COVID-19: ENERGY IN TURKEY

Is the COVID-19 pandemic hastening the transformation of the global energy industry?

Turkish President Tayyip Erdogan, Russian President Vladimir Putin marking the formal launch of the TurkStream pipeline which will carry Russian natural gas to southern Europe through Turkey, January 8, 2020. REUTERS/Umit Bektas


With global industrial activity grinding to a halt and businesses and leisure activities shuttered for much of the last two months, the world has seen the sharpest reduction in energy consumption in modern history. The International Energy Agency (IEA) predicts that energy demand will fall by 6 percent over the year—seven times larger than the decline following the 2008 global financial crisis.

The drop in the energy market has been led by the developed world—demand is expected to fall by around 10% in both the US and the EU.

Turkey's energy demand decline is expected to be smaller than 10%, but in recent months the drop has been acute. In Turkey, April saw a 20% decrease in electricity demand, and May is expected to see a 17% decrease.

This decrease in demand has an immediate impact on producers' bottom lines. According to the Turkish Electricity Producers' Association, the spot price of electricity is expected to fall 40% in April, and 15% overall in 2020.

The IEA predicts a sharp decline in global demand for every energy source, except renewables. The agency cites priority access to grids and low operating costs as the primary drivers behind an expected 5% jump in renewable electricity generation in 2020, and an in-kind increase in its total share of electricity generation.

Already, globally, the solar sector was set to see the largest increase of all renewable energy sources in 2020. Much of that investment has been spurred by end-of-year construction deadlines for feed-in tariff qualification in a number of countries, including Turkey.

However, new investments in renewable energy have been hindered by a one-two punch of construction and supply chain challenges. As in many industries, social-distancing measures and travel restrictions have placed a number of solar projects on hold.

Though construction projects across Turkey have started to hum back to life, the rest of the year will be spent making up for lost time. Similarly, the global supply chain-integral to the solar industry-has been battered by the COVID-19 pandemic, setting back projects dependent on imported materials and expertise.

In crises, however, lie opportunities. Turkey has been investing to increase its solar panel manufacturing capabilities for years, and the disruption of the global supply chain-mostly, in the case of solar, imported Chinese-manufactured panels-will only hasten this push.

Solar is also uniquely positioned because of the development of the distributed generation marke—the market for most rooftop solar systems. While it is hard to predict the long-term fallout on the energy industry from the COVID-19 pandemic, some analysts believe distributed generation's socially-distanced nature will make it an attractive option.

However, low electricity prices available from centralized generation systems will likely discourage industrial and individual consumers from investing in small-scale systems.