$8.7 billion coal subsidy contradicts Türkiye’s renewable goals

Executive summary

Despite the drop on solar costs, Türkiye bets on coal incentives

Over the past decade, with a 77% reduction in installation costs, electricity generation from solar energy has become cheaper than domestic coal. In contrast, Türkiye prefers to promote domestic coal power plants by 2030. However, by directing its resources towards renewing the grid and removing bureaucratic barriers to different solar energy projects such as rooftop, floating and hybrid, Türkiye could reach its total target of 120 GW of wind and solar energy by 2035.

Over the past decade, the installation cost of wind power plants has fallen by 40%, while the installation cost of solar power plants has fallen by 77%. This decline has reduced the cost of electricity generation from solar energy by 69%, making solar energy Türkiye’s cheapest source of electricity generation. Despite falling renewable costs, Türkiye has decided to provide incentives in USD for domestic coal power plants, despite their expenses being in TRY. The $75 USD/MWh incentive price is 12% above the average sales price ($67 USD/MWh) over the past year and 36% above electricity generation cost of domestic coal power plants ($55 USD/MWh). With this incentive, domestic coal power plants, whose costs are subsidized under the capacity mechanism even if they do not generate electricity, will receive a total of at least $8.7 billion over a four-year period. This amount is 53% higher than the five-year grid renewal budget, which has become an obstacle to new power plant investments due to limited capacity.