07 February 2020

Turkey’s dilemma: risky coal or clean development

Will Turkey break free of its coal shackles?
By Elif Gündüzyeli and Duygu Kutluay

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Turkey is at a turning point. It needs to decide between a managed and just transition away from coal, or to keep its old and sick coal plants on life support – wasting money, burdening public health, and forcing yet more communities out of their homes.

Turkey chose a fossil-fuel dependent path for growth back in 2012 by declaring it the “Year of Coal”, with serious repercussions. Choosing coal to power its path has led to terrible air pollution, and put Turkey on the road to being a pariah in a Europe that is rapidly switching to clean energy.

Globally we are already suffering from twin climate and air pollution crises, with coal as one of the main culprits. Governments throughout Europe get this, and there are signs that some of Turkey’s leaders do too.

In February 2019, the Turkish Parliament unanimously ended exemptions from environmental regulations for coal power plants previously operated by the state-owned utility EÜAŞ. Called Article 45, had it not been voted down the amendment would have allowed polluting plants to continue business as usual until 2021. But thanks to strong public opposition and a nation-wide campaign for the right to clean air by Turkish civil society organisations and medical associations, the parliament sided with the people.

Fast forward to November 2019, and the same proposal was resurrected as “Article 50”, and despite even greater public protests, this time it was passed by parliament. However, it ended up being vetoed by President Erdoğan on the basis that the constitution recognises the right to live in a healthy environment for all Turkish citizens. Five of the 16 coal plants suspended operations on 1 January 2020 as a result.

Meanwhile, EÜAŞ, once the owner and the operator of Turkey’s coal plants, has now become an intermediary, making coal assets more attractive (through price purchase guarantees, non-compliance with environmental regulation, or pre-obtained permits and licenses- for privatisations); and as late as 2016 Turkey still had more than 70 planned coal projects in the pipeline. Now, it has 31 planned new plants – less than half. Facing mixed messages politically, private investor and financier appetite for new coal has drained, and those that bought old and sick coal plants just a few years ago are not only struggling to keep them running, they are facing huge costs for rehabilitations and other measures to clean up their emissions.

As our EÜAŞ briefing for investors, insurers and banks shows, the giddy privatisation party between 2012 and 2015 put eight of EÜAŞ’s assets into private hands. Most of these plants lacked sufficient environmental measures in terms of filtration systems, flue gas facilities, and ash dams. This meant that in some cases EÜAŞ had to invest in installing basic flue-gas desulfurization (FGD) before hand over, or shift the responsibility onto buyers.

This is where the fiddling of electricity market laws began. If newly bought plants could become unprofitable because of necessary pollution reduction investments, then non-compliance with environmental rules would need to be made legally possible. Coal plant owners could then pollute, with Turkish society picking up the bill.

However, as it turns out, people in Turkey have had enough of polluter abuses.

Today, in February 2020, five coal plants are offline because the operators aren’t willing or able to clean up their act, and there’s been no significant impact on electricity supplies.

In fact, there is a huge oversupply. As of 1 January 2020, Turkey has 91 GW of installed power. Demand peaked  at 45.5 GW on 1 August 2019, at 4pm on a summer afternoon, with air conditioners running full blast around the country.

So far, the government has been trying to address this overcapacity problem by paying would-be polluters via capacity mechanisms. This is expensive life support for unprofitable coal and natural gas, and even though they are generous, the money is not enough to make a dent in the existing 60 billion USD credit debt of Turkish energy companies (as of September 2019). With the European Green Deal and a border tax on carbon being discussed, the outlook for Turkish coal companies looks even more dire, and finance is drying up. Tenders for coal plants have been postponed several times since no bidders are present.

This is a historic opportunity. Turkey has an oversupply of coal electricity, and it is costing the health of its people and economy dearly. It also has an overabundance of sunshine and wind resources, offering it the promise of becoming a clean energy superpower. This will not only reposition Turkey’s economy to take full advantage of the clean energy revolution and improve the health of its people, it will help it do its part as one of the regions most vulnerable to the climate crisis.

It’s time for Turkey to break the coal gridlock. This would be a tremendous win for the government, and a massive chance for EÜAŞ to be a leader and to plan for a modern, just, low-carbon Turkey.