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THE DEVELOPMENT OF THE DEVELOPMENT OF COGENERATION COGENERATION SYSTEMSSYSTEMS IN IN

TURKEYTURKEY ANDAND ITS ITS FUTURE FUTURE TRENDTRENDPresented byPresented by

OZKAN AGISOZKAN AGIS

Chairman Chairman Türkiye Cogen AssociationTürkiye Cogen Association

A Regional Chapter of WADE Coordinated by COGENA, Italian A Regional Chapter of WADE Coordinated by COGENA, Italian Cogeneration AssociationCogeneration AssociationMarch 20,2009-Rome-ItalyMarch 20,2009-Rome-Italy

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IntroductionIntroduction

• According to the “World Sustainable Energy According to the “World Sustainable Energy

Summit” held on 2002, the countries can reach to Summit” held on 2002, the countries can reach to

their targets in the developments, if they could their targets in the developments, if they could

provide accessible, economical, reliable and provide accessible, economical, reliable and

sustainable energy for their citizens and for their sustainable energy for their citizens and for their

industry.industry.

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• International Energy Agency (IAE) states that, up to 2030, International Energy Agency (IAE) states that, up to 2030,

26 trillion USD is estimated to be spent to maintain the 26 trillion USD is estimated to be spent to maintain the security of supply in the electricity needed. % 25 of this security of supply in the electricity needed. % 25 of this amount is to be used for the transmission and distribution amount is to be used for the transmission and distribution related investments.related investments.

• We need to reduce this figure by designing and building We need to reduce this figure by designing and building new power generating plants as close as to the electricity new power generating plants as close as to the electricity consumers. consumers.

• The World Alliance for Decentralized Energy (Wade) has The World Alliance for Decentralized Energy (Wade) has devoted its efforts on the Decentralized Energy Production devoted its efforts on the Decentralized Energy Production since many years. since many years.

• Thanks to these valuable efforts today, Decentralized Thanks to these valuable efforts today, Decentralized Energy has reached to %10 of global energy production.Energy has reached to %10 of global energy production.

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• Countries are developing in accordance with the Countries are developing in accordance with the

importance they give on strategies and projects, which importance they give on strategies and projects, which

are in tune with the country’s geographic and are in tune with the country’s geographic and

geostrategic situation. geostrategic situation.

• Turkey, with its 780 000 km2 territory and with a 73 Turkey, with its 780 000 km2 territory and with a 73

million population, ( 70 percent of which living in million population, ( 70 percent of which living in

Marmara and Aegean Regions), is a country that Marmara and Aegean Regions), is a country that

should take maximum benefit from Decentralized should take maximum benefit from Decentralized

Energy Systems.Energy Systems.

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• Up until 1990, the planning of electricity and the building and Up until 1990, the planning of electricity and the building and

operation of its systems were undertaken by TEK –later known operation of its systems were undertaken by TEK –later known

as TEAŞ – which is a public enterprise. as TEAŞ – which is a public enterprise.

• TEK has perceived its mission to be connecting the electricity that TEK has perceived its mission to be connecting the electricity that

was produced in the East (since most of the lignite reserves, and was produced in the East (since most of the lignite reserves, and

hydraulic potential are in the hydraulic potential are in the EEastern part of Turkey, and whilst 70 astern part of Turkey, and whilst 70

percent of the consumers are in the Western part ) to the West by percent of the consumers are in the Western part ) to the West by

a 380 KW energy transmission line, which is 1000 – 1500 km a 380 KW energy transmission line, which is 1000 – 1500 km

long. long.

• The misinterpretation of our geographical situation and the The misinterpretation of our geographical situation and the

common understanding that any sort of regulation with regard to common understanding that any sort of regulation with regard to

electricity must be of public enterprises, has continued until 1984, electricity must be of public enterprises, has continued until 1984,

when private sector has been finally authorized to build their own when private sector has been finally authorized to build their own

facilities to produce electricity.facilities to produce electricity.

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• Although the law (No: 3089) enabled private sector to Although the law (No: 3089) enabled private sector to

build and operate plants and sell the surplus electric build and operate plants and sell the surplus electric

produced to the grid, up until 1990 that the private produced to the grid, up until 1990 that the private

sector started building its own plants since the sector started building its own plants since the

advantages that the law brings to the private sector, advantages that the law brings to the private sector,

have been very well understood.have been very well understood.

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• After 1990, there were shortages, and fluctuations in After 1990, there were shortages, and fluctuations in

frequency and voltage of electricity. frequency and voltage of electricity.

• With the frequent electricity blackouts, added to the With the frequent electricity blackouts, added to the

above mentioned problems, the industrial consumers above mentioned problems, the industrial consumers

(so called Autoproducers) had to build and operate (so called Autoproducers) had to build and operate

their own plants, which produce high quality electricity. their own plants, which produce high quality electricity.

• Since so many years, industrial consumers were Since so many years, industrial consumers were

purchasing their electricity from TEK, which is a public purchasing their electricity from TEK, which is a public

enterprise and generating heat from separate boilers.enterprise and generating heat from separate boilers.

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• However industrial entrepreneurs got to the However industrial entrepreneurs got to the

understanding that they would earn more money if they understanding that they would earn more money if they

were to produce electricity and heat at the same time. were to produce electricity and heat at the same time.

• Therefore Cogeneration Technology was started to be Therefore Cogeneration Technology was started to be

implemented. implemented.

• In Turkey at first, Cogeneration technologies were In Turkey at first, Cogeneration technologies were

interpreted and executed as Industrial Cogeneration.interpreted and executed as Industrial Cogeneration.

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THERE ARE OTHER REASONS FOR THERE ARE OTHER REASONS FOR DECENTRDECENTRAALISED PRODUCTION LISED PRODUCTION

• Although there are rich lignite reserves and a great hydro potential in the Eastern Turkey, these only meet 25 percent of the need, we have to import the rest being 75 percent.

• In other words we have to import 83 million tones of energy sources, out of the 110 million ton, which is the whole demand. Since we are importing such a great amount of energy from outside, if we were to direct our purchases to the Marmara and Aegean region, where the energy consumption is high, we would have great energy savings by consuming energy where it’s being produced.

• This is inevitability directing us to Decentralized Energy Systems and as a country, we save a lot by deploying decentralized energy.

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• As we know all, the most important fuel for

cogeneration systems and combined cycled power

plants is natural gas.

• Turkey started to import natural gas from Russia in

1987 for the first time via the Trans Balkan route, and

the first decentralized energy plant has been deployed

in Hamitabat Power Plant near the Bulgarian border.

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• As seen from the map, natural gas has been transported to

places like İstanbul, İzmir, Bursa and Eskisehir, which are

densely populated and the energy consumption high, from

Hamitabat power plant, and caused to the establishment of

approximately 200 Cogeneration Plants.

• The capacity of decentralized energy in Turkey increased

by 100 times, to 6000 MW in 2006, starting from 1992, due

to the advantages that the natural gas provide to the

cogeneration plants, with its high efficiency and short

payback duration.

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YEARS

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LEGAL STRUCTURE OF TURKISH LEGAL STRUCTURE OF TURKISH ELECTRICITY MARKETELECTRICITY MARKET

• The regulatory framework and structure of the electricity market are in the process of significant changes.

• In 2001 Electricity Market Liberalisation Law (No 4628) was enacted.• The aim of this law was fully liberalized the Electricity Market.• Market is regulated according to EMRA regulations and decisions.• Since 5 years of operation, the market share of private operators reached

to 20%. The remaining 80% is controlled by public companies, TEDAS and TETAS.

• The following sorts of licences can be obtained from EMRA:a. Generationb. Autoproducersc. Autoproducers Groupd. Transmissione. Distributionf. Wholesaleg. Retail

• The Board of EMRA determines the licence fee. However, it seems reasonable.

• The import and/or export of electricity, can be conducted by wholesale licensees or retail licensees.

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THE DEVELOPMENT OF COGENERATION THE DEVELOPMENT OF COGENERATION CAPACITY IN TURKEYCAPACITY IN TURKEY

• The number of these plants has reached up to 300 by 2009,

meaning that, the average plant capacity has become 20

MW.

• They are all industrial cogeneration. Türkiye Cogeneration

Association, which I am the president of, has greatly

affected these positive developments by organizing

seminars, conferences and symposiums in the potential

industrial zones of Turkey.

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• The biggest and the most famous of these are the ICCI

–International Cogeneration Conference of Istanbul –

conferences, being the biggest cogeneration

conference in Europe.

• The 15th of ICCI conferences will be held in Istanbul on

13- 14-15 May in Istanbul, at WOW Convention Center.

• As a result of these endeavours, Türkiye

Cogeneration Association has been granted “The

Cogen Europe Award in 2000”.

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WHY DID THE DEVELOPMENTS IN WHY DID THE DEVELOPMENTS IN COGENERATION SLOW DOWN?COGENERATION SLOW DOWN?

• As I have previously mentioned, from 1994 to 2004 there

was a rather rapid development in cogeneration.

• However after the year 2004, natural gas prices were

increased sky high. The price rises in natural gas, caused

an increase in the electricity production cost and a

decrease in profitability of electricity sales.

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• Under these circumstances, some cogeneration plants sized

down their electricity generation to only meet their own need

in the factories.

• This situation created shortages in electricity in Turkey. In

August 1st 2006, the government deployed a new regulation

to operate the Liberal Electric Market and thus free

electricity market started operating.

• Today, as a result, there are 2 prices in the sector. One is

the official price from TEDAŞ ( 11.0 US cent/kwh) and the

other is the prices melted down in the pot of free market for

day, night and peak hours.

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• Free Market Prices are approximately 10 – 20 percent

higher than the official price.

• Given this situation, there is a new hope for

cogeneration plants (especially in the summer) to

restart operating full capacity, and therefore new

investments will be accelerated.

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• Below, we may see the correlation between the natural gas

prices and the electricity prices in Turkey since 2004.

• Gas prices have increased sky high; however the electricity

prices stayed almost stable.

• During conferences and symposiums Türkiye Cogen

Association has taken attention of the Minister of Energy to

the fact that, the cogeneration plants in Turkey must be

survived with the measures to be taken by the Government..

• As a result of our pressure, the price of electricity has been

increased by 22 percent, where as that of the natural gas

has been decreased by 17 percent.

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NATURAL GAS AND ELECTRICITY PRICES (ELECTRICITY PRICES ARE SDF PRICES AFTER AGU. 06)

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Natural Gas Prices

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• After these fundamental measures were operated, there

have been new license applications for cogeneration

investment. Today, approximately with a total of 4000 MW

capacity of new Cogeneration Plant have got their licenses

from EMRA ( Energy Market Regulatory Authority)

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WHAT IS THE SHARE OF COGENERATION WHAT IS THE SHARE OF COGENERATION CAPACITY AND PRODUCTION IN TURKEY?CAPACITY AND PRODUCTION IN TURKEY?

• First of all let’s take a look at Turkey’s balance of power First of all let’s take a look at Turkey’s balance of power supply and demand.supply and demand.

• Since 5 years Power Plant Investments have not been performed in line with growing power demand in Turkey.

• Table 1. shows electricity supply / demand balance between 2006 - 2010.

• That means; in 2007 and 2008 Turkey is not importer of electricity. But, if measures are not taken in 2007 and 2008, as of 2009 it becomes a net importer of electricity next years.

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• As far as cogeneration capacity is concerned , by the end of year 2008, it has been recorded that there is 6605 MW total installed capacity in cogeneration sector. This figure corresponds to 15 percent of Turkey’s total capacity, which is 41748 MW.

• In terms of electricity production, the share of cogeneration plants has been 36353 Gwh the total of 198329 Gwh in Turkey by the year 2008. ( 18.3 percent) I would like to get your attention to the fact that; this performance has been reached despite the high gas prices and the global crisis.

• Despite very high price of natural gas, (45.0 US cent / m3), we believe that, the share of cogen production in total, will keep its steady increase of 0.5 percent per year and its share in total is estimated to reach to 24 percent in 2015.

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WHAT ARE THE OTHER OBSTACLES WHICH WHAT ARE THE OTHER OBSTACLES WHICH ARE SLOWING DOWN THE COGENERATION ARE SLOWING DOWN THE COGENERATION

DEVELOPMENT?DEVELOPMENT?

• The obstacles in front of the development of cogeneration

systems are as follows:

– The reluctance of TEDAS (Electricity Distribution Authority) to

facilitate Cogeneration plants to connect to the grid

– The slow progress in the legislative operations, which regulate

implementation of residential cogeneration

– High taxes and funds on natural gas and other fuels used for

cogeneration plants.

• In order to overcome these obstacles, our Association has

been working in cooperation with Sister Associations and

organizing meetings with the Ministry of Energy.

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MICRO COGENERATIONMICRO COGENERATION

• Thanks to the intensive follow up of Türkiye Cogen

Association the micro-cogeneration has been a part of

the Energy Efficiency law numbered 5627, which has

passed in the year 2007.

• This law came into force on 02 May 2007. It is almost

similar to EU Energy Saving Directive.

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• Similarly, our Association has been intensely lobbying for

the EU – Cogeneration Directive to be recognized under

Turkish Law since 2004.

• We are pleased to see that the draft of the law is being

finalized, and to be submit to the Parliament nowadays.

• If the above mentioned draft were to be legalized, the

Cogeneration Plants would be given incentives in

accordance with their efficiencies and this would in return

cause the cogeneration technologies to further spread.

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THE FUTURE OF COGENERATIONTHE FUTURE OF COGENERATION• The demand for electricity rose annually with the

average 8 percent in Turkey in the past 10 years.

• Only in the year 2008, with the effect of the global

crises, the rise in the demand stayed at 4 percent.

• In the past years, the governments have taken some

measures to increase the electricity production from

our indigenous resources; such as hydro, wind,

geothermal and lignite.

• Moreover the law that enables the deployment of

certain incentives for electricity production from

renewable resources has been passed.

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• However depending on the forecast for the upcoming 20 –

25 years, it can be seen that, our own renewable energy

resources will not suffice.

• One of the calculations is derived from a scenario with the

assumption that the average rise in the demand of energy

would be 6 percent until the year 2030 annually.

• According to this scenario, by the year 2030, the demand in

electricity in Turkey, will be 650 000 GWH, and even if all

the renewable energy resources such as wind, hydraulic,

geothermal and biomass were put into operation, these all

would only meet 30 percent of all the demand. ( 195 000

Gwh)

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• If we were to use all our indigenous lignite reserves in electricity production, we would be creating a capacity worth 18 000 MW, which translates to 110 000 Gwh worth electric energy.

• All these calculations show us that, even if all the renewable energy and lignite resources were made use of; there would still be need for imported coal and natural gas.

• Turkey has been authorized by the parliament to sign the Kyoto Protocol, and starting from 2012, certain sanctions will be imposed.

• This means that, the deployment of coal plants will not be as economic as it used to be, and the production cost of electricity will be higher.

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• This all means that the Natural gas plants will continue

to have their privileged status due to their advanced

technology, relatively low investment cost, being

relatively more environment friendly, and requiring

relatively shorter time for constructing.

• These all will affect cogeneration plants. Cogeneration

technology will continue to attract the Turkish investors

and will continue to have its privileged status as a

preferred energy production model.

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Since the presentation time of my paper is Since the presentation time of my paper is limited, you can send your questions to limited, you can send your questions to

Türkiye Cogen Association via following Türkiye Cogen Association via following e–mail. e–mail. info@kojenerasyon.com

THANK YOU!THANK YOU!