By 2023, the centenary of the foundation of the Republic of Turkey, President Tayyip Erdogan wants to send a mission to the Moon. This is one of his grand projects, aimed at placing the country on the map as a global power. Building the biggest airport in the world and the Istanbul Canal, or a second Bosporus Strait, are among the others.
Being an energy hub is also part of that ambition. Turkey likes to boast that with 73% of global oil and gas reserves situated in the countries around it, all energy roads should naturally lead to Ankara.
However, there are two complications.
The first is geopolitical. Turkey’s accession to the EU is frozen. The country started the lengthy process of integrating into the EU more than 60 years ago with its application to the then European Economic Community. However, relations between Brussels and Ankara have deteriorated, with any possibility of Turkey joining the EU firmly out of reach, at least for the time being.
Since 2018, the EU-Turkey relationship has hit a new low with the dispute over access to the Exclusive Economic Zone of the Republic of Cyprus. The European Council has been strongly critical of Turkey, although at its last meeting in March 2021, it softened its position. EU leaders welcomed “the recent de-escalation in the eastern Mediterranean through the discontinuation of illegal drilling activities, the resumption of bilateral talks between Greece and Turkey, and forthcoming talks on the Cyprus problem”. Nonetheless, tensions are likely to persist.
The second issue is technological. With a greater role for renewables and liquified natural gas (LNG), more gas pipelines are unlikely to help transform Turkey into an energy hub. The EU’s gas demand will continue to decline in line with its target to reduce CO2 emissions by 55% by 2030 and to reach climate neutrality by 2050. Moreover, the bloc already has more LNG capacity and pipeline import infrastructure than it needs.
Reducing dependence on Russia
One of the main drivers of Turkey’s energy policy is its ambition to reduce its dependence on politically unpredictable suppliers, mainly Russia. Ankara has tried to balance out this dependence with coal. However, even setting climate change aside, this is not a long-term solution. The country imports 58% of its coal (in calorific value), the fuel is not that cheap and its price will only increase if the EU, Turkey’s main trading partner, introduces a carbon penalty under its proposed Border Carbon Adjustment Mechanism. Ankara needs a different solution.
Renewables are part of the answer. Next year Turkey is expected to reach 100GW of installed power generation capacity. A major part of the increase will be renewables – the country already has more installed renewable power generation, (including hydro) than fossil fuel capacity. In 2020, the country added nearly 5GW of renewables. It plans to add another 10GW of solar and 10GW of wind this decade, targets that will most likely be exceeded as a result of falling costs.
At the same time, Turkish gas demand has, for the last ten years, stayed relatively flat and primary energy consumption is set to fall by 14% by 2023 thanks to a $11bn National Energy Efficiency Action Plan.
Focusing on clean energy
The complicated relationship between Turkey and the EU would be helped if both sides succeeded in separating out questions around the energy transition from the stalled accession process and Turkey’s recent drilling in disputed waters off the coast of Cyprus.
Achieving this would require some high-level surgical diplomacy, but it is not entirely impossible. There are many reasons to set up a new EU-Turkey energy transition platform. Turkey and the EU need each other for their energy transition and energy security objectives.
As increasing amounts of renewables come online in the EU and Turkey, both would benefit from a wider integrated market that could help balance variable solar and wind generation. Cross-border electricity infrastructure capacity needs to expand. Turkey’s current two interconnectors with Bulgaria and Greece limit trading opportunities. It would be wise for Turkey and the EU, or at least the EU’s south-eastern members, to start a discussion on expanding cross-border capacity.
Energy demand and supply forecasts is another important area. Turkey is still a net importer of electricity from the EU, but this is changing. With its ambitious gas, nuclear, renewables and energy efficiency policies, Turkey might soon start generating a significant electricity surplus.
This electricity could pile up on the EU border with major impacts on the Greek, Bulgarian, Romanian and other European markets. Cheaper Turkish electricity is likely to start outcompeting that generated in the EU and could undermine plans for new capacity. There is hardly any discussion about possible consequences for power prices and return on investment in the energy sector in the region. Simply restricting Turkish exports by limiting cross-border capacity is not a sensible approach.
Officials should bear in mind the need to increase cross-border capacity when they revisit the EU Projects of Common Interest (PCI) list later this year. It currently includes Turkey with one gas project. It would help if Turkey became a full member of the European Network of Transmission System Operators for Electricity (ENTSO-E). EU countries in the region and Turkey should start discussing the further integration of their electricity markets, including market coupling.
The EU will find it more difficult, and more expensive, to reach its 55% goal without closer cooperation with its neighbours. It is unclear how the Carbon Border Adjustment Mechanism will work, but it would certainly be more effective if developed in close cooperation with key trading partners. An EU-Turkey clean energy platform could help advance this debate.
Turkey recently protested against another European PCI, the EuraAsia interconnector, an HVDC submarine cable that should link Israel, Cyprus and mainland Greece. This is a relatively sensible project and it would be reasonable to try to include it in discussions with Turkey.
The supergrid or ‘Electricity Highways‘ vision neglected by the EU in recent years should be put back on the agenda. Turkey would be a useful partner in this discussion. Expanding electricity highways into the country would enlarge the European electricity market, bring more clean power to Europe and help balance out the variability of wind and solar generation.
Cooperation on the financing of clean energy – including offshore wind and hydrogen – research and development, and green transport corridors for rail, road and sea should also be on an EU-Turkey agenda. The European Commission, the Energy Community, and the Central and South Eastern Europe energy connectivity group could play a key role in this process. It should not be focused on isolated single projects, but become a politically supported platform with a strong role for transmission system operators and ENTSO-E, regulators, traders and investors.
In December 2020, the European Council reaffirmed “the EU’s strategic interest in the development of a cooperative and mutually beneficial relationship with Turkey”, insisting “the offer of a positive EU-Turkey agenda remains on the table”.
Whether an EU-Turkey energy transition platform could feature on this agenda is a matter of interpretation and political will on both sides. Yet a joint energy transition plan could help meet the Council’s call to “keep channels of communication between the EU and Turkey open”, while helping both sides meet economic and environmental goals.
Whether wisdom prevails over deep-seated emotions and ideologies remains to be seen.
The views expressed are those of the author and do not necessarily reflect the position of Energy Monitor.
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