Low profits drive Turkish gas turbines to Africa

Low profits drive Turkish gas turbines to Africa

Merve Erdil - ISTANBUL

REUTERS photo

Many Turkish investors have started to dissemble gas-turbine power plants, which are no more profitable in Turkey due to the loss in Turkish Lira and lowering sector prices, and carry them abroad, mainly into Africa, according to sector representatives.

This trend may, however, put the future supply into risk, they warned. 

A loss in the lira’s value, lowering electricity and natural gas receipts and increasing electricity supply in Turkey have put pressure on the power industry. Amid decreasing profits, some producers have recently chosen to dissemble their gas-fired power plants and go to other countries that are in urgent need of increasing their electricity supply, like Africa. This may, however, create a danger over the future supply of the Turkish market, according to sector players. 

“Gas prices are high. Some power plants, therefore, cannot meet their operational costs, initiating a natural selection and carrying their power plants abroad. Some African countries show great interest in these plants. It is also very advantageous to carry them to Iran as natural gas is cheap there,” said a source from the Energy Markets Regulation Board (EPDK). 

The same trend is also the case of several coal-fired turbines, which produce high emission levels and use expensive fuels. 

African countries ‘offer purchasing guarantee’ 

Saying that some 44 percent of Turkey’s power generation is based on natural gas turbines, Sarempet Enerji General Manager Ali Rıza Öner added, “There is no chance for combined cycled power plants with a productivity level under 58 percent to be profitable all the year around, except some months when prices are higher, such as winter months. While independent electricity producers made their financing feasibility calculations on 7,200 hours at minimum, this figure decreased to 2,500 hours in the last two years. Many gas-fired power plant owners have therefore tended to take their plants abroad, mainly Iran, Kazakhstan and western African countries, amid high natural gas prices and low electricity prices in Turkey. Most of the African regions have an energy deficit and their purchasing guarantees constitute lifeblood for the secondhand power plant market.” 

Meanwhile, there are also non-functional gas-fired power plants in Europe due to a dramatic rise in the number of renewable power plants.

“In contrast to Turkey, some reserve capacity payment is made to such power plants in Europe so as to keep them revived in case of any need in the future. We don’t see similar payments in Turkey. There are many gas-cycled power plants in Turkey, including both gas turbines and gas engines. As gas engines have lower productivity levels than gas turbines, almost none of them are online now. Gas turbines’ productivity level is around 50 percent, but most of them have barely come online this year. We’ll close the year with 14 kuruş per kilowatt/hour in electricity price, although some of the power plants’ costs are around 17 kuruş. Such power plants have no choice other than being closed down…It is more feasible for them to be taken abroad, especially to African countries, some of which give purchasing guarantees up to 85 percent. This means the capacity costs are paid even if they go offline,” said a high level energy executive. 

Another sector representative said Turkey may face electricity shortage if the recent trend continues in the sector.