Turkey Renewables Report Q2 2016
BMI View: Turkey will remain a frontrunner in the European renewables segment over the next decade, as subsidy cuts in Western Europe coupled with strong government support in Turkey, in form of feed-in-tariffs and ambitious 2023 capacity targets will continue to be conducive to investor interest. Relative policy clarity under the new majority AKP government, and the political necessity of diversifying the Turkish power mix away from imported natural gas, will add further momentum to the renewables sector over the coming five years.
Latest Updates And Structural Trends
The November 1, 2015 snap election, after the Justice And Development party (AKP) failed to establish a government after the June election, saw the AKP win a parliamentary majority with 316 out of 550 seats. This is the 'Goldilocks' scenario our Country Risk Team outlined prior to the June 7, 2015 general election, as it avoids the instability of coalition governance while keeping in check President Recep Tayyip Erdogan's ambition to empower the executive office under a new constitution. This result is bullish for Turkish financial markets and offers the best hope for a rapid rebound in economic growth momentum in the coming quarters, as greater political clarity eases investor uncertainty. That said, the country will now operate under a de facto presidential system with Erdogan at the helm, entrenching a shift towards greater authoritarian tendencies that will come at the expense of long-term growth potential.
Turkey remains at the top of our Risk/Reward Index for Central and Eastern Europe due to the large opportunities available to investors relative to the region. With the government aiming to have 27.5GW of cumulative non-hydropower renewables capacity by 2023, consumption growing rapidly (at an annual average of 5.1% between 2016 and 2025) and the country being intent to diversify away from imported hydrocarbons - Turkey will remain the outperformer in the region. This is underscored by the government offering incentives in form of Feed-in-Tariffs to investors developing capacity in the country.
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