNG in energy import in Turkey’s annual gas consumption is considerably low.

The import of LNG started in 1994 from Algeria with the signing of an agreement, and a second source was added in 1999, when Nigeria also signed an agreement. Today, LNG is also imported via spot markets from Qatar, Norway and Trinidad-Tobago.

Source: BP

While 22.1 billion cubic meters of natural gas was imported in Turkey in 2004, this figure reached 49.8 billion cubic meters in 2015. Turkey’s long-standing economic growth has also increased the demand for energy resources. Energy supply security has recently begun to be seen as an important issue in Turkey.

In this case, Turkey needs to benefit from LNG trading. The demand of Turkey for LNG has also started to increase from this angle. As known, Turkey is able to import LNG from many different countries. LNG is an important tool in meeting daily and seasonal flexibility. It is also essential as an alternative source if the supply of natural gas declines or stops. However, the share of LNG in total natural gas consumption in Turkey is only around 15 percent.

Turkey needs to increase the amount of LNG in total energy consumption in the near future. There are currently two gasification terminals in Turkey. Marmara Eregli LNG terminal belongs to BOTAŞ, which has been operating since 1994 and has a capacity of 7.8 billion cubic meters. The second LNG terminal in Turkey, EgeGaz Aliağa Terminal, which was commissioned in the winter of 2006, has a capacity of 6 billion cubic meters.

With increasing energy consumption, Turkey has turned to LNG trading in order to decrease dependency on a single source and country. This has also increased the need for natural gas storage facilities. With ample imports of LNG, Turkey will have to store natural gas. The importance of natural gas storage facilities is increasing steadily and they have a serious role in ensuring energy security in the world. Natural gas storage facilities are especially aimed at eliminating differences in seasonal consumption and possible technical issues in gas supply.

As a result, Turkey needs to make many innovations in order to strengthen its LNG market. The steps that Turkey should take in order to become a trade centre in natural gas as follows: 1) Turkey should be involved in the process of liberalization in the natural gas market. 2) In order for a liberal market to emerge, energy imports should not be dependent on a single source and country. 3) Apart from BOTAS, other companies should also operate in the natural gas sector. 4) Within established storage facilities, advanced infrastructure and human resources should be developed. 5) Priority should also be given to initiatives for Floating Storage Regasification Units (FSRU) as storage facilities and re-gasification terminals.

Building relationships around energy

Turgut Özal re-conceptualized the vision of an energy highway from the Caspian basin as a pipeline rather than a series of “shipments” through the Black Sea. The issue at hand was not only the congestion of the Bosporus and environmental concerns for the enclosed body of water. Turkey was after a relationship built of steel pipes. And if Özal was the visionary, the worker was a man who described himself as “the peasant boy” and was nicknamed “the shepherd.” As Turkey convulsed from Cold War to regional power and from weak political coalitions to military interventions, Süleyman Demirel was the Prime Minister of choice in the 1960s and 1970s and the President in 1993 and 2000. The primary trait of leadership for his generation was making the desirable look inevitable.

Demirel presented the pipeline from Azerbaijan to Turkey via Georgia as a regionalization story. But, from an early stage, the idea for Turkey was to become an energy hub, bridging the energy sources of the Middle East, the Caspian Basin, and Central Asia to Europe. That was always a story less about Europe and more about Turkey. Turkey was given the historic chance to remold and redirect its relationship with its neighbors and build around this relationship a new regional consensus on its own status as the indispensable partner to nearly every economic sector, from construction to tourism and from agriculture to retail. The point then and the point now is that Europe is a major component of the role Turkey has defined for itself.

The triangle of Azerbaijan, Georgia, and Turkey widened the scope of the relationship. Since the 2000s, successive AKP administrations have built a triangular high-level policy instrument in the South Caucasus that remains effective largely because it is transactional rather than transformational. The three countries cooperate through a trilateral forum that is very much top-down and policy focused. Despite being a NATO member, Turkey has self-consciously avoided playing the counterbalancing strategic actor in the region vis-à-vis Russia and has kept policy cooperation with each and every state in the region in neat and self-contained “boxes.” When it comes to energy cooperation, there is no contradiction between Russia emerging as Turkey’s single biggest partner and cooperation with Georgia. Ankara pursues a multi-vector policy inherent in the very notion of a hub, strategically aspiring to play the role of a bridge between emerging and developed economies. A bridge must be stable on both shores.

Regionalization in a European Framework

The political narrative of Turkish exclusion from decision-making when it comes to European policy development is one side of the coin. But, the status of a candidate country, membership in the Customs Union, the process of accession negotiations – however, unrealistic the prospect of membership appears – and the normative, and regulatory harmonization in Europe comes with two distinct advantages.

The first is scale. Undoubtedly, for Turkey, Europe is a catalyst. As a launchpad to Europe’s market, Turkey has been able to scale up foreign direct investment, access international capital markets in preferential terms, bolster industrial capacity, and increase trade volumes. Energy is no exception. Energy infrastructure is developed to channel considerable energy flows from the Middle East, Russia, and the Caspian Basin to Europe, with Turkey reaping short and long-term benefits. In the short and medium term, Turkish industry reaps the benefits of downstream project development; in the long run, Turkey reaps the benefits of low energy rates that become a competitive advantage.

The second is protection for certain types of volatility. For example, as an investor, Turkey can operate in a predictable multilaterally regulated energy market of Europe’s energy community. Therefore, Turkey can function as an investor in places like Georgia and Azerbaijan, gaining access to cheaper energy, such as hydroelectric power, within a coherent, transparent, and predictable normative framework. On these foundations, the three countries have built a regional electricity market that projects a diminished national risk than an investor would expect at first sight.

Hydroelectric power is in this sense a good case study. Georgia has set the ambitious objective of becoming carbon neutral by 2050. With over 25,000 streams and rivers, Georgia has reached 90% autonomy in electricity production and is a net exporter, primarily to Turkey. Thus far, the country has only developed 20% of its estimated capacity. Turkish firms are the leading investors in hydroelectric project development in Georgia, with access to a state of the art grid developed with the support of institutional investors that operate within a EU-driven framework. That is essential not only for risk management and access to capital markets but also for the regulatory transparency that each investor expects.

National Objectives in a European Framework

Turkey is the most important economic partner of Georgia and Azerbaijan across most economic sectors. That is no longer a process driven by EU engagement, but an effect amplified, catalyzed, and facilitated by normative and regulatory integration stemming from Brussels.

Turkey, Georgia, and Azerbaijan have moved from oil and gas to develop high-speed rail networks, roads, and electricity infrastructure, widening the scope and scale of their relationship. By becoming the indispensable conduit from emerging markets to Europe, Turkey and the region at large has become the hub for all kinds of flows from the Middle East, Central Asia, Russia, and China to Europe. Turkey’s multi-vector policy is no longer about oil and gas alone, but also trade in goods, logistics, electricity, and even data. And the emerging cluster makes an attractive case for a manufacturing hub that brings together competitive labor, ever-more attractive energy rates, and market access (normative and physical).

The scope and depth of the relationship no longer depends on oil price fluctuations. There is now an ecosystem in which this regional triangle has its own regional niche. And Turkey is a stakeholder not only in regional stability but also the European Energy Community, and beyond.