2023 Forecasts For Turkish Energy Markets – OpEd
At the end of each year, Energy Analysts are expected to make projections for the next year. Economists make forecasts, social scientists make political forecasts, we energy analysts make energy forecasts. Some of these predictions hold, many do not. For Energy Markets employees, since 2013, at the end of each previous year, I make predictions for the next year. What is written here is purely the personal opinions of your author. In the following year, many things happen that affect the markets. The political preferences of the political administration change. May 2023 Turkish General elections are approaching, optimistic economic, financial and political policies come into play before the election, and domestic and foreign politics inevitably give different directions to economic events. We all need to make short-medium-long-term forecasts in order to manage our business and direct investments. Together, we draw a forecast for the next year, then we make corrections in our forecasts according to the events that developed during the year.
Electricity production-consumption increased by +7% in 2022 compared to the previous year. Fossil fuel consumption remained almost the same due to rising prices. The prices of fossil fuels almost doubled, sometimes tripled, prices fluctuated. It was impossible to give a long-term price. Due to the Ukraine war and the Covid-19 outbreak, current events have developed so much that I had to renew the article many times.
Since the beginning of 2020, we have been faced with the new Covid-19 virus epidemic that occurs once in a century. We, 65+ years old, have been closed for a long time in the spring and autumn of 2020. The effect of the Corona pandemic seems to have eased now. However, even if we are protected from Corona infection, old age diseases such as heart, diabetes and osteoporosis started to hit us all. Sudden heart attack cases have increased dramatically all over the world. Mask-hygiene-distance gained importance. Then came the mutations, Delta from India, and then the Omicron variant from South Africa. We got two doses of Sinovak, then two doses of Biontech.
Istanbul Atatürk Cultural Center opened, I watched many concerts and operas. I was fascinated by the architecture. Ankara Presidential Symphony Orchestra’s new building has been opened, a wonderful Gewandhous design has been constructed, the audience take seats around the orchestra, the acoustics are great in the middle, the automatic entry-exit payment system in the underground garage allows the cars to be evacuated in a short time, we congratulate the architects of both great architectural works.
We have been at home again 24/7 for a long time, we have no other topic to talk about except the upcoming 2023 general elections, the Ukraine war and the Covid-19 outbreak. Although global wrong policies are implemented, late and incomplete decisions are made, and negative comments are made. Covid-19 epidemic adjusts every place, every administration, every country, forcing decision makers in the direction they should be. The number of people who use public transport is decreasing, the elderly do not leave their homes, they postpone their health needs, they postpone their doctor’s appointments, they go out with their own cars, the roads are in a traffic jam.
Payments to other investment projects were delayed due to the fear of the epidemic. Limited resources were directed to city hospitals, funds were provided for unfinished hospital constructions, and construction was accelerated. Istanbul Anatolian Başıbüyük and Başakşehir City Hospitals on the European side, Ankara Etlik City Hospital were opened rapidly. Ankara Bilkent City Hospital has become a specialist center on pandemics. Hacettepe Ankara TIP İbniSina hospitals specialized in treatment. Domestic production ICU (intensive care units), medical ventilator mass production accelerated, health personnel needed by new hospitals were recruited from the young staff of old hospitals, family physicians were appointed, and financial support was given to the construction of “city hospitals” in all provinces. The herd immunity advantage of the young population came into play. There are still anti-vaccine opponents, it’s probably too early to say right or wrong. The possibilities for the vaccine to make other conflicts arose. Even vaccine manufacturers cannot give absolute guarantees. Before we get vaccinated, the risk is mine, they have us sign the papers. With the Biontech vaccine, the spread of the pandemic has visibly decreased. Cases began to be seen mostly among those who were not vaccinated.
Protection, mask, hygiene, distance measures were very effective. Being outdoors in the summer has activated the distance measure.
Oil prices in the world have risen to 80-90 US dollars per barrel these days. There has been a huge increase in natural gas prices all over the world. Coal production conditions have changed. Local coal will no longer be extracted from underground mines so easily. Only to a limited extent mechanized unmanned underground mines can operate. Thermal power plants will be completely idle in the future.
Wind, solar, hydro resources, which do not require manpower, will gain importance. After Covid-19, we will return to completely renewable energy-oriented sources. Investments will quickly flow into renewable power plants.
GOP27 Sham-El-Sheikh meetings revealed the turnaround from fossil fuels. Fossil fueled thermal power plant investments will decrease over time. Renewable energy investments will increase rapidly. Global warming will be tried to be limited to +1.5C. The arrival of politicians and celebrities in their private jets to GOP27 meetings received a lot of criticism.
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The Ukraine-Russia war affected not only the neighboring countries, but the whole world. Europe stopped buying fossil fuels from Russia. It accelerated its renewable energy investments. The thermal and nuclear power plants that were closed have started to be opened again. In all western countries, there were decreases in electricity production and consumption in 2020-2022. In our country, it was announced that there was a minor change in energy production in 2022 compared to the previous year. Our electricity production is 334+ billion kWh, our installed power is 103+GWe in 2021, and our peak (maximum) energy draw is 55+GWe in August. By the end of 2022, our Natural Gas consumption will be 61+ BCM (billion Sm3), our lignite production will be 85+ million metric tons, our hard coal 1.2 million metric tons, our imported coal imports will be 50 million metric tons. Actual figures will become clear by the end of 2022. The relative decrease in production activities during the Covid-19 process has reduced the demand for electricity. We did not go on long journeys on the highways – we could not. Most retirees preferred to spend the winter in their summer cottage by the sea or in their country house in their hometown. They installed the stove, started the air conditioner, and had a combi boiler connected if there was natural gas. Houses in big cities remained empty. Cars waited for months in parking lots in front of the door. Petroleum consumption decreased. Due to the economic crisis, gasoline prices have increased non-stop.
The need for more electricity generation was only slightly reflected in the past 2022 due to the Covid-19 pandemic. We see stagnant electricity generation, investment, and very little renewal and rehab activity. New investments, environmental equipment ESP-FGD rehab investments are being made in the power plants that have been transferred to private companies with privatization, but it seems doubtful how effective they will be.
There is no longer financing for thermal power plants in international markets. There is no possibility to invest in new thermal power plants, no large-capacity equipment sales, no spare parts production. In 2022, the new imported coal power plant Hunutlu (Sugözü) with a capacity of 1320 MWe came into operation. Spot prices for imported coal have risen a lot, most of the imported coal-burning thermal power plants are waiting idle.
European and North American countries began to impose an embargo on Russia because of the Ukraine war. They stopped buying fossil fuels. On the other hand, Russia has started to give 20-30% discounts to countries that buy natural gas, coal and oil from themselves. The countries that benefited most from this price advantage were China, India and Turkey.
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In recent years, we have seen serious blockages in project financing. According to the latest reports of International Credit Rating agencies, it is difficult to say that we are in the position of “investment country”. Evaluation agencies, instead of making negative evaluations, stop evaluating difficult geographies altogether in such cases.
The oil barrel price has fluctuated in the 80-90 US$ band in the past year. There is Eastern Mediterranean gas, but how it will be transported is still on paper. It takes at least 4-5 years, maybe 10-years for the solution. Offshore studies continue for Black Sea natural gas resources. Russian natural gas is still too expensive for us, 1000m3 costs us $1000. Azerbaijan gas is more expensive. Iranian gas is cut for 1-2 months in order to meet its domestic market demand in winter. A TurkStream natural gas pipeline coming from under the Black Sea has been built, but it was later subjected to US sanctions. The 30 billion BCM gas that came to us cannot be sold to Europe. In the domestic market, natural gas is cheap in US dollars, but since the value of the US dollar against TL has increased so much, natural gas prices in TL have increased a lot. This winter, common expenses for heating fuel have exceeded the tolerance limits of the condominium owners.
Relaxing economic policies are expected before the 2023 election. These practices will increase inflation again in the long run.
Debt restructuring has been done in our energy market, and it will be done. Changes from private to private ownership may occur again in power plant properties. Our growth at the end of 2022 is expected to be stable at most, optimistic public projections indexed to the 2023 general elections are higher. Politicians believe that energy investments should increase more than the growth rate.
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Refractory deterioration, equipment and I&C system, synchronous failures are heard in cheap domestic coal-fired thermal power plants that are in operation. Plant availability is low.
There is a lot of ash in the West Anatolian local lignite coals, preheating is required to reduce the water, too much ash clogs the flue channels after the combustion chamber, too much ash comes out too much slag, to keep the ash A very big bag filter ESP and FGD are needed to hold the sulfur, to carry them to the ash dam It requires large water pumps, a large ash dam.
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There is not much willingness for other new thermal power plant investments in Afşin Elbistan, there are no serious investors. Far East Financing groups are on hold due to the pandemic and high fuel prices. They are in no hurry for new investments. They are assessing the situation to buy old facilities that have lost a lot of value.
Those started in imported coal power plant investment projects will end, but the political will has taken a clear stance on the use of imported coal, which increases and negatively affects the current account deficit. After all, imported coal investment is not recommended. Price of imported coal in the international spot market (South Africa, Colombia, Australia) has risen a lot per metric ton.
The news that the “Sinop Japanese project was cancelled” for the nuclear plant was published, then it was denied. On-site construction work continues for Akkuyu. Third nuclear power plant news came out, but no details were given. Long-term high price increases with purchase guarantees in nuclear energy give serious concerns to the markets.
More investment will be required in environmental equipment, clean coal technologies. In the near future, there will be a complete escape from coal all over the world, and a total cut off financing for fossil fuel power plant investments. While the critical target of energy strategies is economic growth, it is necessary to increase efficiency, reduce the increase in demand or keep it constant. We have a relative surplus at the moment, but this situation will not last long.
In addition, most of our excess energy supply comes from solar and wind farms that are not continuously produced, these power plants are not available 24/7. Renewable energy sources can only work 2000-3000 hours a year. If there is wind, sun and water available, then there is energy, otherwise there is no energy. Most of the time there isn’t. In other words, the availability of 103 thousand MWe installed power is only half of it. Hard times go, always be optimistic. Happy New Year.
