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Turkey Moves Ahead in Appropriate Application of PV

The Turkish PV market is being driven by the competitive cost of PV electricity more than by other incentives. In fact, the latest market developments in Turkey support our recent forecast for 2013 PV demand, as featured in Marketbuzz 2013, of approximately 100 MW. This forecast is based upon the emerging competitive economic terms being recognized.

PV installations within Turkey are being realized according to the terms of February 2012 legislation exempting production license requirements for installations less than 500 kW, a limit soon to be raised to 1 MW.

The graphics below exhibit the pre-tax economic case of a typical 500 kW installation paid for on the ‘Project Start Date’. These installations are largely around factories, and electricity purchase avoidance (Avoided Rate) is driving the market more than the FIT rate of €0.10/kWh (Export Rate converted from $0.133/kWh). The PV levelized-cost-of-electricity (LCOE) is less than both alternative benefit rates, and avoiding purchase is better than selling at FIT Rate.

Source: Adapted from NPD Solarbuzz European PV Markets Quarterly report, January 2013.

High solar insolation (1,900 Peak Sun Hours/Year) and low installed system prices (including 15% margin to the sole provider) help deliver a remarkable PV LCOE (assuming 6% discount rate). Electricity purchase avoidance aims are currently driving private company investments.

As shown in the next figure, other economic attractiveness indicators highlight that the market segment should not be constrained in terms of economic return.

Source: Adapted from NPD Solarbuzz European PV Markets Quarterly report, January 2013.

Assuming that all PV production is consumed on-site (meaning hourly demand is always greater than hourly PV production) the proposition becomes one of sustainable drive, due to attractive economic return on investment  as indicated by project IRR, and attractive wealth creation indicated by Profitability Index (PI). Often times a PI < 1.0 will be rejected from investment consideration, but that depends directly on the discount rate applied to a net present value calculation (NPV, 6% rate here), and moreover the needs of the investor in that regard.

If, however, the proposition were dependent solely upon the FIT remuneration, project IRR would be 5 points less than shown here, and PI would not exceed 0.4.

By allowing the advantages of distributed PV generation to be realized, rather than effectively constraining it as traditional utility company territory, the Turkish market demonstrates the benefits of appropriate PV application. The intrinsic fairness of the proposition is a key aspect of its sustainability, with the consumer advantage allowance being the avoidance of purchase.

In contrast to Western European grid situations, the Turkish grid has the opportunity to expand after previously establishing a distributed generation baseline component including PV at the end of the line (point of commercial use).

The immediate future of this market segment appears very bright, and extending the soft-cap of 600 MW is a function of the utility company further validating transformers compatibilities and opening up for more applications.