Turkey incentivises use of domestic lignite to ease gas import dependency

Gas to Power Journal

The hunger of Turkey's industry for natural gas is unabated, while new government incentives and tax breaks aim to put the use of domestic lignite resources at an advantage over natural gas as a fuel source for power generation.

 "We are over reliant on gas imports and this dependency is set to rise in line with GDP growth," said Levent Özcan Caner, Strategy Department, Ministry of Energy and Natural Resources, suggesting that government regulation in favour of coal would help reduce Turkey's gas import dependency.

 As project developers start to submit more licences for lignite-fired plants, "we are also putting a strategy document together for licence applications for power plants that run on imported coal," he told a conference organised by Gas to Power Journal in Istanbul.

 To incentivise investment in new coal power plants, the Turkish government has granted developers of new lignite power plant projects some form of corporate income tax allowance (investment participation rate), exemptions from customs duty and VAT and support employer's contribution to insurance premiums. Moreover, the government also helps with allocating state-owned land near domestic lignite production sites.

Analysts estimate the above measures will increase the share of coal in Turkey's energy mix rise from about 28 percent in 2011 to over 37 percent by 2020. To reap maximum benefits, developers of coal-fired power plants need obtain investment certificates by 2013, Gas to Power Journal was told.

Notwithstanding the pro-coal regulation, gas demand continues to rise amid strong industrial demand which is largely driven by economic growth. "The volume of gas imports to Turkey is not sufficient to meet rising energy demand," Caner said, pointing at the potential of additional gas supply from Azerbaijan's Shah Deniz II development as well as from northern Iraq and Iran.

"Our growth trajectory anticipates that power generation capacity will rise from currently 57.072 MW to over 110,000 MW in the next decade as Turkey needs more plants to cater for rising energy demand.

The costs of gas supply varies significantly however with state-owned power plants paying higher prices, which result in a subsidy to state-owned gas supply incumbent Botas, compared with lower tariffs for privately run power plants.

Conference participants unanimously agreed on the need for a legal unbundling of Botas and the removal of subsidies and restrictions for gas imports by the private sector.

Renewable energy, targeted to supply 30 percent of Turkey's power demand by 2050, is yet another measure to curb reliance on imported fuel sources in an environmentally sustainable manner.

Source:http://gastopowerjournal.com/markets/item/1538-turkey-incentivises-use-of-domestic-lignite-for-power-production-to-curb-gas-import-dependency