Policy Developments in Turkey Bioenergy Markets Turkey

Transcription

1 Policy Developments in Turkey Bioenergy Markets Turkey 30 September 2010, 14:00 Turkish International Renewable Energy Congress Grand Cevahir Hotel & Congress Center Sisli/Istanbul Turkey Erkan Erdogdu Energy Expert & PhD Candidate University of Cambridge

2 1. Introduction (1/3) 1. Introduction 2. Bioenergy in Turkey 3. Turkish policy on bioenergy Contents 4. Benefits & drawbacks 5. Barriers to bioenergy use in Turkey 6. Guidelines for policy makers 7. Conclusion 2/28

3 1. Introduction (2/3) BioEnergy Utilization in Turkey Traditional Biomass (for cooking and heating) Modern Biofuels Wood Bioethanol & Biodiesel Crop residues Power production Animal dung Biogas Charcoal Waste-to-Energy 3/28

4 1. Introduction (3/3) Biofuel programs have proliferated around the world in recent years, whether motivated by a desire to bolster agricultural industries, achieve energy security, reduce GHG emissions or improve urban air quality While a range of technologies including renewable sources like wind and solar photovoltaics and carbon-free technologies like nuclear are poised to challenge coal and natural gas in the electricity sector, there seemed to exist no alternative that could compete widely with oil in terms of cost and convenience for transportation. But today, plant-based fuels like ethanol and biodiesel seem to be emerging as a serious alternative fuel ahead of technologies like fuel cell vehicles, electric/hybrid vehicles, and natural gas vehicles. 4/28

5 2. Bioenergy in Turkey (1/4) Total primary energy supply in 2008, ktoe BioEnergy Sources Turkey % OECD % Primary solid biomass 4, , Biogas , Industrial waste , Biodiesels , Bioethanol , Charcoal Other liquid biofuels , Municipal waste (non-renewable) , Municipal waste (renewable) , Total BioEnergy 4, , Total of all energy sources 98, ,422, Source: IEA Extended Energy Balances, /28

6 2. Bioenergy in Turkey (2/4) Bioenergy supply in Turkey since 1960 Source: IEA Extended Energy Balances, /28

7 2. Bioenergy in Turkey (3/4) Electricity generation in 2008, GWh BioEnergy Sources Turkey % OECD % Biogas , Industrial waste , Primary solid biomass , Municipal waste (renewable) , Municipal waste (non-renewable) , Other liquid biofuels , Total BioEnergy , Total of all energy sources 198, ,676, Source: IEA Extended Energy Balances, 2010 Turkish electricity installed capacity in 2010, MWe (Total: 46,304 MWe) Under Construction In Operation Source Number of Total Licenses (MW) (MW) (MW) Biogas Biomass Municipal waste Total Bioenergy Source: TEIAS, 2010; EPDK, /28

8 2. Bioenergy in Turkey (4/4) To sum up, in Turkey forestry products and animal waste are the main bioenergy sources used almost all biomass energy is consumed in the household sector for heating and cooking needs of rural people firewood is the largest source of heat from renewable sources (in 2008, 4.7 mtoe of firewood was used for residential heating in rural areas) other forms of biomass are negligible biofuels use for transport is marginal and amounted to 15.3 ktoe in 2008, most of which was domestic biodiesel 8/28

9 3. Turkish policy on bioenergy (1/3) Turkey s energy policy broadly follows the strategic objectives shared by many OECD countries, i.e. energy security, economic growth and environmental protection. Turkey has a young and urbanizing population and energy use is still comparatively low. Therefore, ensuring sufficient energy supply to a growing economy remains the government s main energy policy concern. As one of the government s primary policy goals, energy security has attracted more focus than market reform and environmental protection. Turkey imports practically all the oil and gas it uses and these imports may almost double over the next decade. However, Turkey does not have a broad policy on promoting biofuels for transport. 9/28

10 3. Turkish policy on bioenergy (2/3) Turkey does not have legally binding targets for primary renewable energy supply. Turkey became a Party to the Kyoto Protocol in However, Turkey is the only Annex-I country that has not set GHG mitigation targets for the post-2012 period or proposed mitigation actions to support them, as required under the Copenhagen Accord. Turkey is also the only OECD country that does not have a national emission target for Turkey has, however, included several targets for electricity from renewable sources in its 2009 Electricity Market and Security of Supply Strategy, approved on 18 May In this document, the government outlines an overall target for renewable sources to provide at least 30% of electricity generation by /28

11 3. Turkish policy on bioenergy (3/3) Legislation The cornerstone of Turkey s legislation on electricity from renewable sources: the Law on the Utilization of Renewable Energy Resources for the Purpose of Generating Electricity, enacted in May 2005, the 2001 Electricity Market Law (Electricity Market Licensing Regulation) the 2007 Energy Efficiency Law In all regulations, biomass is included in the definition of renewable energy resource. There is no legislation currently existing for biomass alone. Together, they set the legal framework for promoting electricity generation from renewable sources and include the following main instruments: Feed-in tariffs (EUR cents per kwh) Purchase obligations (in an amount declared by EMRA) Connection priority (by TEIAS and the distribution companies) Reduced licence fees (99% less for the initial licensing fee and exempt from the annual licence fee during the first eight years of operation) Exemptions from licensing and company obligations for small-scale (0.5 MW or less) generators Reduced fees for project preparation and land acquisition (new renewable energy plants commissioned before the end of 2012 are given an 85% discount on several land-use fees during the first ten years of operation) 11/28

12 4. Benefits & drawbacks (1/6) Benefits of bioenergy use Lower emissions to the environment No net releases of carbon dioxide Environmental benefit of displacing fossil fuels Economic development and growth in the agricultural sector Generation of new jobs especially in rural and farming communities, which in turn may result in an improvement of income distribution Development of new dedicated energy crops would help farm income and reduce the rate of land abandonment 12/28

13 4. Benefits & drawbacks (2/6) Contribution to security of supply and sustainability Biofuels are an inexhaustible resource since the stock can be replenished through agriculture Development of competition in the market Bioenergy presents an opportunity to move towards more decentralized forms of electricity generation, where a plant is designed to meet the needs of local customers, avoiding transmission losses, which in turn provides an opportunity to increase the diversity of power generation plants and competition in electricity generation 13/28

14 4. Benefits & drawbacks (3/6) Drawbacks of bioenergy use Cost of bioenergy production Biofuel production cost is currently higher than that of the classic fuels. Raw material cost, collecting, transporting and storing biomass is expensive. There are also significant costs of marketing, distribution and service. However, cost comparisons are highly dependent on the fluctuations in the international market for crude oil and refined products and in biofuel feedstock. The continuous efforts for the increase in the raw material yields as well as the advances in production technologies may make this cost relationship more favorable for biofuels. 14/28

15 4. Benefits & drawbacks (4/6) Soil degradation and run-off Biofuel technology is land intensive. Biofuel demand will put pressure on existing use of land including food production and natural habitats. The large volumes of water required to produce biomass, the abundant use of fertilizers and manure for bioenergy production may result in considerable environmental problems. In case of an increase in bioenergy utilization, the demand for agricultural land could increase; growing amounts of forest could be cleared for farmland and greater soil degradation ensues. 15/28

16 4. Benefits & drawbacks (5/6) Inefficiency in the production process A large amount of effort is put into cultivating, harvesting and processing the biomass, even though only a relatively small proportion is used to derive energy. Crops used for bioenergy production have lower energy content than conventional petroleum products. Problematic, too, is that fossil fuels are generally required in the production of biofuels. Technical concerns Biomass fuels cannot replace conventional fuels on a one-for-one basis in unmodified vehicles. 16/28

17 4. Benefits & drawbacks (6/6) Practical limitations E.g. in order to replace just under 6% of petrol and diesel, the EU would have to convert 19% of its arable land from food crops to fuel crops. Impacts of biofuels on food prices Some studies criticize biofuels as one of the factors responsible for the 2008 food crisis. 17/28

18 5. Barriers to bioenergy use in Turkey (1/3) Barriers to bioenergy exploitation in Turkey Barriers in the institutional, legal and administrative framework Real and perceived risks and other inherent difficulties associated with bioenergy 18/28

19 5. Barriers to bioenergy use in Turkey (2/3) Barriers in the institutional, legal and administrative framework Lack of a coherent energy policy Insufficient available information about existing and possible future costs of biomass utilization Insufficient detailed biomass energy resource assessments Insufficient credit facilities, particularly for small-scale projects Administrative and time-consuming obstacles for investors Need for staff with sufficient technical information Insufficient policy and market instruments (including available subsidies) in the environmental, agricultural and energy sectors Need for public acceptance and willingness 19/28

20 5. Barriers to bioenergy use in Turkey (3/3) Real and perceived risks and other inherent difficulties associated with bioenergy Sources of biomass are small, dispersed, disparate and seasonal, which contribute to potentially raised costs via logistics, contracting, transport, fuel preparation, storage, etc. Especially, the seasonality of agriculture is seen to be a key risk, for both establishing viable fuel supply businesses and for maintaining year-round fuel supplies for potential energy plants. The high capital cost of agricultural waste or biomass power plants is a major disincentive to investors. Some relevant technology is proven, however, a lot of technology remains in research, development and demonstration phases. This technology risk is considered unacceptable to some investors. 20/28

21 6. Guidelines for policy makers (1/6) In the past, environmental impacts of energy resources were ignored or not foreseen, while energy policies focused on adequate supply of energy to assure high rates of economic growth. Today, besides the economic issues, particular importance should be assigned to environmental factors associated with the choice of energy source. Need for a holistic strategy for bioenergy utilization Energy Transport Urban & Rural Development 21/28

22 6. Guidelines for policy makers (2/6) In the 2009 Electricity Market and Security of Supply Strategy, the government targets generation of at least 30% of all electricity by 2023 from renewable sources. But there must be a separate but integrated target for biomass alone. There is also a need for another policy establishing a target for the penetration of biofuels into the gasoline and diesel transport fuel market by a given year, potentially with interim targets to ensure the country stays on track with the goal. 22/28

23 6. Guidelines for policy makers (3/6) Promotion mechanism The current promotion mechanism for renewable sources of electricity relies on a feed-in tariff capped at the equivalent in Turkish Liras of EUR 5.5 cents per kwh. However, this is not enough. Turkey needs a predictable and transparent support framework to attract investments, while creating technologyspecific incentives that will decrease over time. A draft amendment to apply different tariff levels for different renewable energy sources is on the agenda of the Parliament. A timely decision on new feed-in tariff levels would push companies to investing now, instead of waiting in the hope of receiving higher tariffs later. 23/28

24 6. Guidelines for policy makers (4/6) Promotion mechanism Feed-in tariffs for individual technologies should be limited. It could be done either by limiting the absolute spending on individual technologies, or by limiting the share of individual technologies in total spending on feed-in tariffs. This would help the government avoid possible feed-in tariff budget overruns and subsequent abrupt reductions in feed-in tariff levels, as experienced in several OECD countries. Support mechanisms should be flexible, while ensuring predictability to reduce investor risk. Suggestion 1: A system of gradually decreasing premium on the wholesale price the higher the wholesale price, the smaller the premium needed. Such a premium system would provide some revenue guarantees to underpin investment, but also long-term downward pressure on prices. 24/28

25 6. Guidelines for policy makers (5/6) Promotion mechanism Suggestion 2: A quota obligation with tradable certificates, differentiated by technology, which has been recently introduced in the UK Removal of non-economic barriers to bioenergy development Financial support mechanisms Low interest loans, credit guarantees, start-up subsidies and/or grants, and discounts for consumers willing to purchase bioenergy Exemption or reductions in the level of taxation to electricity, heat, and/or transport fuels produced with biomass sources 25/28

26 6. Guidelines for policy makers (6/6) Development of markets for bioenergy and bio-based products (even with significant gains in the areas of research development, the biomass industry will not be successful without a market outlet to utilize the final product) An effort to control the emissions to the air from waste plants (necessary controls should be taken over by the Ministry of Environment for these emissions to be under standards foreseen by the EU) 26/28

27 7. Conclusion Energy Policy Promotion Mechanism BioEnergy Markets for Bioenergy Specific Targets 27/28

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