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THE DEVELOPMENT OF

COGENERATION SYSTEMS IN

TURKEY AND ITS FUTURE TREND

Presented by

OZKAN AGIS

Chairman

Turkish Cogen and Clean Energy Technologies Association (TURKOTED)

4th SE EUROPEAN CODE WORKSHOP

10 – 11th of March 2011, Thessaloniki, Greece

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1. GENERAL ENERGY POLICY

• The Republic of TURKEY (population 73 million, area 780,000 km²)

forms a natural bridge between Europe and Asia. TURKEY is a

rapidly growing economy and over the past decade, its GDP has

increased at an exceptional rate compared to other OECD countries.

Turkey is the 17th largest economy in the world.

• From 2000 to 2010, the economy is expanded on average by 5% a

year, despite the damages of the last global crises. The

unemployment rate was 12% in 2010, while per capita GDP is slightly

over 10,000 USD. As it is in all developed economies, services

constitute 64% of GDP in 2010, industry 26% including construction,

textiles, vehicle manufacturing, food processing. The agriculture

accounts 10% of GDP.

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1. GENERAL ENERGY POLICY cont

• Turkey has applied for full membership to European Union,

almost 50 years ago but accession talks are going on since

2005. EU membership bid manifests itself in growing

harmonisation with EU legislation. The recent evidence of

such a nice harmonisation is the synchrony operation of

Turkish H.V. Grid with European Grid since 18th September

2010 (through Babaeski – Mariza (Bulgaria) H.V. lines and

through Babaeski – Kometini (Greece) H.V. lines).

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2. ENERGY SUPPLY AND DEMAND

• TURKEY’s total primary energy supply (TPES) was 106

millions tonnes of oil equivalent (Mtoe) in 2009. Turkey

depends on import of 74% if its TPES, including almost all oil

and natural gas and most grade coal.

• The indigenous production constitutes only 26% of the total

energy demand.

• Turkey will likely see the fastest medium to long term growth

in energy demand among European countries. It has a young

and urbanizing population and energy use per capita is still

comparatively law (app. 1.5 Toe/capita).

• Therefore, ensuring sufficient energy supply to a fast growing

economy, remains the government’s main energy policy

concern.

PRIMARY ENERY DEMAND IN TURKEY

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28,8%

6,8%30,8%

5,0%28,7%

N. Gas

Hydro+Wind+Geoth+Solar

Oil

Coal

Others

Figure 1. Primary Energy Demand of Turkey

(2009: 106.1 Mil. Tep, 1990-2009 Average Demand Incerase 3,7%)

ENERGY DEMAND AND LOCAL PRODUCTION

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MToe

0

50

100

150

200

250

1980 1990 2000 2008 2010 2020

Production

Demand

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As one of the government’s primary policy goals, energy

security has attracted more focus than market reform and

environmental protection. However, Turkey has progressed

greatly in all areas of energy policy since 2000, by attracting

energy investments. To attract investments, the following

measures have been taken:

Privatization process have been started. As of today, 90%

of the Regional Electricity Distribution Systems and 50%

power production plants are privatized.

Power sector reforms have been progressed significantly

and comprised moving last reflective whole sale tariffs in

the electricity market.

The share of public company in electricity generation is in

declining, from 100% in 2000 to 45% in 2010.

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• Thanks to attracted electricity tariffs in the market, well known

power generation companies are investing for power generation to

get a share in power market like RWE, OMW, E-ON,

FINMECCANICA, IBERDOLA.

• The government tries to increase the domestic energy supply. In

that sense, lignite production has been doubled in last 10 years.

• The government is also determined to utilise Turkey’s large hydro

potential, wind power and geothermal energy and aims to

introduce nuclear power.

• In natural gas sector, reform has been slower, largely owing the

security of supply concerns and needs to be accelerated.

However, Botas is successful in the operation of gas transit from

gas rich countries to Europe.

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3. KEY POLICIESTurkey’s energy policy broadly follows the strategic objectives:

security of supply, to meet energy expectations of economic

growth and environmental protection.

1. Security of Supply

Ensuring sufficient energy to a growing economy, has been main

energy concern. A key part of Turkey’s policy is energy diplomacy

with the supplier countries in the region, which have more than

70% of the proven oil&gas reserves of the world. Turkey has been

quite seccessful by the supply agreements with Russia, Iran,

Azerbaijan, Egypt, Algeria, Nigeria, Qatar. These agreements and

the related projects strenghten Turkey’s role as a transit country,

an energy corridor and terminal between its neighbouring suppliers

and the international markets.

NATURAL GAS IMPORT OF TURKEY 2009

(35,8 billion m3 Üretim:0,7 billion m3 )

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56

15

14

123

Russland

Iran

Aserbaidschan

Algerien

Nigeria

NATURAL GAS CONSUMPTION REACHED 36.86

BILLION m3 IN 2008

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In the following chart you will see, how natural gas purchases

have been developed with the gas suppliers:

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“BAKU-TİFLİS-CEYHAN” CRUDE OİL

PİPE LİNE

CASPİAN -TURKEY NATURAL GAS PİPELİNE

(South Caucasus N. Gas Pipeline)

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BLUE STREM NATURAL GAS PİPELİNE

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SOUTH EUROPE NATURAL GAS RING

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TURKEY – GREECE NATURAL GAS PIPELINE

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Karacabey

Kipi / İpsala

Kızılcaterzi

Değirmencik

Turkey-Greece Natural Gas Pipeline

Marmara Sea

Çanakkale

İstanbul

(Dedeağaç)

(Gümülcine)

Bursa

TekirdağAmbarlı

Pendik

Hersek

Muallim

NABUCCO NATURAL GAS PIPELINE PROJECT

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2. Attracting the Domestic Energy Production

To attract the domestic energy production incentives were enacted

with the renewable energy law in 2005. At the end of last year,

revision of the incentives was passed from the Parliament, which

increased feed-in tariffs, especially for agro residues firing and

geothermal energy production. In renewable energy production,

the target is 30% of total production in 2030. To secure this, the

government is issued a Decret of Strategy in 2009.

3. Environmental Protection Became an Integral Part of

Energy Production

Turkey has been a Party to UNFCCC since 2004 and to the Kyoto

Protocol since August 2009. Turkey has gained a special status

within the Annex – I Parties to UNFCCC. However, Turkey is the

only Annex – I country that has not set mitigation target for the past

2012 period. It is also the only OECD country that does not have a

national emission target for 2020.

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• Efforts to limit energy related GHG emissions focus on

promoting renewable energy, energy efficiency, nuclear

power.

• In recent years, Turkey has improved its policies to control a

pollution. For example, old coal or lignite-fired plants are

being equipped with the flue gas desulphurization units.

• The limits of gas emissions and discharge limits of the liquid

waste are exactly same with the values given in German

Standard of TA LUFT ½.

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4. POWER SUPPLY AND DEMAND BALANCE

• The total power generating capacity (the total installed capacity) in Turkey

was 48,588 MW in 2010. The break down of this capacity upon the

sources is shown in Graphic 1 below:

Graphic 1. The installed capacities of the power plants upon the sources of energy

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• You can see from this graphic, natural gas firing capacity is 16,081.3 MW

which constitutes 33.1% of the total.

• If we look at the break down of this capacity upon the power producers,

we have the following (Graphic 2):

• As you can see, Public Utility Company, EUAS has almost 50% of the

installed power capacity.

Graphic 2.The installed capacity of the power plants upon the power producers

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• As far as the electricity generation is concerned:

1. Upon the sources of generation

• Once again, the share of generation by means of natural gas is

45.90% of total electricity production.

Graphic 3. Electricity Generation upon the sources

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2. Upon the power producers

• As you see, in 2010, the share of public utility company

EUAS was only 45.37%.

Graphic 4. Electricity Generation upon the Power Producers

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5. INCREASING TREND OF DEMAND

• The increasing rate of the demand (consumption) is quite

sustainable. Despite the global crises, the average of

increase in demand was 6% in last 7 years (since 2003).

Graphic 5. Annual demand increases of last 7 years

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6. ELECTRICITY MARKET

OPERATION

• The Electricity Market Law (No:4628 is enacted on year2001. this Law created EMRA as the RegulatingAuthority of the Electricity Market.

• EMRA has several tasks: issues licenses,

determines and approves regulated tariffs,

sets the eligibility limit for market opening,

drafts secondary legislation on the electricity market,

resolves dispute,

applies penalties.

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• EMRA has the powers to issue licenses for all market activities:generation, transmission, distribution, wholesale and retail.Separate licenses are required for each market activity and foreach facility where the activity is carried out. Generation anddistribution licenses are granted for at least 10 years and notmore than 49 years.

• The gradual opening of the electricity market began in March2003, when all consumers directly connected to thetransmission network and those consuming more than 79,000MWh per year to choose their supplies.

• EMRA defines this eligibility threshold for a year at a time in2010 is set at 100 MWh.

• The transmission system operator TEIAS and distributionsystems operator TEDAS are obliged to provide a non-discriminatory transmission and connection services to allsystem users, including eligible consumers, connected or to beconnected to the transmission system.

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7. MARKET DESIGN

• Turkey’s electricity market model combines bilateral agreements

that are expected to cover the bulk of electricity demand with day-

ahead and real time balancing mechanism as well as a settlement

system for imbalances.

• Within the scope of the balancing and settlement implementations,

two different prices were produced namely an hourly marginal price

and systems, imbalance price. The hourly marginal price was

calculated on an hourly basis and announced daily through the web

site of TEIAS. Theoretically, this price was the market price

indicating the supply-demand situation of the electricity.

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• The second phase of the transition, started on 1st December 2010,

entails switching from day-ahead planning to the “day-ahead

market”, which is a spot market. However, the practice of hourly

reconciling imbalances in the real time balancing market will

continue.

• If the result of the tender does not ensure sufficient supply, the

Council of Ministers may authorize state owned generation

company (EUAS) to build new power plants.

• After August 2006, when the Transitional Balancing and Settlement

Regulation came into force, suppliers selling electricity through

bilateral contracts terminated their contracts with the consumers

and started to sell electricity to the balancing market. According to

EMRA, from September 2006 to May 2008, the volume of electricity

trade, based on bilateral contracts, fell by 38%.

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8. THE DEVELOPMENT OF

COGENERATION SYSTEMS IN TURKEY

• Up to year 1984, Power related investments and operations were

under the monopoly of Turkish Electricity Authority (TEK).

• Either the quality of electricity (frequency, voltage, availability,

accessibility etc.) and supply was controlled by TEK.

• Industrial and/or residential consumers had to satisfy with the

available and accessible electricity.

• In 1984, Law No:3096 was enacted by the Turkish Parliament. First

time in Turkish power history, the subject law was giving the right of

build, right of operation and right of ownership of the power

generating facilities.

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• Thus, first cogeneration plant was built in 1992 (Yalova Elyaf

– 4 MW).

• At that time, natural gas network was only available in

Marmara Region, Bursa, Eskisehir and Ankara (almost 1/6th

of Turkey). Therefore, the number of the new cogen plants

were limited.

• After year 1995, gas network was enlarged by Botas and new

cogen plants were built.

• As you can see from bar-chart No.1, up to year 2004, the

development of Industrial Cogeneration Systems were in “Golden

Age”.

• The total cogen plants capacity was reached to 5000 MW (15% of

the total capacity in Turkey). But, in 5 year afterward, only 2000 MW

new cogen capacity is connected to the grid.32

1992 4

1993 127

1994 200

1995 332

1996 837

1997 1040

1998 1560

1999 2056

2000 2734

2001 3200

2002 3800

2003 4500

2004 5000

2005 5300

2006 5700

2007 5800

2008 6000

2009 64004

127 200332

8371040

1560

2056

2734

3200

3800

4500

50005300

5700 58006000

6400

0

1000

2000

3000

4000

5000

6000

7000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Inst

alled

Cap

aci

ty [

MW

]

YEARS

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• After 2004, the natural gas prices were rising up so fast that, the

existing plants which were in operation, were loosing money due to

non-affordable gas prices. Consequently, new cogen investments

were almost stopped.

• The graphic – 3 indicates, how natural gas prices were fluctuated from

March 2004 to November 2008.

NATURAL GAS AND ELECTRICITY PRICES

(ELECTRICITY PRICES ARE SDF PRICES AFTER AGU. 06)

0,00

10,00

20,00

30,00

40,00

50,00

60,00

Mar

.04

May

.04

Tem.0

4

Eyl.0

4

Kas.0

4

Oca

.05

Mar

.05

May

.05

Tem.0

5

Eyl.0

5

Kas.0

5

Oca

.06

Mar

.06

May

.06

Tem.0

6

Eyl.0

6

Kas.0

6

Oca

.07

Mar

.07

May

.07

Tem.0

7

Eyl.0

7

Kas.0

7

Oca

.08

Mar

.08

May

.08

Tem.0

8

Eyl.0

8

Kas.0

8

MONTHS

Na

tura

l G

as

Pri

ce

s

[ce

nt$

/Sm

3]

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

Ele

ctric

ity P

rice

s

[$c

en

t/kW

h] (P

rice

s a

re S

DF

Pric

. Afte

r Ag

u.0

6)

Natural Gas Prices

Electricity Prices

Graphic 6. Change of Natural Gas and Electricity Prices from March 2004 to November 2008

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• “Renewable Energy Law” which was issued on 2005 offered

incentives to “renewable energy sourced” electricity production (i.e.

wind, hydro, geothermal, solar, biogas etc.). Since these are

national sources, new power investors (local or foreign) gave No.1

priority to these new era. As of today, nobody is investing money,

unless this investor needs power and heat or coolig energy at the

same time.

• In the buildings, “existing flat owner’s law” is a big barrier on the way

“micro cogeneration”. Because, only one rejecting (opposite) vote in

the owner’s committee, could stop installation, micro or midi

cogeneration installation in the buildings.

• Only shopping malls or new private Residential Projects are trying to

incorporate the cogeneration projects with their civil engineering

studies. Our Association tries to encourage them.

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• Nowadays, our Association is concentrated on the newmass housing projects to include cogeneration andtrigeneration in their engineering deliverables. In thatrespect, we are getting the full support from MENR. Thebiggest barrier on the way is TOKI, State Mass HousingAdministration. This public Administration is undertakingthe construction of 100,000 houses (flats) in a year. Up tonow, they are applying the conventional “Central HeatingSystems” in their buildings.

• This system is against new “Energy efficiency and energysaving law” which was enacted in 2007.

• Our Association prefers to convince the Authorities,including prime minister T. Erdogan, with symposiums andconferences, explaining academically how big energysaving will be gained, in case cogeneration systems are tobe incorporated with new mass housing projects.

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However, there are other factors influencing the slowing down

development of cogen plants. These are:

• Government was not agreed with our Association, to issue “The

Cogeneration Directive”, Despite, Turkish Cogen Association

prepared adaptable draft of law tender the name of “High

Efficiency Cogen Systems”, one week after European

Cogeneration Directive is approved (21.02.2004). Then, expected

incentives for cogeneration systems are not approved. This

situation discouraged the cogen investors.

• Anti – natural gas lobby convinced the government on the slowing

down of gas power plants, claiming that, “increasing gas supply is

also increasing Turkey’s dependency to gas supplying countries”.

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9. INCENTIVES FOR

COGENERATION SYSTEMS80% higher cycle efficiency is accepted to benefit from the following

incentives:

• Connection to the grid will be in priority,

• They don’t need to provide license from EMRA (Energy Market Regulatory

Authority),

• All micro cogeneration units don’t need to provide license. But their

connection to grid is still under discussion. Because new private operators of

the electricity distribution system prefer to deal with big customers,

• If biomass power based design covers the “made in Turkey” cogeneration

system, 0.4 US$ cent/kWh for steam or gas turbine 2.0 US$cent/kWh, for

internal combustion engine or stirling engine 0.9 US$cent/kWh bonus are

to be added at the top of feed-in tariffs.

10. ENERGY EFFICIENCY

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Turkey’s energy efficiency policy is guided by the 2007

Energy Efficiency Law. This law is almost complying EU’s

Energy Efficiency Strategy’s goals.

Energy Efficiency Law (2007) aims to reduce energy

intensity by 15% below the reference scenario projections

by 2020.

The following regulations have been prepared, based on

the Energy Efficiency Law:

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• Sharing the heating and domestic hot water expenses in the

buildings,

• Improving Energy efficiency for the utilization of Energy and

Energy Resources,

• Energy Performance of Buildings,

• Regulation on Appointment of Energy Managers in Schools.

Measures on new buildings focus on Energy Performance

requirements. The requirements cover energy needs for space

and water heating, cooling and lightening. The by-law also

mandates regular inspections of boilers and centralized air

conditioning systems. All these requirements largely follow EU

rules that are laid out in the Directive on the Energy

Performance of Buildings (2002/91/EC),

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• All new buildings must have an energy performance certificate

indicating their energy performance class. Existing buildings

will be required to have energy performance certificate by May

2017,

• Furthermore, the 2007 Energy Efficiency Law obliges large

energy users to appoint or contract an energy manager and to

report annually on energy consumption to MENR.

• Mandatory energy labeling of domestic appliances is

harmonized with EU directives. It covers lamps, ovens,

refrigerators, freezers, washing machines and dishwashers.

THANK YOU

FOR YOUR ATTENTION

Ozkan AGIS

info@kojenerasyon.com

ozkan.agis@enerko.com.tr

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