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A quadratic helix approach to evaluate the Turkish renewable energies
ARTICLE IN PRESS Energy Policy 37 (2009) 4959–4965
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A quadratic helix approach to evaluate the Turkish renewable energies Melih Soner Celiktas a,, Gunnur Kocar b a b
EBILTEM, Ege University Science & Technology Research Center, Izmir, Turkey Solar Energy Institute of Ege University, Izmir, Turkey
a r t i c l e in fo
abstract
Article history: Received 20 April 2009 Accepted 23 June 2009 Available online 10 July 2009
The first renewable energy law concerning the ‘Use of Renewable Energy Resources for the Generation of Electrical Energy’ was adopted from European Union regulations on 18 May 2005 in Turkey. The purpose of the Law is to expand the utilization of renewable energy resources for generating electricity. Renewables are defined in the Law as generation facilities based on wind, solar, geothermal, biomass, biogas, wave, current and tidal energy resources, hydrogen energy and hydroelectric generation facilities. The aim of the study was to use strengths, weaknesses, opportunities and threats (SWOT) analysis to identify Turkish renewable energy market strategy and perspective by focusing on four different concepts: policy, market, technology and the social dimension. Different information gathering strategies have been applied such as monitoring of all statements and press releases published in the newspapers by all Turkish renewable energy parties starting from the launch of the law, articles presented in the events between 2000 and 2008 and face-to-face interviews. Our results demonstrated the importance of technology development and knowledge creation for gaining competitiveness on the global arena and the need for a systematic approach for transforming the created know-how into economic and social benefits. & 2009 Elsevier Ltd. All rights reserved.
Keywords: Renewable energy SWOT analysis Energy policy
1. Introduction The European Union and the world are at a cross-road concerning the future of energy. Climate change, increasing dependence on oil and other fossil fuels, growing imports, and rising energy costs are making our societies and economies vulnerable. The European Parliament in Renewable energy road map (2007) stated that these challenges call for a comprehensive and ambitious response, and therefore the European Union commitments are very clear. Climate change and energy are at the top of the political agenda and in a fully integrated approach. The 20% energy efficiency; 20% renewables and 20% greenhouse gas emissions targets demonstrate their commitment to deliver on their existing targets but also go further in looking at the medium term agenda. Moreover, the European Strategic Energy Technology Plan presented in November aims to speed up the innovation of low carbon technologies by focusing on more joint planning (Euractiv, 2007). Additionally, on 23 January 2008 the European Commission put forward a far-reaching package of proposals that would deliver on the European Union’s ambitious commitments to fight climate change and promote renewable energy up to 2020 and beyond. The ‘‘Climate action and renewable
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energy package’’ set out the contribution expected from each Member State to meeting these targets and proposed a series of measures to achieve them (Climate Action, 2008). Although, Turkey is endowed with a significant amount of renewable energy sources (hydro, wind, geothermal, solar power and biomass) potential (Fig. 1) and renewables are the second largest domestic sources for energy production after coal, the current Turkish electricity model is unsustainable and the country is overly dependent on imported fuel. Turkey depends on energy imports to an even bigger extent than the European Union. Currently, Turkey imports about 70% of its total energy needs. About 25% of its electricity is generated from hydroelectric power plants (MEMO/07/219, 2007). On the other hand, the energy produced from renewable sources has reached to the amount of more than 10.8 Mtoe which is 11% of the total primary energy sources in 2006 and 10.2% in 2007. Renewable energy supply in Turkey is dominated by hydropower and biomass. More than two-thirds of renewable energy supply is biomass, mostly wood and animal wastes that are almost exclusively noncommercial fuels. They are mainly used in the residential sector for heating. The remaining one-third of renewable energy supply is predominantly hydropower. The contribution of wind and solar is limited but expected to increase rapidly. The large potential of Turkey in geothermal, wind and solar have not been systematically developed until recently. In 2007, their combined share in total primary energy supply
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Fig. 1. The potential of Turkish renewable energy resources (MW).
was only 1.5% (AEA, 2009). All these data suggest that Turkey can reduce its dependence on fossil fuels by utilizing its renewable energy resources. Turkish researchers (Utlu and Hepbasli, 2009; Ozturk et al., 2009; Demirbas, 2008; Erdogdu, 2008; Kumbaroglu et al., 2008; Kaya, 2006; Ozturk et al., 2004; Arikan and Kumbaroglu, 2001; Dincer, 2000) have made important contributions to shape Turkish energy policies. However, a significant gap was identified in all renewable energy sub-fields in terms of ‘‘policy development’’ which is a vital issue for the development of renewable energies (Celiktas et al., 2009). Therefore, the objective of this paper was to evaluate renewable energy policies and regulations with a special focus on policy, market, technology and social dimension by conducting a strengths, weaknesses, opportunities and threats (SWOT) analysis.
2. Methodology and renewable energy parties SWOT is an acronym for strengths, weaknesses, opportunities and threats. SWOT analysis, is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities and threats (Hill and Westbrook, 1997). Within SWOT analysis, the strengths and weaknesses are seen as internal factors which are controllable, and can be acted upon. The opportunities and threats are external, uncontrollable factors. These form the external environment within which the organization operates and may include demographics, rates of interest, changes in legislation, etc. (Hatton et al., 1992). The technique is credited to Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from Fortune 500 companies (Saaty, 1987). It is the opinion of some that for a company which desires to grow, the objective appraisal of strengths and weaknesses should be high on the list of necessary activities (Ansoff, 1956; Cordiner, 1956; Leavitt, 1965). SWOT can be used for the analysis of internal and external environments in order to attain a systematic approach and support for decision making and, if used correctly, it can provide a good basis for successful strategy formulation (Jackson and Dutton, 1988; Schmoldt and Peterson, 2000). Various SWOT quantitative analysis methods were summarized, including External Factor Evaluation (EFE) Matrix and Internal Factor Evaluation (IFE) matrix. Kurttila et al. (2000) and Stewart et al. (2002) combined the Analytic Hierarchy Process (AHP) with SWOT to provide a new hybrid method for improving the usability of SWOT analysis (Lee et al., 2006). In the SWOT analysis, available resources and their potential utilization are studied from the
viewpoints of economic, ecological and social sustainability (Bradshaw and Boose, 1990). Most of the literature concerning SWOT analysis is found within the field of strategic management (Hill and Westbrook, 1977; Brownlie, 1999; Lee, 2006; Terrados et al., 2007). In this study, different information gathering strategies have been applied for the analysis of Turkish renewable energy technologies, market and policies. A different technique has been developed for analyzing all segment applications, named as quadratic helix approach formed by eliciting the opinions of previously identified academicians (Celiktas et al., 2009), policy makers and politicians, industrialists and representatives of civil society organizations, operating in the field of renewable energies. First, all statements and press releases published in the newspapers by all Turkish renewable energy parties starting from the launch of renewable energy process of law till today (May 2005–February 2009) were gathered and screened. Second, all articles presented in the events between 2000 and 2008 were collected and evaluated. Finally, face-to-face interviews were conducted with all the parties determined within the quadratic helix. A number of trigger questions were used during face-to-face interviews and for formulation of the output elicited from the screening studies.
3. 3. Results and discussion In this study, the SWOT analysis method was used to analyze the current situation of Turkish renewable energy electricity market and to formulate strategy for raising reciprocal satisfaction in the market and guide to new regulation approaches. A large number of different opinions were gathered from different parties which were researchers, nongovernmental organization representatives, governmental officers and industrialists totaling to 288 (Fig. 2). Among these, 58% were researchers, 27% industrialists, 9% governmental officers and 6% representatives of nongovernmental organizations. Technological issues were evaluated under the grouping of ‘‘state of the arts’’ and social and economical trends were analyzed under the grouping of ‘‘trends and vision’’ in SWOT analysis as a structural approach (Table 1). The data gathered were classified and presented as segments. Existing laws and regulations were considered in ‘‘policy’’. While the trends in the ‘‘market’’ were presented, technological level was assessed and provided in the segment of ‘‘technology’’. Additionally, the creation of social reflexes was explored in regards to ‘‘social dimension’’ (Table 2). 3.1. Policy (law and regulations) The first renewable energy law concerning the use of renewable energy resources for the Generation of Electrical Energy Law
Fig. 2. Distribution of face-to-face interviews.
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Table 1 Trigger questions formulated for the SWOT analysis. State of the arts ‘‘Strengths’’
Which renewable resources and technologies are presently
‘‘Weaknesses’’
Trends and vision ‘‘Opportunities’’
industrially used in the corresponding sector? What are their technological and socio-economic advantages?
What are the actual technological and socio-economic
How can R&D opportunities in renewables (new development of renewables, scientific breakthroughs) solve the existing problems and improve the existing weaknesses of products?
‘‘Threats’’
barriers to be overcome concerning products and applications in the corresponding sector?
What are the threats/risks linked with the new opportunities; technological, market and socio-economic risks?
Table 2 SWOT analysis matrix. Segments Policy (laws and regulations)
Strengths
Economical value
Market
Liberalization(Law
Technology
added Sustainable & secure energy Economical development Contain incentives Geostrategic location Gaining competitiveness EMRA Other good samples Reducing greenhouse gas emissions
no:4628 and 5346) Reliable Resources Price and purchase guarantees Improvement efficiency Energy bottleneck Foreign interest Being development country Kyoto sign
Improving R&D
Studies Improving Renewable energies Creating technological platforms Access of technology records Traceability
Weaknesses
Opportunities
Technical infrastructures Uncontain hybrid systems Lack of energy investment policy Uncovered all renewable Price guarantees Networking of stakeholders Coordination action Energy future perspective Wrong modeling of future energy demands Action plan-No clear strategic direction Polluter pays -principle
Being the first law and
Cost competitive Fixed price for all renewable Sectoral network Purchase guarantees Transparent regulations Comprehensive roadmap (The absence of a strategic energy technology roadmap) Proprietary technology Adequate financial resources Vulnerable to competitive pressures
All renewable energy technologies Patents and rights Qualified human resources Know-how Energy technology policy Scientific studies for potential Access to economies of scale Product innovation abilities Falling behind R&D
Using efficiently potential
revisible Provide oil independency Current account deficit EU Regulations Kyoto sign Obselete facilities (out of farming land)
Sustainable development Creating new sectors Energy farming Effective use of resources Carbon trade Energy costs Energy demands (annually %7-8) Exploit new market segments
resources Establishment of new R&D SMEs Govermental supports for R&D
Threats
Nuclear energy investments Forest field Application procedure for licensing
Political stability
Unproven technology
transfers Know-how High investment cost Natural Gas negotiations International enterconnections Financial instability or stagnation Political instability Forex market fluctuation for investments
Lack of knowledge Absence of novel production process
Experience Production stability(windsolar)
Political instability Lack of managerial depth and talent
Monopoly of leading core technologies & Firms Social dimension
Preventing
immigration Creating new jobs Economic development Rural development
Non eligible investment costs Consumer conscious Governmental support
(Law no.: 5346, 2005) was adopted from EU regulations on 18 May 2005 in Turkey. The purpose of the Law was to expand the utilization of renewable energy resources for generating electricity in a dependable and economic manner, to increase the
Sustainable environment Public health Protecting environment
Political instability
and natural resources
Social Costs Demographic changes Synergy effect
diversification of energy resources, to protect the environment and to develop the related manufacturing sector for the realization of these objectives. Renewables were defined in the Law as generation facilities based on wind, solar, geothermal, biomass,
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biogas, wave, current and tidal energy resources, hydrogen energy and canal and river type hydroelectric generation facilities and hydroelectric generation facilities with a reservoir area of less than fifteen square kilometers. The Law also included price and purchase guarantees for electricity generated from facilities having renewable energy resources certificate granted by Turkish Energy Market Regulatory Authority, a certificate entitling the holders to benefit from the incentives under the Law. The procedures and principles regarding the issuance of this certificate were specified in a regulation, published in the Official Gazette on 4 October 2005 (Law no.: 5346, 2005). Bagdadioglu and Odyakmaz (2009) reported that the applicable price for electricity energy purchased in pursuance of this Law in each calendar year should be the average wholesale electricity price in the previous year determined by Turkish Energy Market Regulatory Authority. Turkey has reached an opportunity and generated a new field to create added value by the launch of the law in the renewable energy sector. An increase in economical development is foreseen because of the huge potential, the country possesses in renewable energy resources (Bilgen et al., 2008) and its geostrategic position. Lack of long-term energy investment policies and action plans and additionally inappropriate future energy projections (Benmayor, 2008) increased the uncertainty in investments. Furthermore, weaknesses in sectoral planning, technical infrastructure and lack of environmental investments to fulfill polluter pays principle were elicited to be important factors. Although, some other weaknesses were also encountered such as excluding hybrid systems and providing equal price guarantees in all renewable energies regardless of the state of art in technology, there was a common belief that corrective actions would be taken in the time being to compensate such weaknesses. The interest in renewable energies was expected to increase as a result of the incentives provided and access to renewable and safe energies would be possible by the investments realized. Additionally, a more competitive structure would be created among all sectors by exceeding the critical mass in investments. Good practices reported in European Union (Ringel, 2006; Walker, 2008; Dutra and Szklo, 2008; Munksgaard and Morthorst, 2008; Gorensek and Forsberg, 2008; Yudego and Pelkonen, 2008; Leonardo, 2008; Barbose et al., 2008; Papadopoulos and Karteris, 2009; Diomand, 2009; Nemet, 2009) were regarded as positive indicators for the implementation of this law in Turkey. Moreover, nongovernmental organizations had provided full support because of the environmental friendly aspect of the law. The major opportunities were identified to be independency in oil and consequently, a decrease in current account deficit. Signing the Kyoto protocol was regarded as a positive approach. Regulations to be fulfilled and implemented during the European Union accession period were considered to have high significance. On the other hand, application procedures for licensing, nuclear energy and political instability were perceived as threats. Approvals of licenses were mentioned to require considerable amount of time and subsequently acquiring loans for investments were stated to be troublesome. In a report prepared for Turkish Industrialists and Businessmen’s Association (Bas and Ulgen, 2008), it was stated that unpredicted obstacles were faced during the legal approval process, which in turn created barriers for the investments. As for nuclear energy, although the Turkish Akkuyu nuclear power plant project with a capacity of 3000 MW was delayed in 1999 and cancelled in 2000, the Turkish government now, however, plans three nuclear plants with a total of 4500 MWe by 2015. The first units will probably be built at Akkuyu because the site already has a license. The Turkish Constitutional Court in March 2008 rejected a request to cancel
the plant, leaving the way open for companies to tender (World Nuclear Association, 2009). 3.2. Market Turkey is among the world’s fastest growing energy markets. Average annual growth rate for electricity demand has been over 8% and is expected to continue in the next years but the capacity is not (TEIAS, 2009). Such a huge demand in growth rate increases the magnitude of investment for Turkish power sector, which is apparently beyond the financing capability of the public sector. The annual development of Turkey’s installed capacity is given in Fig. 3. The current installed capacity has reached 40,835 MW, therefore, a capacity increase of approximately 3500 MW is required in order to attain a correlation between the annual growth rate and the installed capacity. Otherwise, increased energy consumptions and the demand in parallel, will create an energy bottleneck. This was one of the main drivers behind the power sector liberalization process. The ‘‘Electricity Market Law’’ enacted in March 2001, enabled progress into a liberalized electricity market providing fair and transparent market regulations (Erdogan et al., 2008). Hence, it would not be irrational to name the renewable energy market so-called before and after the law. Annual development of Turkey’s installed capacity can be seen in Fig. 4. Installed capacity in renewable energies excluding hydroelectric was 35.1 MW until 2005, whereas it has reached 362 MW after this date (Gunaydin, 2008), boosting 10-fold. Turkey has already
Fig. 3. The annual development of Turkey’s installed capacity 1913–2007.
Fig. 4. The annual development of Turkey’s renewable energy installed capacity (1913–2007).
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taken major actions to bring its legal framework in line with the European Union energy acquisitions, in particular regarding the conditions for trade in electricity and gas (MEMO/07/219, 2007). The law provided a purchase obligation for retail sales companies for the electricity generated from renewable energies. Additionally, the Kyoto Protocol approved by the Turkey’s parliament on February 5, 2009 has also given a confidence to all investors. Therefore, price and purchasing guarantees have been perceived as appetizers. Investors were encouraged with reliable resources such as solar, geothermal and wind, which in turn, increased both local and foreign investments. According o face-to-face interviews, major investments and developments are expected in the solar energy field, while the only improvement is the demonstration plants having a capacity under 1 MW for the moment. According to world wind energy report (WWEA, 2008), an important indicator for the vitality of the wind market was the growth rate in relation to the installed capacity of the previous year. The growth rate went up steadily since the year 2004, reaching 29.0% in 2008, equaling to an increase rate of 61.2%, which is another indicator of increase in investments. Almost all participants have mentioned the major weakness of the renewable market as not being cost competitive with fossil fuels and nuclear energy. Lack of trained labor and sectoral network except the national photovoltaic technology platform, absence of a strategic energy technology roadmap and some financial problems were identified to be weaknesses. As for opportunities, renewable energy industry will create new sectors, and consequently new jobs. According to the Greenpeace report (2008), over 2.4 million jobs globally were created in the renewable energy sector. Around 1.1 million of the jobs were in biofuels productions. A report by the University of California (E2, 2007) stated that the renewable energy sector generates more jobs per megawatt of power installed, per unit of energy produced, and per dollar of investment than the fossil-fuel-based energy sector. Every $100 million invested in the renewable sector creates 2700 new jobs. The report estimated that additional investment between 2007 and 2010 would be between $14 billion and $19 billion, which would create between 400,000 and 500,000 new jobs. Another opportunity is the implementation of energy farming. The main drive is to facilitate the implementation of the energy system in rural and undeveloped areas. Effective use of resources, carbon trade, exploiting new market segments, energy demand and energy costs were also listed as opportunities for renewable energies. One of the threats for the market was elicited as unproven technology transfer. Indian and China type biogas reactors were constructed in some regions of Turkey which turned out to be failure as the temperature of the reactor could not be kept stable (Kaygusuz and Sari, 2003). Because of the unproven technology transfer, the development of biogas sector remained premature. Economical sustainability of renewable energies is closely related to the interest rates of the loans and the payback period. Hence, the high investment costs were perceived as a threat by the respondents. On the other hand, inevitable fluctuations in the forex market as a consequence of political and economical instabilities and also natural gas agreements and international interconnections were recorded as threats.
2005). Focusing on some of the indicators for Turkey, it is necessary to mention that the share of GDP in R&D expenses has doubled between 1998 and 2007 from 0.37% to 0.71% (Fig. 5), The increase in R&D financing during the last 10 years has raised hopes for the development of renewable energy technologies (Yetis, 2009). Ease of access to the existing knowledge was attained by the technological developments in information technologies. Furthermore, traceability and access to technology records have been improved with the establishment of Technology Transfer Offices in Turkey, which in turn created positive expectations for more diverse and technologically competitive renewable energy sector. For the moment, Turkey cannot compete with the developed countries except in the field of solar thermal panels. On the other hand, implementation of a national renewable energy technology is forecasted to take a considerable time because of the lack of know-how and product innovation abilities. Although, the number of full time equivalent R&D personnel has increased 2.2-fold between 2002 and 2007 (Fig. 6) and domestic patent filings and grants increased 4.4-fold during the same period (Fig. 7), qualified human resources, patents and potential scientific studies were reported as weaknesses particularly considering the renewable energy technologies. Furthermore, the Law’s enumeration of renewable energy resources lacks flexibility in terms of technical developments in the future and, thus, it may be argued that technological aspects should have been included. Finally, in its 2005 Progress Report concerning Turkey, the European Commission criticized the Law for not setting a target for electricity generated from renewable energy resources by 2010, as foreseen by the relevant European Union law. Insufficient research infrastructure and absence of know-how for R&D and novel production technologies, lack of experience and managerial talents and political instability were noted as threats at national level. Even though, the budgets of R&D projects financed via national funds are quite small, international cooperation is sought not only in funding but also for knowhow exchange (Kaya, 2006). On the other hand, the monopoly of leading companies and core technologies particularly in the fields of solar and wind energy were perceived as threats at international level. Although, efficient use of potential resources, governmental supports for R&D and establishment of new R&D small and medium size enterprises (SMEs) were noted as opportunities, respondents mentioned that these would not be sufficient to overcome the identified threats. As a result, opportunities in technology segment were reported as the weakest chain of the whole study. The Minister of Energy and Natural Resources (2008) also emphasized the importance of technology diffusion which may reduce the costs in the long term.
3.3. Technology Exploring the interrelations between science and technology is essential and the contribution of scientific knowledge to technological developments has been stressed in many fields (Hassan,
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Fig. 5. The gross domestic expenditure on R&D (GERD) as % of GDP*.
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Fig. 6. The annual FTE* personnel.
Fig. 7. Patent applications from Turkey.
3.4. Social dimension Social dimension was the final segment investigated in this study which is an important pillar of the quadratic helix and aims at making a contribution for analyzing the impact of renewable energies. Sustainable development within a society requires a supply of energy resources that, in the long term, is readily and sustainably available at reasonable cost and can be utilized for all required tasks without causing negative societal impacts (Kaygusuz and Kaygusuz, 2002). Renewable energies were expected to enhance rural development by energy farming and prevent immigration by the launch of new jobs, thereby creating a remarkable social impact. Additionally, utilization of energy from local resources would strengthen regional development which is in accordance with the findings of Rio and Burguillo (2008). The authors stated that renewable energy sources have a large potential to contribute to the sustainable development of specific territories by providing them with a wide variety of socioeconomic and environmental benefits which include diversification of energy supply, enhanced regional and rural development opportunities and creation of a domestic industry and employment opportunities. However,
when compared with conventional fossil-fuel technologies, the benefits of renewable technologies were seldom internalized (Caldes et al., 2009). On the other hand, noneligible investment costs, lack of consumer conscious but more importantly lack of governmental support for end-users in terms of both generating their own energies and selling excess amounts were reported as weaknesses. For instance, although biomass fuels market already existed including rural areas, a large number of people generated income through the trade of wood and wood residues primarily for cooking purposes. Thus, policy gaps with regards to the supply side of wood fuels from both forest and nonforest sources need to be bridged (Kaya, 2006). Therefore, the governmental support is very significant. While political instability was perceived as the only threat, considerable number of opportunities was identified. Possession of a sustainable environment was interpreted as a significant impact on public health. Renewable energies were regarded as an opportunity when considering the negative impact of thermal power plants on the environment and the public. In community terms, renewable energy is almost entirely positive, bringing employment, support to farm communities through land rents, clean industries and funds for local projects. Expansion of renewables, in particular further development of onshore wind, hydro and energy crop biomass, which are all linked to rural areas, is therefore very positive. The greatest expansion is likely to be in biomass which impacts on less remote rural areas. Lessons can no doubt be learned from existing projects about how best to involve local people and ensure that they share in the benefits of expansion of the technology (K/BD/00291/REP, 2003). Consequently, synergistic effects were expected to result in demographic changes and improved wealth also at the other segments of the society by creating a multiplier effect.
4. Conclusion This study analyzed the current situation of Turkish renewable energy electricity market by performing a SWOT analysis. Systematic operation of the whole institutions and mechanisms required carrying out scientific and technological research and development activities and transforming the results of those
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activities into economic and social benefits would enable successful implementation of renewable energy law. The results emphasized the importance of technology development and knowledge generation in order to compete on the global arena and reach economies of scale so that the social dimension could be fulfilled as well.
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Energy Policy journal homepage: www.elsevier.com/locate/enpol
A quadratic helix approach to evaluate the Turkish renewable energies Melih Soner Celiktas a,, Gunnur Kocar b a b
EBILTEM, Ege University Science & Technology Research Center, Izmir, Turkey Solar Energy Institute of Ege University, Izmir, Turkey
a r t i c l e in fo
abstract
Article history: Received 20 April 2009 Accepted 23 June 2009 Available online 10 July 2009
The first renewable energy law concerning the ‘Use of Renewable Energy Resources for the Generation of Electrical Energy’ was adopted from European Union regulations on 18 May 2005 in Turkey. The purpose of the Law is to expand the utilization of renewable energy resources for generating electricity. Renewables are defined in the Law as generation facilities based on wind, solar, geothermal, biomass, biogas, wave, current and tidal energy resources, hydrogen energy and hydroelectric generation facilities. The aim of the study was to use strengths, weaknesses, opportunities and threats (SWOT) analysis to identify Turkish renewable energy market strategy and perspective by focusing on four different concepts: policy, market, technology and the social dimension. Different information gathering strategies have been applied such as monitoring of all statements and press releases published in the newspapers by all Turkish renewable energy parties starting from the launch of the law, articles presented in the events between 2000 and 2008 and face-to-face interviews. Our results demonstrated the importance of technology development and knowledge creation for gaining competitiveness on the global arena and the need for a systematic approach for transforming the created know-how into economic and social benefits. & 2009 Elsevier Ltd. All rights reserved.
Keywords: Renewable energy SWOT analysis Energy policy
1. Introduction The European Union and the world are at a cross-road concerning the future of energy. Climate change, increasing dependence on oil and other fossil fuels, growing imports, and rising energy costs are making our societies and economies vulnerable. The European Parliament in Renewable energy road map (2007) stated that these challenges call for a comprehensive and ambitious response, and therefore the European Union commitments are very clear. Climate change and energy are at the top of the political agenda and in a fully integrated approach. The 20% energy efficiency; 20% renewables and 20% greenhouse gas emissions targets demonstrate their commitment to deliver on their existing targets but also go further in looking at the medium term agenda. Moreover, the European Strategic Energy Technology Plan presented in November aims to speed up the innovation of low carbon technologies by focusing on more joint planning (Euractiv, 2007). Additionally, on 23 January 2008 the European Commission put forward a far-reaching package of proposals that would deliver on the European Union’s ambitious commitments to fight climate change and promote renewable energy up to 2020 and beyond. The ‘‘Climate action and renewable
Corresponding author. Tel.: +90 232 343 44 00; fax: +90 232 374 42 89.
E-mail address: [email protected] (M.S. Celiktas). 0301-4215/$ - see front matter & 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2009.06.061
energy package’’ set out the contribution expected from each Member State to meeting these targets and proposed a series of measures to achieve them (Climate Action, 2008). Although, Turkey is endowed with a significant amount of renewable energy sources (hydro, wind, geothermal, solar power and biomass) potential (Fig. 1) and renewables are the second largest domestic sources for energy production after coal, the current Turkish electricity model is unsustainable and the country is overly dependent on imported fuel. Turkey depends on energy imports to an even bigger extent than the European Union. Currently, Turkey imports about 70% of its total energy needs. About 25% of its electricity is generated from hydroelectric power plants (MEMO/07/219, 2007). On the other hand, the energy produced from renewable sources has reached to the amount of more than 10.8 Mtoe which is 11% of the total primary energy sources in 2006 and 10.2% in 2007. Renewable energy supply in Turkey is dominated by hydropower and biomass. More than two-thirds of renewable energy supply is biomass, mostly wood and animal wastes that are almost exclusively noncommercial fuels. They are mainly used in the residential sector for heating. The remaining one-third of renewable energy supply is predominantly hydropower. The contribution of wind and solar is limited but expected to increase rapidly. The large potential of Turkey in geothermal, wind and solar have not been systematically developed until recently. In 2007, their combined share in total primary energy supply
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Fig. 1. The potential of Turkish renewable energy resources (MW).
was only 1.5% (AEA, 2009). All these data suggest that Turkey can reduce its dependence on fossil fuels by utilizing its renewable energy resources. Turkish researchers (Utlu and Hepbasli, 2009; Ozturk et al., 2009; Demirbas, 2008; Erdogdu, 2008; Kumbaroglu et al., 2008; Kaya, 2006; Ozturk et al., 2004; Arikan and Kumbaroglu, 2001; Dincer, 2000) have made important contributions to shape Turkish energy policies. However, a significant gap was identified in all renewable energy sub-fields in terms of ‘‘policy development’’ which is a vital issue for the development of renewable energies (Celiktas et al., 2009). Therefore, the objective of this paper was to evaluate renewable energy policies and regulations with a special focus on policy, market, technology and social dimension by conducting a strengths, weaknesses, opportunities and threats (SWOT) analysis.
2. Methodology and renewable energy parties SWOT is an acronym for strengths, weaknesses, opportunities and threats. SWOT analysis, is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities and threats (Hill and Westbrook, 1997). Within SWOT analysis, the strengths and weaknesses are seen as internal factors which are controllable, and can be acted upon. The opportunities and threats are external, uncontrollable factors. These form the external environment within which the organization operates and may include demographics, rates of interest, changes in legislation, etc. (Hatton et al., 1992). The technique is credited to Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from Fortune 500 companies (Saaty, 1987). It is the opinion of some that for a company which desires to grow, the objective appraisal of strengths and weaknesses should be high on the list of necessary activities (Ansoff, 1956; Cordiner, 1956; Leavitt, 1965). SWOT can be used for the analysis of internal and external environments in order to attain a systematic approach and support for decision making and, if used correctly, it can provide a good basis for successful strategy formulation (Jackson and Dutton, 1988; Schmoldt and Peterson, 2000). Various SWOT quantitative analysis methods were summarized, including External Factor Evaluation (EFE) Matrix and Internal Factor Evaluation (IFE) matrix. Kurttila et al. (2000) and Stewart et al. (2002) combined the Analytic Hierarchy Process (AHP) with SWOT to provide a new hybrid method for improving the usability of SWOT analysis (Lee et al., 2006). In the SWOT analysis, available resources and their potential utilization are studied from the
viewpoints of economic, ecological and social sustainability (Bradshaw and Boose, 1990). Most of the literature concerning SWOT analysis is found within the field of strategic management (Hill and Westbrook, 1977; Brownlie, 1999; Lee, 2006; Terrados et al., 2007). In this study, different information gathering strategies have been applied for the analysis of Turkish renewable energy technologies, market and policies. A different technique has been developed for analyzing all segment applications, named as quadratic helix approach formed by eliciting the opinions of previously identified academicians (Celiktas et al., 2009), policy makers and politicians, industrialists and representatives of civil society organizations, operating in the field of renewable energies. First, all statements and press releases published in the newspapers by all Turkish renewable energy parties starting from the launch of renewable energy process of law till today (May 2005–February 2009) were gathered and screened. Second, all articles presented in the events between 2000 and 2008 were collected and evaluated. Finally, face-to-face interviews were conducted with all the parties determined within the quadratic helix. A number of trigger questions were used during face-to-face interviews and for formulation of the output elicited from the screening studies.
3. 3. Results and discussion In this study, the SWOT analysis method was used to analyze the current situation of Turkish renewable energy electricity market and to formulate strategy for raising reciprocal satisfaction in the market and guide to new regulation approaches. A large number of different opinions were gathered from different parties which were researchers, nongovernmental organization representatives, governmental officers and industrialists totaling to 288 (Fig. 2). Among these, 58% were researchers, 27% industrialists, 9% governmental officers and 6% representatives of nongovernmental organizations. Technological issues were evaluated under the grouping of ‘‘state of the arts’’ and social and economical trends were analyzed under the grouping of ‘‘trends and vision’’ in SWOT analysis as a structural approach (Table 1). The data gathered were classified and presented as segments. Existing laws and regulations were considered in ‘‘policy’’. While the trends in the ‘‘market’’ were presented, technological level was assessed and provided in the segment of ‘‘technology’’. Additionally, the creation of social reflexes was explored in regards to ‘‘social dimension’’ (Table 2). 3.1. Policy (law and regulations) The first renewable energy law concerning the use of renewable energy resources for the Generation of Electrical Energy Law
Fig. 2. Distribution of face-to-face interviews.
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Table 1 Trigger questions formulated for the SWOT analysis. State of the arts ‘‘Strengths’’
Which renewable resources and technologies are presently
‘‘Weaknesses’’
Trends and vision ‘‘Opportunities’’
industrially used in the corresponding sector? What are their technological and socio-economic advantages?
What are the actual technological and socio-economic
How can R&D opportunities in renewables (new development of renewables, scientific breakthroughs) solve the existing problems and improve the existing weaknesses of products?
‘‘Threats’’
barriers to be overcome concerning products and applications in the corresponding sector?
What are the threats/risks linked with the new opportunities; technological, market and socio-economic risks?
Table 2 SWOT analysis matrix. Segments Policy (laws and regulations)
Strengths
Economical value
Market
Liberalization(Law
Technology
added Sustainable & secure energy Economical development Contain incentives Geostrategic location Gaining competitiveness EMRA Other good samples Reducing greenhouse gas emissions
no:4628 and 5346) Reliable Resources Price and purchase guarantees Improvement efficiency Energy bottleneck Foreign interest Being development country Kyoto sign
Improving R&D
Studies Improving Renewable energies Creating technological platforms Access of technology records Traceability
Weaknesses
Opportunities
Technical infrastructures Uncontain hybrid systems Lack of energy investment policy Uncovered all renewable Price guarantees Networking of stakeholders Coordination action Energy future perspective Wrong modeling of future energy demands Action plan-No clear strategic direction Polluter pays -principle
Being the first law and
Cost competitive Fixed price for all renewable Sectoral network Purchase guarantees Transparent regulations Comprehensive roadmap (The absence of a strategic energy technology roadmap) Proprietary technology Adequate financial resources Vulnerable to competitive pressures
All renewable energy technologies Patents and rights Qualified human resources Know-how Energy technology policy Scientific studies for potential Access to economies of scale Product innovation abilities Falling behind R&D
Using efficiently potential
revisible Provide oil independency Current account deficit EU Regulations Kyoto sign Obselete facilities (out of farming land)
Sustainable development Creating new sectors Energy farming Effective use of resources Carbon trade Energy costs Energy demands (annually %7-8) Exploit new market segments
resources Establishment of new R&D SMEs Govermental supports for R&D
Threats
Nuclear energy investments Forest field Application procedure for licensing
Political stability
Unproven technology
transfers Know-how High investment cost Natural Gas negotiations International enterconnections Financial instability or stagnation Political instability Forex market fluctuation for investments
Lack of knowledge Absence of novel production process
Experience Production stability(windsolar)
Political instability Lack of managerial depth and talent
Monopoly of leading core technologies & Firms Social dimension
Preventing
immigration Creating new jobs Economic development Rural development
Non eligible investment costs Consumer conscious Governmental support
(Law no.: 5346, 2005) was adopted from EU regulations on 18 May 2005 in Turkey. The purpose of the Law was to expand the utilization of renewable energy resources for generating electricity in a dependable and economic manner, to increase the
Sustainable environment Public health Protecting environment
Political instability
and natural resources
Social Costs Demographic changes Synergy effect
diversification of energy resources, to protect the environment and to develop the related manufacturing sector for the realization of these objectives. Renewables were defined in the Law as generation facilities based on wind, solar, geothermal, biomass,
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biogas, wave, current and tidal energy resources, hydrogen energy and canal and river type hydroelectric generation facilities and hydroelectric generation facilities with a reservoir area of less than fifteen square kilometers. The Law also included price and purchase guarantees for electricity generated from facilities having renewable energy resources certificate granted by Turkish Energy Market Regulatory Authority, a certificate entitling the holders to benefit from the incentives under the Law. The procedures and principles regarding the issuance of this certificate were specified in a regulation, published in the Official Gazette on 4 October 2005 (Law no.: 5346, 2005). Bagdadioglu and Odyakmaz (2009) reported that the applicable price for electricity energy purchased in pursuance of this Law in each calendar year should be the average wholesale electricity price in the previous year determined by Turkish Energy Market Regulatory Authority. Turkey has reached an opportunity and generated a new field to create added value by the launch of the law in the renewable energy sector. An increase in economical development is foreseen because of the huge potential, the country possesses in renewable energy resources (Bilgen et al., 2008) and its geostrategic position. Lack of long-term energy investment policies and action plans and additionally inappropriate future energy projections (Benmayor, 2008) increased the uncertainty in investments. Furthermore, weaknesses in sectoral planning, technical infrastructure and lack of environmental investments to fulfill polluter pays principle were elicited to be important factors. Although, some other weaknesses were also encountered such as excluding hybrid systems and providing equal price guarantees in all renewable energies regardless of the state of art in technology, there was a common belief that corrective actions would be taken in the time being to compensate such weaknesses. The interest in renewable energies was expected to increase as a result of the incentives provided and access to renewable and safe energies would be possible by the investments realized. Additionally, a more competitive structure would be created among all sectors by exceeding the critical mass in investments. Good practices reported in European Union (Ringel, 2006; Walker, 2008; Dutra and Szklo, 2008; Munksgaard and Morthorst, 2008; Gorensek and Forsberg, 2008; Yudego and Pelkonen, 2008; Leonardo, 2008; Barbose et al., 2008; Papadopoulos and Karteris, 2009; Diomand, 2009; Nemet, 2009) were regarded as positive indicators for the implementation of this law in Turkey. Moreover, nongovernmental organizations had provided full support because of the environmental friendly aspect of the law. The major opportunities were identified to be independency in oil and consequently, a decrease in current account deficit. Signing the Kyoto protocol was regarded as a positive approach. Regulations to be fulfilled and implemented during the European Union accession period were considered to have high significance. On the other hand, application procedures for licensing, nuclear energy and political instability were perceived as threats. Approvals of licenses were mentioned to require considerable amount of time and subsequently acquiring loans for investments were stated to be troublesome. In a report prepared for Turkish Industrialists and Businessmen’s Association (Bas and Ulgen, 2008), it was stated that unpredicted obstacles were faced during the legal approval process, which in turn created barriers for the investments. As for nuclear energy, although the Turkish Akkuyu nuclear power plant project with a capacity of 3000 MW was delayed in 1999 and cancelled in 2000, the Turkish government now, however, plans three nuclear plants with a total of 4500 MWe by 2015. The first units will probably be built at Akkuyu because the site already has a license. The Turkish Constitutional Court in March 2008 rejected a request to cancel
the plant, leaving the way open for companies to tender (World Nuclear Association, 2009). 3.2. Market Turkey is among the world’s fastest growing energy markets. Average annual growth rate for electricity demand has been over 8% and is expected to continue in the next years but the capacity is not (TEIAS, 2009). Such a huge demand in growth rate increases the magnitude of investment for Turkish power sector, which is apparently beyond the financing capability of the public sector. The annual development of Turkey’s installed capacity is given in Fig. 3. The current installed capacity has reached 40,835 MW, therefore, a capacity increase of approximately 3500 MW is required in order to attain a correlation between the annual growth rate and the installed capacity. Otherwise, increased energy consumptions and the demand in parallel, will create an energy bottleneck. This was one of the main drivers behind the power sector liberalization process. The ‘‘Electricity Market Law’’ enacted in March 2001, enabled progress into a liberalized electricity market providing fair and transparent market regulations (Erdogan et al., 2008). Hence, it would not be irrational to name the renewable energy market so-called before and after the law. Annual development of Turkey’s installed capacity can be seen in Fig. 4. Installed capacity in renewable energies excluding hydroelectric was 35.1 MW until 2005, whereas it has reached 362 MW after this date (Gunaydin, 2008), boosting 10-fold. Turkey has already
Fig. 3. The annual development of Turkey’s installed capacity 1913–2007.
Fig. 4. The annual development of Turkey’s renewable energy installed capacity (1913–2007).
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taken major actions to bring its legal framework in line with the European Union energy acquisitions, in particular regarding the conditions for trade in electricity and gas (MEMO/07/219, 2007). The law provided a purchase obligation for retail sales companies for the electricity generated from renewable energies. Additionally, the Kyoto Protocol approved by the Turkey’s parliament on February 5, 2009 has also given a confidence to all investors. Therefore, price and purchasing guarantees have been perceived as appetizers. Investors were encouraged with reliable resources such as solar, geothermal and wind, which in turn, increased both local and foreign investments. According o face-to-face interviews, major investments and developments are expected in the solar energy field, while the only improvement is the demonstration plants having a capacity under 1 MW for the moment. According to world wind energy report (WWEA, 2008), an important indicator for the vitality of the wind market was the growth rate in relation to the installed capacity of the previous year. The growth rate went up steadily since the year 2004, reaching 29.0% in 2008, equaling to an increase rate of 61.2%, which is another indicator of increase in investments. Almost all participants have mentioned the major weakness of the renewable market as not being cost competitive with fossil fuels and nuclear energy. Lack of trained labor and sectoral network except the national photovoltaic technology platform, absence of a strategic energy technology roadmap and some financial problems were identified to be weaknesses. As for opportunities, renewable energy industry will create new sectors, and consequently new jobs. According to the Greenpeace report (2008), over 2.4 million jobs globally were created in the renewable energy sector. Around 1.1 million of the jobs were in biofuels productions. A report by the University of California (E2, 2007) stated that the renewable energy sector generates more jobs per megawatt of power installed, per unit of energy produced, and per dollar of investment than the fossil-fuel-based energy sector. Every $100 million invested in the renewable sector creates 2700 new jobs. The report estimated that additional investment between 2007 and 2010 would be between $14 billion and $19 billion, which would create between 400,000 and 500,000 new jobs. Another opportunity is the implementation of energy farming. The main drive is to facilitate the implementation of the energy system in rural and undeveloped areas. Effective use of resources, carbon trade, exploiting new market segments, energy demand and energy costs were also listed as opportunities for renewable energies. One of the threats for the market was elicited as unproven technology transfer. Indian and China type biogas reactors were constructed in some regions of Turkey which turned out to be failure as the temperature of the reactor could not be kept stable (Kaygusuz and Sari, 2003). Because of the unproven technology transfer, the development of biogas sector remained premature. Economical sustainability of renewable energies is closely related to the interest rates of the loans and the payback period. Hence, the high investment costs were perceived as a threat by the respondents. On the other hand, inevitable fluctuations in the forex market as a consequence of political and economical instabilities and also natural gas agreements and international interconnections were recorded as threats.
2005). Focusing on some of the indicators for Turkey, it is necessary to mention that the share of GDP in R&D expenses has doubled between 1998 and 2007 from 0.37% to 0.71% (Fig. 5), The increase in R&D financing during the last 10 years has raised hopes for the development of renewable energy technologies (Yetis, 2009). Ease of access to the existing knowledge was attained by the technological developments in information technologies. Furthermore, traceability and access to technology records have been improved with the establishment of Technology Transfer Offices in Turkey, which in turn created positive expectations for more diverse and technologically competitive renewable energy sector. For the moment, Turkey cannot compete with the developed countries except in the field of solar thermal panels. On the other hand, implementation of a national renewable energy technology is forecasted to take a considerable time because of the lack of know-how and product innovation abilities. Although, the number of full time equivalent R&D personnel has increased 2.2-fold between 2002 and 2007 (Fig. 6) and domestic patent filings and grants increased 4.4-fold during the same period (Fig. 7), qualified human resources, patents and potential scientific studies were reported as weaknesses particularly considering the renewable energy technologies. Furthermore, the Law’s enumeration of renewable energy resources lacks flexibility in terms of technical developments in the future and, thus, it may be argued that technological aspects should have been included. Finally, in its 2005 Progress Report concerning Turkey, the European Commission criticized the Law for not setting a target for electricity generated from renewable energy resources by 2010, as foreseen by the relevant European Union law. Insufficient research infrastructure and absence of know-how for R&D and novel production technologies, lack of experience and managerial talents and political instability were noted as threats at national level. Even though, the budgets of R&D projects financed via national funds are quite small, international cooperation is sought not only in funding but also for knowhow exchange (Kaya, 2006). On the other hand, the monopoly of leading companies and core technologies particularly in the fields of solar and wind energy were perceived as threats at international level. Although, efficient use of potential resources, governmental supports for R&D and establishment of new R&D small and medium size enterprises (SMEs) were noted as opportunities, respondents mentioned that these would not be sufficient to overcome the identified threats. As a result, opportunities in technology segment were reported as the weakest chain of the whole study. The Minister of Energy and Natural Resources (2008) also emphasized the importance of technology diffusion which may reduce the costs in the long term.
3.3. Technology Exploring the interrelations between science and technology is essential and the contribution of scientific knowledge to technological developments has been stressed in many fields (Hassan,
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Fig. 5. The gross domestic expenditure on R&D (GERD) as % of GDP*.
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Fig. 6. The annual FTE* personnel.
Fig. 7. Patent applications from Turkey.
3.4. Social dimension Social dimension was the final segment investigated in this study which is an important pillar of the quadratic helix and aims at making a contribution for analyzing the impact of renewable energies. Sustainable development within a society requires a supply of energy resources that, in the long term, is readily and sustainably available at reasonable cost and can be utilized for all required tasks without causing negative societal impacts (Kaygusuz and Kaygusuz, 2002). Renewable energies were expected to enhance rural development by energy farming and prevent immigration by the launch of new jobs, thereby creating a remarkable social impact. Additionally, utilization of energy from local resources would strengthen regional development which is in accordance with the findings of Rio and Burguillo (2008). The authors stated that renewable energy sources have a large potential to contribute to the sustainable development of specific territories by providing them with a wide variety of socioeconomic and environmental benefits which include diversification of energy supply, enhanced regional and rural development opportunities and creation of a domestic industry and employment opportunities. However,
when compared with conventional fossil-fuel technologies, the benefits of renewable technologies were seldom internalized (Caldes et al., 2009). On the other hand, noneligible investment costs, lack of consumer conscious but more importantly lack of governmental support for end-users in terms of both generating their own energies and selling excess amounts were reported as weaknesses. For instance, although biomass fuels market already existed including rural areas, a large number of people generated income through the trade of wood and wood residues primarily for cooking purposes. Thus, policy gaps with regards to the supply side of wood fuels from both forest and nonforest sources need to be bridged (Kaya, 2006). Therefore, the governmental support is very significant. While political instability was perceived as the only threat, considerable number of opportunities was identified. Possession of a sustainable environment was interpreted as a significant impact on public health. Renewable energies were regarded as an opportunity when considering the negative impact of thermal power plants on the environment and the public. In community terms, renewable energy is almost entirely positive, bringing employment, support to farm communities through land rents, clean industries and funds for local projects. Expansion of renewables, in particular further development of onshore wind, hydro and energy crop biomass, which are all linked to rural areas, is therefore very positive. The greatest expansion is likely to be in biomass which impacts on less remote rural areas. Lessons can no doubt be learned from existing projects about how best to involve local people and ensure that they share in the benefits of expansion of the technology (K/BD/00291/REP, 2003). Consequently, synergistic effects were expected to result in demographic changes and improved wealth also at the other segments of the society by creating a multiplier effect.
4. Conclusion This study analyzed the current situation of Turkish renewable energy electricity market by performing a SWOT analysis. Systematic operation of the whole institutions and mechanisms required carrying out scientific and technological research and development activities and transforming the results of those
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activities into economic and social benefits would enable successful implementation of renewable energy law. The results emphasized the importance of technology development and knowledge generation in order to compete on the global arena and reach economies of scale so that the social dimension could be fulfilled as well.
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