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Renewable energy supply agreements, also known as power purchase agreements (PPA), can help Türkiye expand clean energy capacity without government support and serve as a key financing tool in the country’s energy transition, according to a new report by SHURA Energy Transition Center.
The report, titled "Enabling Renewable Energy Supply Agreements in Türkiye," analyzes PPA's role in increasing renewable energy capacity through market-based mechanisms and presents policy recommendations for implementation.
"PPA stands out as a financing instrument enabling capacity expansion in renewable projects without public support," the report states.
Declining renewable energy costs have encouraged producers and private-sector buyers, particularly in the industrial sector, to sign long-term power purchase agreements.
These contracts provide financial certainty to investors and grant consumers access to low-emission electricity.
SHURA estimates that Türkiye could reach 360 GW in combined wind and solar energy capacity by 2053. PPA is seen as critical to financing this transformation and achieving the nation’s net-zero emissions goal.
Türkiye is projected to reach a total capacity of 360 gigawatts (GW) in wind and solar energy by 2053, with the PPA model expected to play a significant role in financing this transformation.
The PPA model, which stands out as a market-based financing tool that can increase capacity without public support, is projected to have critical importance in achieving Türkiye's 2053 net zero emission target. The report emphasizes that four fundamental areas require reform for this mechanism to become operational in Türkiye.
According to the report, improvements in the wholesale electricity sales market are recommended for the development of the PPA market, ensuring a market environment where price formation accurately reflects production costs, thus increasing market efficiency and reducing system costs.
The incompatibility between existing support mechanisms and PPA is identified as one of the biggest obstacles to the PPA market.
To overcome this problem, the report includes recommendations such as providing access to non-tendered capacities through PPA, creating dedicated connection areas exclusively for PPA projects, and converting unused tender projects to PPA.
The development of Turkish lira-based contract models and publicly supported guarantee mechanisms is recommended to reduce private sector risks in this area.
Additionally, the report states that confidence in the PPA market can be increased through support provided to consumers in energy-intensive sectors.
The report emphasizes that not only supply but also the demand side needs to be supported in expanding PPA applications.
In this context, it is stated that consumers should be directed toward these agreements through incentives such as exemptions from tax and market costs and renewable energy quotas for specific sectors.
The report suggests that for the PPA market to develop, the wholesale electricity sales market needs improvements to ensure price formation accurately reflects production costs.
This would increase market efficiency and reduce system costs, creating a more favorable environment for renewable energy investments. The analysis indicates that a comprehensive policy framework is needed to make PPA agreements more attractive to both producers and consumers.
The report recommends creating special connection areas exclusively for PPA projects and converting unused tender projects to PPA arrangements.
Energy-intensive sectors are identified as key targets for PPA implementation, with the report suggesting that targeted support for these consumers could boost market confidence.
The recommendations include providing exemptions from various taxes and market costs, along with establishing renewable energy quotas for specific industrial sectors.
The SHURA Energy Transition Center's comprehensive analysis positions PPA as a crucial mechanism for achieving Türkiye's ambitious renewable energy targets while reducing dependence on public financing mechanisms.
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