The EBRD and the Italian government are funding a study of Turkey's sustainable energy market to prepare the country for a surge in green investments and a decrease in fossil fuel consumption.
The EBRD's newest country of operations imports around 75% of its energy and relies on fossil fuels to cope with its growing demand for power. At the same time, it lacks the finance and know-how to make use of its renewable energy resources and increase energy efficiency. So to help prepare Turkey for green investments, the EBRD is embarking on a study of the country’s sustainable energy market, funded by the Italian government.
Miroslav Maly, the EBRD's energy efficiency expert responsible for the project, has the details.
How will the study help Turkey move towards greener energy?
Investing in sustainable energy is one of the Bank’s priorities in Turkey. This exercise will provide information to guide the EBRD in designing and launching market-based financing mechanisms for energy efficiency and renewable energy projects.
In Turkey, energy demand has increased as a result of strong economic growth and rising social standards. So far, 88 per cent of the energy demand has been met by fossil fuels. Turkey has taken steps to address the energy challenge but there is a significant funding gap in the area of energy efficiency financing. There are no financial resources and no proper lending facilities for energy efficiency projects, particularly small-scale ones.
Why is there such a big funding gap?
Local financial institutions view the energy efficiency sector as high-risk because lenders lack the technical capacity to evaluate such projects and borrowers have failed to make energy efficiency bankable. The EBRD, however, is very experienced in developing sustainable energy projects from central Europe to central Asia. So the Bank could bring its experience to the Turkish market and help attract financial institutions to the energy efficiency sector, while also developing a competitive market for energy efficiency products.
The Bank will engage a consultant to review potential investments in sustainable energy and design market-based financing mechanisms. Continuing Italy's strong collaboration with the Bank, the Italian government will cover the costs of the market study through Italy’s Technical Cooperation Fund with the EBRD.
What areas will be reviewed and who will the EBRD talk to in Turkey?
The study will analyse the potential for sustainable energy investments in Turkey’s energy, industrial, commercial and residential sectors as well as in municipalities. It will also look at the renewable energy sector and its potential by source (hydro, biomass, solar and wind) and it will evaluate the country’s carbon finance potential. It will also observe the Turkish financial sector to help the EBRD understand the sector’s willingness to finance energy efficiency and renewable projects. Lastly, the study will include a review of the current environmental permitting system in Turkey and benchmark these against the Bank’s Environmental and Social Policy.
The EBRD will talk to international financial institutions working in the country, donors, the government and other stakeholders. The market study will look at the energy supply and demand balance in Turkey. It will identify key actors in the energy efficiency and sustainable energy business and will come up with concrete examples of the needs for energy efficiency improvements and clean technologies.
When will the study be ready?
We are in the process of hiring a consultant to carry out the study and we expect results by June 2009. The Italian-funded study is the first technical cooperation project in Turkey. It is a step towards understanding the Turkish sustainable energy market for the Bank to then move into investing in energy efficiency and sustainable energy in Turkey.
By Marjola Xhunga, Communications Adviser