Özer: Unlicensed solar power plants should be licensed by adding storage

MEHMET KARA

Unlicensed solar power plants (SPPs) emerged as projects that paved the way for Türkiye's shift toward renewable energy sources in the 2010s. Offering a fixed-price purchase guarantee for the electricity they generate for the first 10 years, these unlicensed solar power plants have attracted considerable interest from entrepreneurs.

Today, investments in this group, with a total installed capacity approaching 7,000 MW, are gradually entering their 10th year. With the end of the 13.3 cents (in dollars) per kilowatt-hour purchase price, revenues from these power plants are declining rapidly.

Add to this the requirement to pay a system usage fee, which initially starts at zero, and some power plants are forced to shut down their power plants. Because increasing production not only increases profits but also increases losses.

The operators of these power plants suddenly witnessed their facilities transform from revenue-generating, or at least cash-flowing, assets into debt-generating assets. So, what will be the fate of these facilities? To answer these questions, we listened to a spokesperson for an association whose members include the individuals and organizations operating these facilities. Mehmet Özer, President of the Solar Energy Investors Association (Güneşder), answered questions from Enerji Günlüğü.

I think yours is the most recently established association in the solar sector. Why was Güneşder established and what is its position in the sector?

In fact, Türkiye's first solar energy association was the Güneşe Association. It was founded in 2017, and I was its founding president. But the Güneşe Association fulfilled its mission over the years. Many new associations were established, and we ceased operations at that time. However, in the last three or four years, solar investors have faced serious challenges, and other associations have generally focused on other issues. So, we established Güneşder, an association that represents investors and supports their relations with the public. Our biggest difference is that our association's goal is to ensure the healthy progress of solar investments in Türkiye.

So, don't associations like Günder and Gensed have the ability to represent investors in this sense?

Now, there have been many practices that have disadvantaged investors in the past. Other associations were not involved in any of these cases. They did not express any opinion. Therefore, the establishment of Güneşder was necessary. In other words, the other associations' goals were largely focused on expanding the market, increasing installations in Türkiye, and so on. But no one has ever addressed the rights of those who have invested in solar in this country and contributed to improving the investment environment. That's why we founded Güneşder.

So, are the problems the same today as when Güneşder was founded? Has progress been made, and what are the problems today?

The biggest issue at hand right now is this: Power plants that have been excluded from the YEKDEM system—that is, whose 10-year support period has ended—are now paying more for system usage and distribution than they generate, and they're operating at a loss. Because they're operating at a loss, these plants have begun shutting off their circuit breakers. A power plant shutting off its circuit breakers soon means even the salaries of the facility's security guards become a heavy burden. And eventually, these power plants are abandoned and become scrap metal.

Are these power plants that have completed 10 years?

Yes, those that have reached 10 years. But the economic life of a solar power plant worldwide is 30 years, and right now, in Greece, Italy, France, Germany, and Spain, there are plants that have been operating for 20, 25, or even 30 years. They're producing. They're continuing their economic life. In other words, a solar power plant isn't an investment that can be thrown away just because it's 10 years old.

How much installed power do the power plants you mentioned represent?

The power plants we've described have a capacity of 7,000 megawatts and 7 gigawatts. This represents a significant portion of Türkiye's installed capacity. We shouldn't squander such capacity.

What are the productivity levels of those who have been working for 10 years? I'm asking because technology has advanced so rapidly in the last 10 years.

Well-designed and installed power plants still have quite high efficiency. But of course, rational policy must ensure the continued operation of these plants. In other words, they need to be modernized. But I can say this: even if these well-built plants are over 10 years old, their efficiency is quite good and they are quite effective. Regardless, technology has advanced. In other words, it's actually possible to make these plants more efficient with small investments. This should pave the way, but it's not the only way to do it. The sector is currently experiencing concerns about whether existing power plants can continue to operate.

Isn't the system usage fee collected from unlicensed power plants available in other solar power plants?

The price charged for unlicensed power plants is 56 times higher than for licensed ones. Let's say you have a field and you're producing potatoes. You load your produce onto a truck to take it to market, and let's say a truckload of potatoes costs 10,000 TL. But the truck driver charges you 15,000 TL to transport them. So, this is the situation of an unlicensed solar power plant investor. Currently, they sell energy for 100,000 lira per month, but the distribution company bills them for 160,000 lira for system usage. In other words, the more electricity they sell, the greater the loss they incur. This is simply unacceptable.

Are those who have not yet completed the 10-year YEKDEM period in the same situation?

The situation I'm describing applies to those that have completed 10 years of service. But unlicensed solar power plants that have not yet completed 10 years also face very serious problems. So, the most important issue is this: Investors built these power plants by borrowing in dollars and using long-term loans. Of course, feasibility studies were prepared. Banks provided loans based on these feasibility studies. In other words, 99% of energy investments in Türkiye are currently made with bank loans. This is a long-term investment. Initially, the distribution fee was around 4%, but over time, the public administration increased this distribution fee to as much as 35%. Of course, the initial calculations don't match the current calculations, and some of these power plants are now unable to service their debts. No one could have predicted that a 4% fee would rise to 35%. And there's no other example of this anywhere in the world. In other words, such fees are either not collected globally, or in the countries where they are, they are charged 12%.

Shouldn't unlicensed power plants be expected to have amortized themselves over the 10-year support period?

Now, the joke here is this: Globally, these kinds of power plant investments aren't made for 10 years; they're made for 25-30 years. But the 10-year support is also meant to encourage investors. This is where the name of the renewable energy support mechanism comes from. Or rather, there's a renewable energy support law. The government tells investors, "Make this investment, and I'll buy your energy at this price for 10 years." But the investor goes into debt and builds the power plant. Right in the middle of the operating schedule, the system usage and distribution fees are increased disproportionately, by 10 or 12 times, putting investors in harm's way and putting them in a difficult position. In other words, this is truly unacceptable. There's a board decision on this matter that says, "We'll collect the distribution fee according to these principles, according to this formula for 10 years." But in the fifth year, you say, "I canceled it."

Are the investors who collect these individually built power plants, most of which have a capacity of 1 MW, and create larger portfolios in the same situation?

Of course, of course, exactly.

The share of solar electricity exceeds 20 percent some days. Would this share be higher if some power plants were not shut down?

Yes, there are power plants that are not operating at all right now. Some have completely shut down. Or some that are shut down during periods of significant loss. This is because electricity prices are normally determined hourly. The loss increases or decreases depending on the resulting market clearing price. What happens then? When electricity prices drop at noon, these power plants suffer even more losses. What happens then? These power plants shut down at noon. Or, for example, electricity prices drop on Sundays because industry shuts down. They don't operate on Sundays because they incur a complete loss. Some even switch off completely. In other words, they don't operate at all. Because this is no longer a sustainable operation. In other words, you can't even cover the cost of the security guards working at the plant. However, we're not the only ones in the world who have built these plants. Similar plants exist in Bulgaria, Greece, Italy, France, and Germany. And these plants produce for 20-30 years. Their technologies are updated, their efficiency is increased, and they are reused. In other words, these are actually important assets for the national economy. In other words, they must be used effectively.

But isn't it normal that as new, more efficient power plants are built, the old ones become strained?

There's essentially no difference in efficiency between a new power plant built in 2025 and a good one built in 2015. At most, there's a difference of maybe 1 percent. The only difference is the smaller land area in newly built power plants. In Türkiye, a 1 MW power plant produces an average of 1,600,000 kWh of electricity annually. A proper, high-quality power plant built in 2015 still produces 1,600,000 kWh, and a good power plant built in 2025 might produce 1,630,000 kWh. In other words, there aren't any differences that would detract from the competition between older power plants.

But the installation costs of new solar power plants are also low…

Yes, we used to build a 1 MW power plant on 20 acres; now, it's built on 12 acres. But this doesn't affect the cost of energy production to the same extent. It's not like we're generating 5% of that while newer plants are generating 3%.

You just say that the fixed investment cost was very high in the past...

Yes, of course. This is precisely why the support mechanism was put in place in the past. But now, these power plants, which are under strain, must be integrated into the national economy.

How can this be done? Do you have any suggestions for a solution?

We have two suggestions here. We've submitted them in writing to the Ministry of Energy and Natural Resources. As you know, industrialists are currently facing a significant challenge. They want to build power plants for their own needs. This is a perfectly reasonable request. However, they can't because the transformers lack the connection capacity. Meanwhile, there are the 7,000 MW power plants we call 5-1-C, the first to be built, currently in operation. These plants are becoming unviable. One of the suggestions we've submitted to the ministry is that if they change the offsetting method for 5-1-C power plants from hourly to monthly, like 5-1-h, these plants would benefit industrialists and alleviate their problems. This kills two birds with one stone. We prevent these power plants from going to waste, contribute to the economy, and offer industrialists the opportunity to generate the affordable electricity they need. We believe this is a highly sensible model that benefits the national economy.

But you are suggesting that a commercially struggling, worthless investment should be revalued and its owner should profit, and the feasibility of this seems a bit questionable...

Don't think that way now. I'll give you a real-life example. This is a medical doctor, my brother. He sold his $4 million worth of land in the city and, given the circumstances of the time, built a 4 MW solar power plant. He operated it for 10 years. Currently, the market value of his plants isn't $2 million. But the $4 million land he sold in Gaziantep 10 years ago is now worth $20 million. So, these are all energy investments today. People all over the world make energy investments with the expectation of a certain return. So, no one gets into this business expecting the investment to be wasted after 10 years, or expecting to get the money back after 10 years and then the matter will be over.

When you say that these should be made operable in a way similar to the 5-1-h model, are you suggesting this on the condition that they are used only for self-consumption?

Yes, yes, exactly.

You say that from now on, the “1 light bulb, 1 MW” criticisms of the past will no longer be an issue.

Yes, that won't happen. Since there's such a criticism, we propose a solution. We say, "Okay, then let's connect them to self-consumption, and the problems of industrial facilities will be solved. And these facilities shouldn't be littered."

So how do you connect it in practice?

It's very simple. Each facility has a consumption point. But the current problem is that these facilities use hourly offsetting. If these plants implement monthly offsetting instead of hourly, then industrialists can utilize them. It's also possible to connect an industrial facility to this through hourly offsetting. However, many industrial facilities don't operate between 12:00 and 1:00 PM. During these periods, when the solar power plant is at its maximum production, that energy is, so to speak, wasted by the operator. However, with monthly offsetting, industrialists can use the energy they generate during times when their solar power plant isn't producing, such as at night. Furthermore, many industrial facilities are closed on Saturdays and Sundays.

Isn't there such a problem with the 5-1-h model?

No, because there's a monthly offset. This means you can offset the energy you don't use between 12:00 and 1:00 p.m. with the energy you use between 8 and 9 p.m.

Okay, let's get to your other suggestions.

Last spring, Spain and Portugal experienced a major grid collapse. Looking back 15-20 years ago, electricity in Europe and the world was generated using dams, thermal power plants, natural gas, and coal. Nuclear power plants are also among these, and these are generally controllable sources. So, you turn the dam valve and cut off the water, and production stops, or vice versa; you turn the water back on and it starts. Coal and natural gas-fired thermal power plants can also be controlled. But now, in the last 20 years, a significant amount of renewable energy has been installed worldwide. Most of it is wind and solar. But the controls for wind and solar aren't in our hands; they're in nature. So, you build a 1 GW power plant in Konya or Karaman. That's great. But suddenly, a massive cloud comes in. 1 GW is suddenly disconnected from the grid within five minutes. Now, these same problems exist with wind. They make managing the grid more difficult. What's happening in Spain and Portugal is that the grid collapses because of poor management. The same risk applies to us. The Minister has also stated this. The solution to prevent this from happening is storage. If you have sufficient storage capacity in your grid, your national grid, you won't be hit by such shocks. You can compensate. Our other suggestion to the ministry is to license these unlicensed solar power plants, provided that a 1 MWh storage facility is installed next to them. They should be converted into licensed players and incorporated into the energy sector. In other words, these companies would sell energy at the daily or hourly price, bringing competition to the energy market.

So you are proposing a solution that will have multifaceted effects…

Yes, this is killing many birds with one stone. Ultimately, Turkey will gain 7,000 MWh of storage capacity. There are many companies investing in storage in Türkiye. This means creating significant business opportunities and employment opportunities for these companies. Furthermore, when these power plants are incorporated into the energy sector as licensed players, they will drive down prices in the overall energy market and create competition.

Do you offer both of your suggestions together or do you say whichever is preferred?

We're offering both. We're requesting that the Ministry implement whichever option it deems appropriate. Can both be implemented? So, let's say some power plant owners opt for storage, while others opt for 5-1-h. Those who want to remain unlicensed will switch to self-consumption and 5-1-h. Those who say, "No, I'll make an additional investment and become an electricity market player," will do so. All are possible.

So, do you have any other suggestions?

In other words, our biggest problem in this regard is that the fate of the 7,000 MW power plant in Türkiye is currently uncertain. While they belong to Company A, Company B, Ahmet, and Mehmet, they ultimately belong to Türkiye. All of these investors are citizens of this country. Therefore, these investments must be integrated into the economy and not squandered. Because these 7,000 MW power plants represent an investment of approximately $7 billion, based on average cost. As a country, we don't have the luxury of squandering this. Therefore, we maintain that integrating them into the economy is in the country's best interest.

Have there been any improvements since you made these suggestions?

It hasn't happened yet; we're waiting. The relevant deputy minister said they would conduct an impact analysis, and they're right. They will analyze what these implementations will lead to, what will happen, and what the positive and negative impacts will be. We've submitted our recommendations. We expect them to evaluate the issue and take action immediately. Because the reason is this: The unlicensed solar power plants installed in Türkiye in 2013, 2014, and 2015 account for only 500 MW of the 7,000 MW we mentioned. Therefore, this 500 MW is currently experiencing these problems. But next year, the number of power plants experiencing these problems will increase, and their total capacity will reach 2,500 MW. The following year, all 7,000 MW will be experiencing these problems. In other words, this problem will grow exponentially. Therefore, it's in everyone's interest to intervene immediately and provide a solution.

Mehmet KARA - Energy Diary