Economies and businesses are always shaped by expectations, just as market expectations are important in economic forecasts themselves. Within our professional capacity, we have tried to outline a draft forecast for the upcoming days. While it may not necessarily foresee the future in all its detail, it is better to have one, rather than none at all. Here are our short-term upcoming year predictions:
Energy supply security is one of our prime concerns. Our installed capacity has reached 92+ GWe, whereas peak demand was at 52+ GWe in August 2019. Electricity generation has reached 303+ billion KW-hours in 2019. Our local lignite production was about 50+ million metric tons in 2019. Hard coal production was 2 million metric tons. Imported hard coal was 30 million metric tons. Natural gas consumption is expected to top 53 billion cubic meters (bcm) in 2019.
The relative decline in production activities reduced demand. The need for additional electricity generation was not seen last year. We observed a stagnant rate of electricity generation, investment and rehab activity. There were no new investments in power plants. Most of them are already transferred to private companies through privatization anyway. The investments in environmental equipment ESP-FGD rehab are not seen yet.
Owners of thermal power plants have secured a new 2.5-year environmental equipment exemption from the government; however, this action has met a strong reaction from environmentalists. It is not right for thermal power plants to extend their exemption in environmental investments. Investments in environmental equipment for old thermal power plants should be made as soon as possible.
Also, last year we have seen serious blockages in project financing.
According to the latest reports from the Credit Rating Agencies, we are not an investment grade country anymore. Rather than making negative evaluations, Credit Rating Agencies have stopped evaluating us. We need to exert confidence in international markets so that foreign resident investors and bankers keep their property, property, and stock in Turkey.
With the increase in the US Fed interest rate -25bp increases with 3-month renewals throughout the year, we understand that hot money will be absorbed from all over the world and directed to the US market.
The price of oil per barrel fluctuated in the $ 70-80 band over the past year. There is a new Eastern Mediterranean offshore gas, but how to transport it is still not fully clear. It may take another 4-5 years to reach a solution in that regard.
Russian natural gas is very expensive, 1000 m3 costs us somewhere around 310-320 US$. The price of Russian gas at the German border has dropped from $ 9.50 to $ 8.25 for 1-MMBTU. The price in the USA is around $ 3.00 for 1-MMBTU. The increase in the amount of US shale gas and German renewable energy incentives have made a significant contribution to this price drop. Depending on the price of oil, it is expected that Russian natural gas will be falling in general.
On the domestic side, there is little change in price that reaches the end consumer. There is a discount on wholesale prices on purchases, but the discount on end-user prices is dependent on pre-election policies.
Our energy market is expected to restructure a debt of around US $ 50+ billion. Change of ownership in power plant properties may occur. Our end of 2019 growth is forecasted in the range of 4-5%, but public forecasts are higher. Politicians believe that energy investments will increase more than the growth rate. It is too difficult to confirm all this in the current environment.
It is not easy to find revenues to cover public expenditures. Public institutions show an easing in the commissioning of new power plants. In the past, test and trial and temporary admission procedures were serious and long-term. Now they are finalized in a couple of days.
Refractory distortions, equipment, and I&C system, synchronous failure sensations are rampant at the new power plants. CFB designs do not work in compliance with our domestic lignite. Domestic coal, which contains a lot of water moisture, does not burn in the CFB combustion chamber. It is necessary to constantly use supplementary liquid fuel to burn local coal continuously. Local coal enters the combustion chamber as ice in winter and mud in summer. The water in domestic coal should be reduced by preheating. Bag filters are not enough, ESP should be added. Afşin-B- type “indirect firing preheated pulverized coal combustion” design seems more compatible with our domestic lignite coals.
New combined cycle power plants were commissioned. But what if the Russian gas is cut off for some reason? We always carry a serious risk of interruptions in gas supply. TurkishStream offshore pipeline from South Russia to the western edge of Turkey was finally realized but it is not clear what amount will be given to Turkey.
Afsin Elbistan -A thermal power plant that was privatized and changed hands. It is a very old plant with operational problems. The new group started engineering work for 4×344 MWe rehab and new 2x344Mwe units. Such large projects require a large financial package and experienced staff. Afşin Elbistan -A power plant works without the necessary environmental equipment: FGD is not installed and ESP is inadequate. Thanks to the capacity mechanism, the price is harmonious with the market. It is futile to repair this power plant; it is more convenient to dismantle and re-build it.
The defective units of Afşin Elbistan-B power plant were repaired and recommissioned. However, the availability of operating units is not yet at the desired level. The coal fields are still closed due to past landslides. How long can the domestic open-pit coal from Kışlaköy coal field keep the system by transport trucks? Investors are not willing to invest in new thermal power plant investments. International financing groups are on hold, they are in no hurry for new investments. They are only considering situations to buy old facilities that have fallen in value.
Imported coal power plant investment projects will end. The political authority has a clear policy of not using any more imported coal, which increases and adversely affects the current account deficit. With that, import coal investments are not recommended. In the international spot market of imported coal (South Africa, Colombia, Australia) the price of US $ 90-100 per metric ton (about US $ 3.00 / MMBTU) is already very expensive.
There are no new energy investments in Turkey’s Southeast. The region absorbs and uses energy – electricity, but most people do not pay their bills.
Instead of spending more money on security, it would be wiser to investigate the possibilities of solving problems through dialogue.
With our renewables policies, energy companies have learned their lessons and hydro, solar, wind investments are on their way. Unit electricity production costs began to decrease. It is the most pleasing news that domestic production opportunities are on the rise. With the activation of specialized solar regions, three-digit solar energy plants are now within reach. We expect to continue to invest in wind and solar, each with a capacity of 1000 MWe.
The headline “Japanese nuclear project in Sinop is canceled”, first appeared, then was denied. We do not see much work for Akkuyu nuclear other than on-site civil construction. They are facing some financial problems. The long-term high purchase price guaranteed by nuclear power raises serious concerns.
What is the possibility of nuclear domestic fuel, was it possible to import fuel from more than one country? Where will the used fuel go? If there are no answers, what is the possibility of abandoning the nuclear industry? How much does it cost? When will the least costly models be made for future production and consumption estimates?
In COP25 Madrid 2019 there are serious sanctions against coal and fossil fuels on the agenda, and the situation will become more evident at the COP26 Glasgow 2020 meetings.
More investments in environmental equipment, more clean coal technologies are required. In the near future, there will be total abandonment of coal all over the world as well as a total financing cut for fossil fuel power plant investments. While economic growth is critical in energy strategies, it is necessary to increase efficiency, reduce demand growth or keep it steady.
Always trust Turkey’s business people. Believe in the great domestic market power of land with a population of 82 million. Be cautious against “fragility” warnings from economists. Don’t borrow, remain in cash, save money if you can, cut costs, but do run your existing business. Continue your advertising, engineering and feasibility studies. Don’t worry, hard times come and go.
Happy new year to you all.