Operating in five different sectors, Aksoy Holding is among the leading actors in Turkey’s energy sector. Arkin Akbay, Chief Operating Officer at Aksoy Holding and its subsidiary, Turcas Petrol, evaluated the developments in the energy sector and the group’s activities in this area. Turkey ranks low among OECD countries in terms of electricity consumption per capita, Akbay said. “However, it made such a move in the early 2000s that it attracted investors who could take commercial risks,” he added. At the forefront of these were natural gas cycle power plants, which can be established quickly and are more environmentally-friendly than coal power plants. During this period, 10 to 11 high-efficiency natural gas power plants started production without a purchase guarantee, taking commercial risks.
► What did these investors rely on to enter the Turkish market?
What investors relied on was their expectations that Turkey would continue its economic growth. Investors trusted this and made serious investments in Turkey. These are not only natural gas, but also lignite, imported coal, wind and solar power plants. Our installed power has increased rapidly, reaching 98,200 MW as of the end of July 2021.
► Developments seem to differ a little from expectations, do you agree?
As supply grew, demand was expected to increase as well. These investments were made with appropriate leverage and smart borrowing, especially with the abundance of money after 2008. But the economy failed to follow suit. Because gas prices were above imported coal prices, natural gas cycle power plants had difficulty operating between 2014 and 2020. Therefore, new investments slowed down.
► How has the recent rapid increase in electricity demand changed the situation?
Delayed demand due to the pandemic started to emerge recently. Added to that is the drought. All natural gas cycle power plants, which have had difficulties in operating in recent years, have started to increase their capacity utilization. Therefore, it is good that they were established on time.
► To what extent does this situation coincide with the strategy of reducing foreign dependency in energy?
Yes, you can say that natural gas is an imported resource and creates a current account deficit. But with nonexistent energy, you create a larger current account deficit, because you will need to consume even if you cannot produce. The important thing is to be able to produce in Turkey and to provide added value to meet this demand. Increasing capacity utilization in natural gas power plants also reduces unit costs. The more capacity you use, the more cost-effective and competitive you become. When the drought is over, the capacity utilization of gas power plants may decrease again. But the most important thing is that the country does not lose its growth trend. Investors who follow the growth trend well bring new investments to our country, no matter what type.
► Is peak demand the only reason for the power outages in the past weeks?
As of the end of July, we have a base load – that is, an uninterrupted generation capacity – of 45,700 MW. This is generally from hydrocarbon-based facilities such as natural gas, lignite and imported coal. Now, if we want to provide uninterrupted, affordable electricity, you need 98,000 MW. It that case one can ask why would there be a power cut when your peak demand is 55,000 MW and around 40-45,000 MW on average? But many factors can come into play at the same time. There may be no sun or no wind, and you may have consumed a large amount of your hydraulic resources. There are places where the air temperature rises to 49 degrees. Inevitably, the demand for electricity increases. The capacity utilization rate in industry is excellent and hopefully will get better. Delayed demand is kicking in worldwide, not only in Turkey. These dynamics have intersected. On the demand side, there has not been a day where supply and demand did not intersect. You can see it from electricity market data. In the past, there was always extra capacity left. But it has reached the limits.
►What are the plans and projects to increase supply?
Let’s look at the resources in hand. We have completed the majority of our hydraulic resources, especially our dam investments. There are still those that can be built and those under construction, but their number has dwindled. We don’t have much of a chance there. On the river side, we have to be more cautious due to climate change. Droughts have been prolonged. In the past, we did not see drought for two years in a row, now we are experiencing them consistently. That’s why we have to be very careful about hydraulic supply.
► What about the renewable resources?
We are one of the very lucky countries for wind and sun. There is blue sky in Turkey for feasible projects in these areas. However, they also seasonal. You want your electricity when you plug in your device into your outlet. But wind cannot provide it for you. You will either store it somehow, transfer it to storage systems, or you have to provide flexibility with other resources.
► What could happen in the energy mix then?
Natural gas is marginal, expensive, we won’t go there. It is difficult to find financing for imported coal or lignite; currently the world is running out of coal. So where are we going? We’re going nuclear. As of 2023-24, we are starting to commission four units of 1200 MW each. This is one of the things that will support the base load. It doesn’t seem possible that a single facility will come into operation in the next five or six years for imported coal. Together with these, we need to see if we can meet the base load requirement.
► We looked at it and the base load is not enough. What do we do?
There are also natural gas cycle power plants with low-capacity utilization. We need to increase the availability of installed capacity. We will need to meet the additional energy demand there. However, if our economic growth goes beyond what’s planned and we increase our market share in the world and undertake investments that will carry our national income further, then we will need new base load investments. We need to calculate and plan well from where we will meet them.
► How will the country meet the additional demand?
Today, we can say that natural gas power plants are not good, not beneficial for the country, and we may need more of them tomorrow, especially after making our own natural gas discoveries. Hopefully, our discoveries will increase and we will have the chance to include natural gas in the domestic mix from now on.
► Could the discovered natural gas be available for use by 2023, as announced?
There are examples of this. Especially in the Eastern Mediterranean basin, similar projects started commercial production at the same time. There is a very similar field in Egypt. Distances are even better in Turkey, especially in terms of pipelines. I think we can achieve this. Tests are being done, new wells are being drilled, we are proving more reserves. Hopefully we will find larger reserves as well. I am one of those people who fully believe that we will be able to deliver our discovery to the pipeline for the first time by 2023. I see it is well planned.
► How much can be fed into the pipe per day?
The amount that can be given to the pipeline on the first day will not be at maximum capacity, which is the nature of the job anyway. The amount of gas that can be extracted from a field and given to the pipe increases gradually. Full load can be reached in 2025. I think that Black Sea gas will be available to the country possibly by 2026, without too much delay.
► What would you like to say about new gas exploration?
Exploration activities are valuable for the country. In this regard, I support both the public administration and the private sector. You can’t find it without searching. It is also very important that you find it and bring it to life. There is a point in this that also touches on your national security. We are in the middle of a region rich in natural gas. We have a good environment in front of us to turn this into an opportunity. There are expired natural gas import agreements. By transferring these to the private sector, we actually have a chance to open up to greater competition and improve the economy.
► Can’t competition be provided by the public sector?
In fact, the point where our market is now offers us this opportunity. The fact that the private sector aspires to all expired agreements on liquefied natural gas (LNG) or pipe gas and makes them available to the country at reasonable economic supply prices will also support growth. That’s why I think that both connecting the Black Sea areas and really liberalizing the market will add value to the country’s growth. Here, too, I see the initiative and sense of responsibility of the public administration in the same direction.
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