Uncertainty in turkey’s solar industry
Solar power companies in Turkey have overcome numerous obstacles over the past five year to reach their current output of 4,500 MW. But on May 2, a new obstacle was thrown in their path. A circular aimed at preventing foreign exchange waste, made it difficult for new solar energy projects to be adopted.
The circular prohibits the use of foreign currency-denominated borrowing from foreign or domestic companies for businesses without foreign exchange income. Although energy investments under the renewable energy sources (YEKDEM) incentives are exempted, most solar energy investments have still been negatively affected. According to the International Solar Energy Society Turkey Section (GUNDER) Chairman, Kutay Kaleli, the exemption only applied to licensed solar power plant (GES) investments and did not afford the same right to unlicensed GES projects – which make up the vast share of completed and pending solar power plants.
“Unlicensed GES projects cannot use foreign currency loans,” Kaleli said. “When they use loans in Turkish lira, they face interest rates of 27-28 percent over 10 years. However, the internal profitability ratios of these projects are 12-14 percent. If you give a loan at 28 percent interest to a business with this income, it is impossible to repay. Thus there is no interest in investing in these projects. Unlicensed projects need to be included in the scope of exception.”
The banks are also confused
Kaleli said that some banks have considered giving credits to unlicensed GES projects if they have the investment incentive certificates but change their minds when they discover it is unlicensed. “Some banks think credits cannot be used at all,” Kaleli added. “Different projects based on the same energy source should be treated in the same way. In this way, the uncertainty in the market will be gone.”
1800 MW of projects suspended
Kaleli said that 6,500 MW of unlicensed GES projects have been given network connection rights. Turkey’s 4,500 MW of installed solar power is made up of those projects that have started production. “Of the 2,000 MW of remaining investment, we guess that the construction of 200 MW was started before May 2, 2018, when the regulation on the foreign exchange credit became operational. The remaining 1,800 MW of projects have loan problems. This means that a $ 2 billion investment is pending.”