Subsidies and Renewable Incentives. Barış Sanlı

Transcription

1 Subsidies and Renewable Incentives Barış Sanlı

2 No part of this presentation can be attributed to the institutions/organisations I worked with. The following slides are my personal insights only. For governmental and organisational views consult these institutions:

3 Message from this presentation - Subsidies Removing subsidies is not economic/financial event it is a game changer for developing countries Do not listen only the economists on this issue, consult the man in the field First protect the poor (LPG-autogas??) then remove subsidies (on gasoline/diesel) -> provide alternative Turkey has the highest tax and highest consumption growth with little economic growth in 2015 Controlling smuggling should be considered Check data, always!

4 Energy and Life interaction is quite interesting and may lead to interesting solutions Year 1980 : The prime suspect for electricity cuts is Turkish Films!!! TV broadcasting time will be limited to 2.5 or 3 hours According to a research, the Turkish films during the week days are the prime reason for excessive power. Therefore, during the week days, Turkish films will not be shown. 4

5 Let thy message be spread across the lands NO SUBSIDIES It will eliminate all evils!

6 Yemen was the poster child for removing subsidies Yemen was shown as an example by Economist-led Organizations Subsidies costing govt billions IMF pushed the reform Prices doubled overnight

7 Yemen Example - July 2014

8 You know the story

9 Life after subsidies should be examined carefully It is not just a few formulas, there are different perspectives What are your neighbours prices? Need effective states in & around In place safety nets for poor? Not the Egyptian example of «open buffet» Do you have some kind of instution for fuel quality? People can be scientists like Mixing jet fuel, lubricants etc Are you sure you want to do it overnight? Having a nice diploma and International career doesn t help, you need the practical insight

10 Life after Subsidies Turkey s Petroleum Market can hint some ideas

11 Turkish Petroleum Products - Consumption

12 Turkish Vehicle Park by Fuel Type

13 Prices Calorific values: kcal/liter Benzin: Diesel: LPG:

14 Prices - Taxes Fuel price Retail & Dist Total Tax

15 Two regimes First part July 2013 July 2013 Oil prices hoovering around 100s, recently increased Prices in the domestic market adjusts with a latency of days Remember Turkish fuel products are one of the most expensive in the World.

16 Prices July 2013

17 Consumption growth July 2013

18 Two regimes Second part Feb2015 YoY increase (Feb 2014-> Feb 2015) Cumulative Increase (Jan-Feb 2014-> 2015)

19 Is there an asymmetric relationship? When oil prices high-> a modest growth When oil prices low -> a higher growth DESPITE %200 TAXES ON THE FUELS ALL THESE DATA ARE TRADED COMMODITY DATA NO UNDERGROUND ECONOMY Will subsidies eliminate energy growth, loss etc?

20 Reasons - Turkey s progress

21 Turkey Consumer demand s price elasticity Very efficient cars Heavy taxes Prices? Who cares (New car efficiency lt/100km second after France) Environmental Benefits But how about asymmetric relations?

22 Sector Insight LPG A 20 TL in the shirt, (approx 8 $) Buys the same TL amount of liter every time Especially drivers tend not to use liters, but cash amount as their consumption «I burned 100 TL of gas this month»

23 Renewable Incentives

24 A Brief History State Periods 2001: Electricity Market Law Coal Hydro Natural Gas Resource Installed Capacity (MW) 2002 * 2013 yılı sonu değerleri Share (%) Generation (TWh) Share in Generation (%) NaturalGas ,5 41 Hydro ,7 26 Lignite ,0 22 Imported Coal ,1 3 Renewable ,2 0 Other ,9 8 Total ,4 100 Resource 2014 Installed Capacity Share (%) (MW) Generation (TWh) Share in Generation (%) NaturalGas 25, ,8 44 Hydro 23, ,2 25 Lignite 8, Imported Coal 4, Renewable 3, Other 1, ,1 2 Total 67, ,

25 Theft problem as a function of employment «can t pay» and «won t pay» Registered Employment Theft Ratio

26 Turkish Power Prices 101 BO/BOT/ToOR Renewables (wind at 25% cap) Most Probably new NG plants Merit Order 26

27 The Increase of Wind Power 27

28 Prices deflated? No wind / Wind (3000 MW) Price : 200 TL/MWh (69 ) Price : 186 TL/MWh (64 ) Still the price is formed by natural gas plant but what is the efficiency? 28

29 Dilemma of State Economic Enterprises EÜAŞ State Generation Company MW Hydro capacity Marginal cost practically <1cent/kWh Should a state enterprise earn 700% profit from the public? EÜAŞ Solution: Hover around market rates

30 Turkish Lira lost value against USD

31 USD/TRY Wind power Blue: Spot sellers Orange: FIT beneficiaries

32 Turkish FIT Tariffs

33 Sub market for unlicensed generation Under 1MW no need for license (simplified) But what if: 10 MW = 10 x 0.99 MW projects? This is actually happening Is it good or bad???

34 Market Growth Unlicensed

35 Conclusion If developing markets should eliminate subsidies, why try on OECD countries first? Get to Time of Use tariffs in Electricity Why no one has to courage to do it, despite all the theory? If you do not have demand growth renewables can be burden Incentives should be technological progress sensitive Inform the investors before hand about incentive system change