TURKEY RUNNING SUN JUST RIGHT

Turkey Moves Ahead in Appropriate Application of PV

Tim Murphy, March 15, 2013 (SolarBuzz)

“The Turkish PV market is being driven by the competitive cost of PV electricity more than by other incentives. In fact, the latest market developments in Turkey support our recent forecast for 2013 PV demand…of approximately 100 MW…PV installations within Turkey are being realized according to the terms of February 2012 legislation exempting production license requirements for installations less than 500 kW, a limit soon to be raised to 1 MW…

“These installations are largely around factories, and [the] electricity purchase avoidance (Avoided Rate) is driving the market more than the FIT rate of €0.10/kWh (Export Rate converted from $0.133/kWh). The PV levelized-cost-of-electricity (LCOE) is less than both alternative benefit rates, and avoiding purchase is better than selling at FIT Rate…High solar insolation (1,900 Peak Sun Hours/Year) and low installed system prices (including 15% margin to the sole provider) help deliver a remarkable PV LCOE (assuming 6% discount rate). Electricity purchase avoidance aims are currently driving private company investments…”

click to enlarge

“Assuming that all PV production is consumed on-site (meaning hourly demand is always greater than hourly PV production) the proposition becomes one of sustainable drive, due to attractive economic return on investment as indicated by project IRR, and attractive wealth creation indicated by Profitability Index (PI). Often times a PI < 1.0 will be rejected from investment consideration, but that depends directly on the discount rate applied to a net present value calculation (NPV, 6% rate here), and moreover the needs of the investor in that regard.

“If, however, the proposition were dependent solely upon the FIT remuneration, project IRR would be 5 points less…and PI would not exceed 0.4…By allowing the advantages of distributed PV generation to be realized, rather than effectively constraining it as traditional utility company territory, the Turkish market demonstrates the benefits of appropriate PV application. The intrinsic fairness of the proposition is a key aspect of its sustainability…The immediate future of this market segment appears very bright, and extending the soft-cap of 600 MW is a function of the utility company further validating transformers compatibilities and opening up for more applications.”

Tweet