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Energy and Green Business Are Turkey's Promising Sectors with A Growth Potential

ImageBy Murat Yalçıntaş- As the President of the Istanbul Chamber of Commerce, one of the most important organizations representing the Turkish business community, I feel great happiness to address you once again in this issue of the magazine TURKOFAMERICA. On these pages, I will try to cover the options to increase the possibility f cooperation between our countries. The visit President Obama paid to Turkey within his first months of taking office was a turning point in the relations between Turkey and the United States.
From our point of view, the most important shift in the discourse was the words the President used in defining the relationship between the countries, words that added a new dimension to this relationship.

He did not stress a single area like “strategic partnership,” which is more commonly associated with military issues. Instead, he used the expression “model partnership” which shows that the two countries now understand each other much better and will henceforth cooperate in many more areas than they did in the past. For us, first and foremost among these is cooperation in commerce and technology. By this, I do not mean activities confined to buying and selling only. What I mean is cooperation in key and niche sectors with high added-value and large scale technology and know-how transfer.  

I believe that cooperation on this scale is very meaningful and important, especially at the time of continuing global crisis. Keeping in mind the contraction in global output, especially in the developed economies; the dramatic situation in conventional sectors such as automotive, textiles, and finance; and the loss of jobs which is expected to reach 25 million at the end of 2010; we suggest energy and related green business as the promising sectors with a growth potential.

BY 2030 ENERGY NEEDS WILL HAVE INCREASED BY 120%

According to World Bank data, unless we take a step forward in energy efficiency, by 2030, overall energy needs will have increased by 120 per cent and the primary sources of supply will remain the conventional (fossil fuel-based) sources of oil, natural gas and coal. The threat posed by the use of fossil fuels for environment and health, expressed in monetary terms, is over $5 trillion. Moreover, this forms the chain consisting of rising carbon dioxide emission values, global warming and a threat to life itself.

Along with the rest of the world, the energy needs of growing Turkey are increasing, as well. The monetary value of energy use is approximately $65 billion for the country. The projects initiated in the last few years are expected to bear their first results from 2012 on. Currently, of the total annual demand of app. 200 billion kWh, the private sector is able to meet less than 20%. Energy market experts claim that in order to meet the expected supply shortage, an additional investment in 25-30 GW is necessary in the coming decade, which corresponds to an investment of $35 billion. And it is estimated that until 2020, a total investment of $130 billion has to be made in the entire energy sector, of which $105 billion would go to electricity alone. The share of the private sector here is expected to be an investment of $3-4 billion a year.

TURKEY: ENERGY CORRIDOR
As you may be know, Turkey is now being characterized as an “energy corridor” thank to its geographical position and the nature of its neighboring countries. It holds a key position in transporting the oil and natural gas from the countries of the region, starting with Russia and Azerbaijan, but also including those of Central Asia, of Iran and Iraq, of Egypt, Syria, and Qatar to Europe. Pipeline projects kicked off with the Baku-Ceyhan pipeline in the 1990’s continued with the Blue Stream. Among the projects that are now either to be imminently signed or under construction are Samsun-Ceyhan, Blue Stream 2, South Stream, and the Southern European Gas Ring. Taking up NABUCCO alone, we see that it provides jobs to 5,000 people, involves an investment of €4.5-5 billion and brings in tax revenue of €400-450 million to Turkey alone, thus proving that such projects act as a stimulus to the economy even at the stage of construction. The construction of these projects is undertaken by gigantic consortia formed by local and international partners and financed by international organizations and thus offers considerable opportunities to our American friends.   
While these sources of energy will be the primary sources until 2030, the star of the future will definitely be renewable energy sources.

“GREEN REVOLUTION”
Industry is undergoing a revolution that nobody can afford to ignore any longer. The business world labels this the “green revolution”: an economy based on energy sources that are clean, renewable, safe, economical and sustainable rather than those based on carbon is on the agenda of all countries. Energy and reduction of carbon emissions top the agenda at fora such as the United Nations, the G-20, or the EU Summits; banks design credit lines for such investments; taxation penalties are envisaged for giants of the world economy that display a lack of concern for this area.

While being in a key position in the supply of conventional energy sources, as I already pointed out, our country offers a considerable potential in the area of renewable sources, as well, which attracts the attention of local and international investors. In our domestic production; natural gas ranks first in terms of installed power, followed by hydraulic sources of an installed power of approximately 14,000 MW. A glance at the totality of projects that are at the licensing or investment stages shows that hydroelectric and wind power stations are going to challenge the rule of fossil fuels. And when we look at the medium-term objectives of the firms in the sector, we see that, over time, they are planning to increase the share of renewable sources in their power generation. This is best indicated by the credit demands which are dominated by the projects on hydraulic as well as wind centrals.

RENEWABLE ENERGY LAW
Renewable sources are supported through laws and incentives in Turkey as in the rest of the world. In particular, the investment incentives and the purchase guarantees that the government provides through the Renewable Energy Law, enacted in 2007, instills confidence in banks and facilitates the extension of credit to firms that plan to invest in this area.

Many banks provide financing for such projects, either by lending from their own resources or through intermediation for international financial organizations such as the European Bank for Reconstruction and Development, the World Bank, the Council of Europe Development Bank, the French Development Agency, the German Development Fund, and the International Finance Corporation (IFC). The most significant among these is the credit line resulting from the agreement between the World Bank and the Ministry of Energy.  Alongside the ordinary criteria taken into consideration in the financing of a project, this requires an additional condition of strict compliance with environmental requirements.

Looking at the profile of companies that have entered this industry, we see, on the one hand, the energy groups of the top companies in Turkish industry and, on the other, small scale firms that have specifically been started for this industry and are at the beginning of the journey. One even comes up on enterprising individuals in the countryside who generate their own power through a system they have installed by their own means on a brook that flows through their plot of land. These tiny success stories make us happy by revealing the consciousness in the grassroots.

INNOVATIVE TECHNOLOGIES
As you are all aware, the world of science strives to generate innovative technologies aiming at a smaller consumption of resources in the provision of our needs for living and producing, technologies that will make it possible for us to harm the environment to a lesser degree. While the world of science had been working on this for decades, the business community has only recently grasped the importance of this and realized that without sustainable development, momentary profits and economic growth will not take us anywhere. Thus emerged green business. It is the name given to economic activities that pay attention to environmental concerns, sustainable growth and social well-being in the process of the growth of the economy. Hence, green business is a new business model and a new industry that insists on concepts such as clean technology, low carbon footprints, energy efficiency, renewable resources, eco-innovation and recycling.

GREEN MARKET GROWTH
Experts estimate the value of this “green market” at €1,000 billion. And by 2020, it is expected to reach €2,200 billion. The United Nations Environment Program defines this market as the totality of environmental products and services, efficiency, recycling and sustainable transportation.

“Green collar” workers will form the employment base of this market, in contrast to the blue and white collar workers of the past. The industry currently employs 2.3 million, directly or indirectly. By 2030, thanks to investments totaling $630 billion, the industry is expected to create 20 million new jobs. When the renewable energy industry is taken up together with areas of energy efficiency, the United States alone is expected to employ 37 million people in this whole sphere in 2030. Hence, “green jobs” rise as a sphere full of promises against the projected loss of 25 million jobs  I mentioned before.

“SUPPORTING WORTHY CAUSES”
Let us also look at the consumption side of the issue: as you are aware, one of the strongest-felt effects of the economic stagnation that we are going through is the shift in consumption patterns. Precisely for this reason, the current financial crisis is an extremely important opportunity to shift to a low-carbon economy.  The economic and ecological preferences of consumers for products and services function as the most important factor in greening the economy. In a survey conducted with 6,000 consumers from ten countries, 68% of the consumers responded that, even in times of crisis, they remain committed to brands “supporting worthy causes” and that they are willing to pay more for these products. On this list of “worthy causes”, concern for the environment ranks first, at 88%. As long as consumers display this kind of awareness, producers are sure to shift their production accordingly.

Besides the situation of the economy, investment opportunities, incentives, and consumers’ preferences. legislation is another factor in deciding to go into the sector. In Turkey, the Renewable Energy Law was enacted in 2005 and the Geothermal Law and the Energy Efficiency Law in 2007. In the wake of this, a National Energy Efficiency Movement (EN-VER) was started with a view to increase the awareness of the public concerning energy efficiency issues. In order to have the public sector lead this movement, the decision was made to begin implementing efficient energy use practices in premises belonging to public institutions, municipalities and professional organizations.  As a first step,  people were informed about the beneficial impact of simply changing the type of light bulbs used.

ENERGY PERFORMANCE OF BUILDINGS
Within the same context, regulations that are of great interest to the bustling construction industry were brought into effect. The Regulation on Increasing of Efficiency in Energy Use and the Regulation on the Energy Performance of Buildings introduce significant innovations for Turkey. Here are some of these innovations:

1. Buildings that do not comply with the Regulation on the Energy Performance of Buildings will not be accorded a permit.
2. Each building will have an “Energy Identification Document”.
3. “Energy Managers” will be employed for production facilities and buildings,
4. The sale of inefficient products that consume too much energy will not be authorized,
5. Projects seeking efficiency increase in industry will be supported,
6. Use of in-house renewable energy sources will be promoted.
7. “Energy Efficiency Consultancy” firms, a new business area, will provide engineering and consultancy services to the industry. These accredited firms will provide services of measurement for purposes of certification and recommendations for renovation in existing buildings and industrial facilities. This standard establishes important opportunities for job creation especially in engineering and R&D.

Even limiting ourselves to the regulations I have just mentioned, it is clear that many new business areas will emerge in sub-sectors that serve the construction sector. Let me cite a few simple examples:
The first has to do with insulation: in order to see the potential of this industry, currently wielding a turnover of $3 billion, it is sufficient to remember that, in our country, buildings that have adequate insulation amount to a mere 10% of the existing building stock. At present, a vast amount of investment is needed for the insulation of small dwellings and the largest commercial buildings alike.

The second example relates to lighting equipment. Through a directive that has come into force recently, the European Union is moving towards eliminating the sale of traditional light bulbs and encouraging the use of compact fluorescents, halogens and LED lighting. Although there will be no legal enforcement in Turkey until this area officially comes within the harmonization process, this shift will affect hundreds of thousands of homes and workplaces as consumers’ awareness increases in our country as well.

As I have tried to explain in these few pages, there is a huge space for cooperation between Turkish and American businesses in investment in renewable energy, know-how transfer in this area, research and development, trading of green products, etc.

Finally, I would like to congratulate  TURKOFAMERICA for having devoted a special issue to energy, the most important item on the world agenda today. I do hope that this new and important sphere will create lasting occasions of cooperation between our countries.

Murat Yalcintas is the President of the Istanbul Chamber of Commerce.
Last modified onSaturday, 06 May 2017 10:07

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