Due to its weather conditions and vast territory, Turkey looks set to become a renewables powerhouse sooner or later. Its proximity to energy-hungry Europe is an additional strategic advantage when it comes to monetizing this potential.
"Total installed capacity in the country is 7.8 gigawatt in solar and 10.7 gigawatt in wind. Before the end of the year, the Turkish Ministry of Energy wants to conclude tenders of additional 3 GW renewable energy projects," said Eser Ozdil, a nonresident fellow at the Atlantic Council in Turkey.
In recent months, the country has focused chiefly on roof PV installations. It had traditionally invested in hydropower and to a lesser extent in geothermal technology.
"The country has achieved an impressive increase in renewable energy generation capacity, reaching 44% [of the overall mix] in 2020. Hydropower is the most prominent renewable energy source, accounting for 20% of electricity production," an EU official confirmed to DW.
However, its increased energy demand is hindering trading options, at least in the short term, making Turkey's exports suitable for small markets. The country targets the EU green hydrogen market and South Eastern Europe (SEE) energy markets, mainly in the Balkans.
Hydropower can be a blessing, but it can quickly turn into a curse. Like neighboring countries, the country suffers from droughts.
"Last year, droughts had a very strong impact on Turkey, which had to switch to gas. Gas consumption went from 48 billion cubic meters (bcm) in 2020 to over 60 bcm in 2021 for this reason," said Aura Sabadus, a journalist at ICIS, a global energy and petrochemicals news and data provider. The Black Sea energy market expert added that hydro levels had improved only marginally since.
Experts argue that the country needs additional baseload capacity to increase investments in renewables, as the electricity grid might otherwise not be stable. The government has invested in gas infrastructure and a new nuclear power station. Difficulties remain, though.
"It is unclear how to fix the electricity market until the Akkuyu nuclear power plant is commissioned. There could be delays in light of the current geopolitical situation. A Russian company is building it," said Charles Ellinas, senior fellow at the Atlantic Council.
Russia could have an incentive to push the facility's inauguration past its 2023 deadline.
Imports of gas at spot prices will be equally limited over the coming months: Prices will remain high as the European Union will buy as much non-Russian gas as possible.
Last year, Turkey renewed its gas contracts with Russia. They were linked to the Dutch gas trading point TTF, Ellinas explained. EU prices are soaring, and Russian gas will also be more expensive. "With the economy being in such dire straits, the cost of imports is a drain on Turkey's financial stability," the expert told DW.
Despite Turkey logging 11% growth in 2021, economists expect a tumultuous year for the country: The local currency has crashed, inflation is rising, and the Russian war on Ukraine is taking a toll on tourism.
Turkey is currently playing a mediating role in the Russia-Ukraine conflict. The current global financial and geopolitical situation has also facilitated cooperation with other countries such as Egypt, Israel, the United Arab Emirates, and more recently Greece.
"So far, experts have seen Turkey attempting to grab energy by confrontation rather than collaboration," Ellinas said. But the recent cordial meeting between the Turkish president and the Greek prime minister is viewed as an encouraging development. "Both countries need to improve their economies after all."
Electricity interconnections could promote further dialogue. The first interconnection between Cyprus and Crete is an example of this shift in the region.
Cross-border electricity trading capacity has been minimal. According to Sabadus, electricity capacity from Turkey to the EU stood at 500 MW-600 MW in 2015.
"Interconnection capacities should be extended considerably," said the Atlantic Council's Eser Ozdil.
Turkish companies are investing in the Balkans, including Kosovo and Albania. The main focus is on gas markets, as Turkey can bank on its four (soon five) LNG terminals, usually idle in spring and summer. Additionally, Turkish and Balkan companies could develop joint electricity projects, according to Ozdil.
Hydrogen in focus
Green hydrogen is a crucial pillar of EU energy plans. "The Europeans will need to import one-third of their hydrogen demand from non-EU countries. They did not mention Turkey in the EU strategy," said Sabadus.
"It would be a great opportunity for the two sides to work together. There could be support from both Turkey and SEE to develop the hydrogen sector and help repurpose the region's gas grid," she noted.
Turkey has a strategic advantage due to its infrastructure, including ports and the Southern Gas Corridor. It tested blending hydrogen in the gas grid in 2021, and the Turkish Ministry of Energy is currently working on its hydrogen strategy. Local experts suggest reaching a minimum of 10% hydrogen transport in gas pipelines by 2025-2030.
Favorable EU financing could help Turkey prioritize investment in electricity and hydrogen.
"It takes political appetite, the EU has to hold out an olive branch to Turkey, and both have to turn the page," said Sabadus, explaining that better ties would represent a win-win situation. She's cautious, though.
"Before saying that better ties are really well underway, I need to see interconnection agreements between Turkey and Bulgaria, but also between Turkey and Greece. Russia remains Turkey's biggest energy supplier."
Edited by: Hardy Graupner