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A Clean, Secure Future: Reshaping Turkey’s Energy Sector

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Turkey has limited fossil-fuel reserves other than coal, but has huge potential in renewable resources, including hydroelectric, solar and wind power, among others. As the demand for energy grows, it has become increasingly important for Turkey to diversify its energy sources and increase national contribution, while also pursuing greater efficiency to manage the growth in demand.

Between 2012 and 2015, The Islamic Development Bank (IsDB) provided financing for the energy sector, supporting four renewable-energy development projects and six energy-efficiency projects. The IsDB extended a Financing Facility approach which worked through an implementing partner: The Turkiye Sinai Kalkinma (TSKB, known in English as the Industrial Development Bank of Turkey).

The combined costs of the projects amounted to US$641.2 million of which IsDB provided US$100 million. All ten projects are already proving to be mightily successful with the energy efficient projects having already decreased its greenhouse emissions by 1,006,000 tonnes, surpassing their target of decreasing emissions by 300,000 tonnes.

A New Approach in Islamic Financing

This was the first time IsDB used Restrictive Mudarabah financing. Under this mode of financing, The IsDB provides capital to Mudarib (in this case, TSKB) to invest in business enterprises, as per the agreed criteria. This approach eliminated the need for IsDB to enter into individual financing agreements for each sub-project being financed and gave a lot of freedom to TSKB as the local executing agency.

Hydroelectric Dams

Two of the hydroelectric dams supported by the facility: Goktas I and Goktas II lie in a valley deep in the mountains north of Adana. The projects combined capacity, once both dams are operational will be 276MW. Additonally a 52KM road, built under the Facility to provide access to these dams has helped to open up the entire region as well as three new bridges crossing the Zamanti River. These have had a significant effect on people living in the area as previously isolated settlements are now connected to larger towns and cities. This means that people can access hospitals, schools and other services more quickly. The construction company: Bereket Enerji responsible for the dams created over 450 jobs during the construction phase of the project and this almost doubled during peak construction times. Mr Ahmet Yilmaz, from Boztahta Village, who works as a general foreman spoke of the benefits of the project. “Previously people were mostly goat herders or seasonal workers in a nearby chrome mine. But the salaries in construction are much higher”.

Solar Panel Projects

The facility has also supported smaller projects that allow companies to generate their own electricity. One beneficiary was Prokon, an engineering manufacturing company located just outside Ankara. In March 2013, Prokon installed 2,040 solar panels on the roof of its workshop. Solar power has huge potential in Turkey especially as the panels generate around 75-95 MW during the peak months of July and August. Between April 2013 and February 2016, Prokon generated around 1,835 MWh from the panels in total. The process has been so successful that Prokon now sells energy back to the National Grid. Prokon have also pursued development of other solar powered equipment such as solar-tracking systems that enable panels to rotate and ‘follow’ the sun thereby generating more power.

Re-using Heat to Reduce Costs

Batisoke, Cimento, a cement company that installed a waste heat recovery system at its plant near Aydin is an example of the country managing its growing demand for energy. This system recycles the heat produced by the clinker-producing process to generate electricity. The successful installation means that the system now provides a significant chunk of the plant’s electricity needs. By reducing costs, the company has become a national energy competitor.

Cheaper, More Efficient Steel Production

The facility has also supported projects in the steel sector. Turkey was the world’s eighth-largest steel-producing nation in 2014 (with around 34 million tonnes). One company taking the lead is Koc Celik, who installed an oxygen-burning system at its plant in Osmaniye. The system increases the amount of oxygen entering the furnace during the melting process making the chemical energy processes involved more efficient. Electricity use has fallen from around 400 kilowatt hours (kWH) per tonne to less than 340(kWH) and the project itself provided 25 new jobs for local people.

The ten projects in the facility have had a huge combined impact. Together, the renewable-energy projects have a capacity of 370 MW and have made significant reductions in greenhouse gas emissions. These changes are making companies involved more internationally competitive while contributing towards global efforts to fight climate change. If future projects can build on this success, Turkey can look forward to a cleaner, more secure and efficient energy future.

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The Race for Universal Energy Access Speeds Up

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Fondly referred to as “mini Africa” by local residents, Sabon Gari is one of Nigeria’s biggest markets, where you can find anything from electronics and clothes to toys and hardware. Shops here used to depend on expensive diesel generators for electricity. But today, thanks to a new solar mini-grid, shop owners say they now spend just a fraction of what they used to previously on electricity.

More than 5000 miles (8000 kms) away, in the remote island of Monpura in Bangladesh, Lhota Khatun runs her own sewing business out of her bedroom, thanks to a solar mini-grid installed on the island. Since 2016, she has had dependable electricity access that helps her work at night, after her children are in bed.

Sabon Gari and Monpura represent communities around the world that, today, are more productive and prosperous through reliable and affordable access to electricity.

Energy is at the heart of development. Access to electricity makes communities safer, helps small businesses thrive and powers essential services such as schools and clinics. It also helps provide a conducive environment for investments, innovations and new industries that spur growth and provide jobs for entire economies.

The World Bank constantly works with governments to tailor solutions to suit every country’s unique energy needs. These approaches, led by countries, are working.

For example, a new $350 million electrification program in Nigeria is expected to attract $410 million in private investment, and create a vibrant market for mini grid and off-grid energy solutions.

In Kenya, the World Bank supports more than $1.3 billion of generation, transmission, distribution and off-grid investments, helping the country more than double electricity access rates from 23 percent in 2009 to 56 percent in 2016. A new $150 million off-grid project is designed to provide service to another 240,000 households living in more remote and poorer areas.

And in Bangladesh, the World Bank supports the largest off-grid solar program in the world, powering over four million households through solar home systems, 1,000 solar irrigation pumps, and 13 solar-based mini-grids. More than 18.5 million people in rural Bangladesh now have reliable access to solar-powered electricity through this program.

Altogether, between 2014 and 2017, the World Bank helped deliver new and improved electricity services to more than 45 million people.

Progress has sped up.  Sub-Saharan Africa’s electricity deficit has begun to close for the first time.  India is bringing electricity to 30 million people a year – more than any other country.  And a number of pioneering countries have put in place approaches that have allowed them to rapidly expand electricity services. Among these are a commitment to both grid and off-grid electrification efforts, long-term national electrification planning, and a focus on the quality and affordability of service.

The success of these approaches has led to a jump in demand from countries for support for energy access programs, which is being reflected in the World Bank’s portfolio.  In recent years the World Bank provided an average of $900 million a year in energy access financing.  This grew to $1.4 billion last year.

Support to mini-grid and off-grid programs is growing the fastest, from roughly $200 million a year in recent years to $600 million last year. The World Bank is on track to provide 20 percent of the projected investment needed for solar home systems in developing countries over the next four years.

The recent progress on energy access will be discussed as part of the review of global energy targets under Sustainable Development Goal 7 (SDG7) at the UN High-Level Political Forum. Underpinning these discussions is the fact that while progress is picking up towards universal energy access, more than 600 million people will still not have electricity access in 2030 if current trends persist.  That could have a devastating impact on health, education and economic prospects for a significant part of the world’s population.

Accelerating progress will require the private sector to play a key role. The World Bank is actively mobilizing private investment for energy access projects by helping to put in place conducive policies, demonstrating viable business models, and providing targeted funding to leverage commercial financing.

In Haiti, a project supported by the World Bank and Climate Investment Funds establishes a fund that will provide grants and loans to mini- and off-grid businesses. The project is expected to eventually mobilize $45 million in private financing and help bring electricity to 10 percent of Haiti’s population.

Innovation and technology are also playing a key role. Geospatial mapping is changing the face of electricity planning, with unprecedented detail and accuracy on unserved populations. For example, the Nigerian Rural Electrification Agency is mapping more than 200 sites for mini-grid development based on this approach.

The World Bank is committed to help countries harness these innovations, whether technological, financial or on the policy side, to accelerate the expansion of reliable and affordable electricity services, and to end energy poverty once and for all.

World Bank

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The importance of real-world policy packages to drive energy transitions

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Authors: Anita Hafner, Peter Janoska and Caroline Lee.

Last December, China announced a roadmap for establishing the largest carbon market in the world: an emissions trading system (ETS) that will start at 1.5 times the size of the European Union ETS, and very likely expand further. For the world’s largest energy consumer and greenhouse gas emitter, this national ETS is set to form a key element of its multi-layered policy approach to driving sustainable energy transition: a transition with aims not only to reduce greenhouse gas emissions, but also improve air quality, spur green economic development and enhance energy security.

China is just one country – though a crucial one – pursuing sustainable energy transitions through a complex mixture of policies that cover multiple aspects of energy transition. These policies need to drive change in all energy sub-sectors, act in both the short- and long-term, be cost-effective and support innovation and diffusion of clean technologies.

Carbon pricing is a cornerstone that can support many of these goals. As of September 2017, over 40 countries and 25 provinces and cities have adopted carbon pricing policies. Taken together, these cover nearly a quarter of global greenhouse gas emissions. However compared to prices that would have a transformative impact on energy systems, carbon prices remain low in the vast majority of countries. For example, in IEA’s World Energy Outlook model, carbon prices reach USD 75-100/tCO2 by 2030 and USD 125-140/tCO2 by 2040 in a scenario consistent with meeting Paris Agreement goals. These are levels far above most current domestic carbon prices.

In power generation and industry, a robust carbon price tends to drive deployment of low-carbon fuels, increased efficiency, carbon capture and storage (CCS) and early retirement of high-emission assets. For example, high carbon prices in China would have a significant effect in reducing coal-fired power generation without CCS, particularly after 2025.

In contrast, in sectors that are shaped by consumer choice carbon pricing plays a more supportive role. For example in transport, carbon pricing can be crucial to offset the effects of lower oil prices in a decarbonised world. However further policies such as standards, mandates and subsidies are needed to unlock more substantial technology shifts, such as electrification, advanced biofuels development and other large-scale investments for transport infrastructure, which are not driven by price alone.

Therefore in the absence of such high carbon prices, complementary energy policies are needed to fill the gaps, creating even more complex policy mixes. These real-world policy packages will be shaped by both domestic energy transition objectives (such as economic development, climate goals, air quality, public health, energy security and access), and constraints (such as limited resources, barriers to raising energy prices, and existence of high-carbon infrastructure).

This is particularly true in power and industry. In power, regulations may be needed to actively encourage the retirement of coal-fired generation that is not CCS-equipped, something we have already seen in the UK and Canada. In both power and industry, measures would be needed to drive deployment of technologies such as CCS and for integration of variable renewables. In transport, even further strengthening of fuel standards and subsidies for alternative vehicles could be needed to offset the lack of carbon price incentive that would otherwise have moderated transport demand from conventional vehicles.

Beyond clarifying the role of carbon pricing within a country’s policy mix, it is crucial to understand how a suite of policies interact – either positively or negatively – and seek ways to enhance coherence and alignment of the whole policy package over time. The more complex the policy mix, the more difficult this challenge becomes.

The next phase of our IEA work programme will be to tackle these questions in the context of China’s national emissions trading system as it relates to ongoing power sector reform and a myriad of other low-carbon policies on energy conservation, renewable energy, and control of coal supply and consumption. But there will be a need by many countries around the world to further strengthen thoughtful, real-world packages of complementary energy policies to keep their sustainable energy transitions on track. The IEA will continue to contribute with our insights and analysis.

*Members of the IEA’s Environment and Climate Change Unit

IEA

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From energy to chemicals

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Authors: Peter Levi and Araceli Fernandez Pales*

We live in a world dependent on chemicals. Fertilisers are used to increase agricultural yields. The cosmetics and pharmaceutical industries are reliant on the chemical sector for their key ingredients. And packaging – much of which is used for food and beverages – accounts for the largest share (36%) of global plastic demand, including synthetic textiles. At the current rate of production, Europe alone produces enough plastic packaging to encase the Eiffel Tower in plastic the thickness of a shopping bag every six seconds.

This demand for chemical products has a direct impact on energy demand (and consequently CO2 emissions). The sector accounts for approximately 11% and 8% respectively of the global primary demand for oil and natural gas.

More than half of the energy inputs to the sector are consumed as “feedstock”, or raw material. Feedstocks undergo a complex series of chemical transformations and ultimately leave the sector embedded in chemical products – for example the million or so plastic bottles consumed every minute around the globe.

The figure below lays out the path that fossil fuel feedstocks take through the chemical and petrochemical sector. A large proportion of oil gets converted into high value chemicals within the chemical sector, with refineries supplying around a third directly. The dominant feedstock for both ammonia and methanol is natural gas, although coal is also used in China. Collectively, these primary chemicals form the building blocks for thousands of intermediates, eventually ending up in fertilisers, plastics and other chemical products.

The total mass of chemical products leaving the sector is larger than the quantity of feedstock entering it. This is because in addition to feedstock (mainly composed of carbon and hydrogen), several chemical products contain other elements (mainly oxygen, nitrogen and chlorine) that are added and substituted at various points in the supply chain.

Partly as a result of this dependence on energy as feedstock, the chemical sector is the largest industrial energy consumer – but only the third largest source of industrial CO2 emissions after iron and steel and cement. In addition, further CO2 and other air pollutants can be released during the use of certain chemical products, such as fertilisers and cleaning products. Also, plastics and fertilisers can cause devastation to marine life when they leak into water courses, without effective management of waste and agricultural practices.

There are alternative pathways to producing chemicals, including recycling of thermoplastics and increased use of alternative feedstocks such as water, CO2 and bioenergy. These alternatives have the potential to reduce demand for primary chemicals made from fossil fuels, cutting both energy use and CO2 emissions. For example, for each tonne of polyethylene being recycled, roughly one tonne of ethylene demand can be avoided, saving the equivalent of at least 1.5 tonnes of oil.

Together with traditional routes equipped with carbon capture, the untapped potential of these alternative routes to decouple chemicals production from CO2 emissions is high. Global recycling of plastic was estimated to reach only 18% of all non-fibre plastic waste in 2014. Meanwhile, bioplastics only make up about 1% of the plastic produced around the world, each year, and electrolytic routes are still at the pilot project phase. Clearly there is much scope for progress. In theory, the chemical sector could do without fossil fuels entirely, though carbon and hydrogen in its feedstock will remain a necessity, whatever their origin.

Finding alternatives is key, because demand for fertilisers and plastics is set to grow as people live longer and enjoy better standards of living. The global transition towards a more sustainable future will rely on outputs from the chemical sector. For example, increasing the use of plastics in vehicles can support strategies to reduce their overall weight – ultimately reducing fuel consumption. Modern insulation materials that reduce the demand for heating and cooling in buildings also rely on products from the chemical sector.

Given the strong link between chemicals and fossil fuels and the potential for sustainable alternatives, what does the future hold for chemicals? Which technologies, strategies and policies could enable the sector to develop sustainably? What will be the consequent impacts on energy demand? The future of the chemical sector – as for the energy system as a whole – is uncertain. At the same time, a future without chemical products seems unlikely.

These questions and challenges will be examined in a forthcoming publication – “The Future of Petrochemicals.” This is the third report from the IEA that focuses on “blind spots” of the global energy system, following the “The Future of Trucks,” which was released in July 2017, and more recently “The Future of Cooling.”

Araceli Fernandez Pales, IEA Energy Analyst

Source: IEA

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