An analysis of Turkey's solar PV auction scheme: What can Turkey learn from Brazil and South Africa?

Sirin S. M., Sevindik I.

ENERGY POLICY, vol.148, 2021 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 148
  • Publication Date: 2021
  • Doi Number: 10.1016/j.enpol.2020.111933
  • Journal Name: ENERGY POLICY
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, PASCAL, ABI/INFORM, Aerospace Database, Business Source Elite, Business Source Premier, CAB Abstracts, Communication Abstracts, EconLit, Environment Index, Greenfile, Index Islamicus, INSPEC, PAIS International, Pollution Abstracts, Public Affairs Index, Veterinary Science Database, Civil Engineering Abstracts
  • Keywords: Turkey, Solar PV, Innovation, LCOE, Auction, RENEWABLE ENERGY INVESTMENTS, DEVELOPMENT EXPENDITURES, ELECTRICITY, INNOVATION, POLICIES, TECHNOLOGIES, UNCERTAINTY, DESIGN
  • Middle East Technical University Affiliated: No

Abstract

As global investments continue in renewable energy technologies, investment costs have declined significantly. Meanwhile, many governments have shifted from pre-set renewable support schemes to auction schemes in order to introduce competition in price setting. Turkey has initiated Renewable Energy Resource Zone (RERZ) auctions to promote solar photovoltaic (PV) and wind technologies. We examine the first of these auctions, Solar PV RERZ, which has ambitious targets in terms of increasing solar PV capacity and enhancing domestic competence in solar technologies. Despite the auction being hailed as a success in terms of low prices, we utilize the Levelized Cost of Electricity generation (LCOE) analysis to demonstrate that the project is vulnerable to macroeconomic shocks and financial risks. Model results show that the capacity factor is the most prominent factor in costs, and 10% change in the capacity factor affects the LCOE about the same rate. Investment cost and interest rate are the other major factors affecting the LCOE. Based on these results, we make recommendations by discussing how Turkey can improve its auction design by incorporating some of the elements used by Brazil and South Africa.