TheThe Turkish wind energy market Turkish wind energy marketfrom the developers viewfrom the developers view

Erol DemirerErol DemirerCChairmanhairman

EWEA 2012 Copenhagen

History:1996 :Demirer decided to invest in wind energyIn the same year more then 30 measuring masts are erectedWe visited leading manufacturers in Europe.1997:Wind data analyzedA site near Izmir with good infrastructure and easy terrain is selected for the first windfarm 3x 500kW turbines are orderedAs we had no reference and it was the first wind farm in Turkey, project financing was not an optionWe bought them for one of our group companies to cover the own consumptionThis scheme was called auto producer.The permissions and approvals were in some way easy, as the authorities were not prepared what to ask ,so they had less questions.On the other way it was difficult, as some questions on existing forms were not appropriate for wind. We were asked for example how to secure the fuel supply.1998:The wind farm became operational as February 1998 and is still performing well

B.O.T. (Build Operate Transfer) projects

In the BOT scheme a tariff for 20 years, with higher prices in the first years, was very helpful to the cashflow of wind projects

The 2. wind farm was built as BOT in 1998 Nov. In 1999 there was a confusion about the BOT law That was solved in 2000 with an amendment to the law The 3. wind farm was built in 2000 as BOT by Demirer But then the government decided to introduce free

market rules for the electricity, and froze other BOT projects on the pipeline

The application as private electricity company was possible but not feasable because of cashflow in the first years

Our 17x600kW Bozcaada farm could keep its position being the largest WF for 6 years until the Renewable

Energies law came

Turkish Turkish Wind EnergyWind EnergyInstalled CapacityInstalled Capacity

0200400600800

100012001400160018002000

in MW

•Renewable energy law:•2005 original : •all RE will be purchased with the wholesale price average of the previous year.• The producers have the option to sell on the spot market if they choose to do so.•Long term credits are only available in Euro or USD =>parity risk

•2007 amendment:•The applicable purchase price can not be lower than 50euro/MWh and higher than than 55 euro/MWh •In practice this law is used only as reference basis for worst case scenarios with the banks and not a single kWh is sold according to the law.

•Market•The spot price was always above 55 euro/MWh and reached in 2007 even 75 euro/MWh•The investors made their calculation regarding the spot market and showed high demand•As the given licences surpassed 3,000MW, TEIAS ,the grid company informed EMRA Electricity Market Regulatory Authority that the grid could reach its limits soon. And EMRA stopped to accept any more licence applications.

November 2007 applications

EMRA opened applications for one day

The market prices were at top level And that was the only chance since

two years (and most probably for several coming years)

Result:78,000MW application (including some off-shores)

The system was blocked

November 2007 solution EHV(380kV) applications should be revised to HV(154kV) Applications above the (154kV) grids connection capacity

will compete on basis of additional connection fee per kWh .

Result: 2,000MW will get licences without competition 28,000 will compete for 5,500MW

Licenced or to be licenced projects

0 0 0-1 1-2 2-3 3-4 4-5 5-6 6+0

500

1000

1500

2000

2500

3000

3500

4000

Nov 2007?Nov 2007development?developmentoperational

kurus

MW

My estimation :out of 11GW, under current conditions 6.7GW will be operational until 2015

Where to sell?

Spot market: Very much dependent on natural gas prices 2010: 88 USD/MWh average 2011: 80 USD/MWh average Or Feed-in law Basis price : 80 USD/MWh for ten years (functional) Plus for local production of equipment max 37

USD/MWh bonus for 5 years ( yet not functional) Switching on yearly basis Add 7 USD/MWh carbon income with VER

certificates

Market price vs. feed-Market price vs. feed-ininspotspot 2010:2010: $88.46; 2011: $80.23 $88.46; 2011: $80.23

$73;$79;$87;$97;$110$73;$79;$87;$97;$110

Conclusions:

To investors: Until 2015 4,900MW feasible projects will be build

up

To equipment suppliers: 4,100MW equipment not contracted yet Actually electricity price is supressed by

state owned power plants with paid back depreciations

These power plants will be privatised soon Private companies who pay fresh money for take

over, will calculate higher production costs

Thank you for attentionI will be pleased to answer further questions