A Comparative Approach: The Wind Energy Sector in , and Spain as a Contributor for an Affordable Market

Ferhat GÜLEBAŞ

Hochschule International Graduate Center Master in European Studies

Master Thesis

M.A HOCHSCHULE BREMEN 2016

Bursiyer ve Programa Ait Bilgi Formu

Adı-Soyadı Ferhat GÜLEBAŞ

Referans No. JM- 085 Sözleşme No. TR2012/0136.08-01/085

Başvuru Yaptığı Sektör

(Kamu-Üniversite-Özel Sektör) Kamu

Başvuru esnasında Bursiyerin Bağlı Kıyı Emniyeti Genel Müdürlüğü Olduğu Kurum

Bursiyerin Bağlı Olduğu Kurumun İli

Başvuru esnasında Bursiyerin Bağlı Memur Olduğu Kurumdaki Unvanı

Çalıştığı AB Müktesebat Başlığı Enerji

Öğrenim Gördüğü Ülke Almanya

Şehir Bremen

Yabancı Dil İngilizce

Üniversite Hochschule Bremen, University of Applied Sciences

Fakülte International Graduate Center

Bölüm

Program Adı Master in European Studies

Programın Başlangıç/Bitiş Tarihleri Ekim 2015 / Eylül 2016

Öğrenim Süresi (ay) 12

Tez/Araştırma Çalışmasının Başlığı A Comparative Approach: The Wind Energy Sector in Turkey, Germany and Spain as a Contributor for an Affordable

Danışmanının Adı/Soyadı Michael Glotz-Richter

Danışmanının E-posta Adresi [email protected]

Scholar and Programme Information Form

Name/Surname Ferhat GÜLEBAŞ

Reference No. JM - 085 Contract No. TR2012/0136.08-01/085

Applied From Public Public Sector/University/Private Sector Institution on the date of application The Directorate General of Coastal Safety

City of the Institution on the date of Istanbul application Title Civil Servant

Related EU Acquis Chapter Energy

Country of Host Institution Germany

City of Host Institution Bremen

Language of the Programme English Name of the Host Institution Hochschule Bremen, University of Applied Sciences Faculty International Graduate Center Department Name of the Programme Master in European Studies Start/End Dates of the Programme October 2015 / September 2016 Duration of the Programme (Months) 12 Title of the Dissertation/ Research Study A Comparative Approach: The Wind Energy Sector in Turkey, Germany and Spain as a Contributor for an Affordable Electricity Market Name of the Advisor Michael Glotz-Richter

E-mail of the Advisor [email protected] THESIS APPROVAL PAGE

I have examined the dissertation/research report entitled

A Comparative Approach: The Wind Energy Sector in Turkey, Germany and Spain as a Contributor for an Affordable Electricity Market

presented by

FERHAT GÜLEBAŞ

and hereby certify that it is worthy of acceptance.

19/09/2016

Michael Glotz-Richter

HOCHSCHULE BREMEN

International Graduate Center

TABLE OF CONTENTS LIST OF ABBREVIATIONS ...... 7 ACKNOWLEDGEMENTS ...... 9 Personal Background ...... 10 Abstract ...... 10 Özet ...... 11 Methodology ...... 12 Introduction ...... 12 The Generation Costs Of Electricity By Wind Energy...... 14 Levelized Cost of Electricity (LCOE) and Affordability ...... 15 Electricity Generation Costs by Fossil Fuels...... 17 Internalisation of External Costs for Electricity Generation ...... 18 THE STATE OF THE ...... 21 The European Commission and The Wind ...... 21 Germany...... 22 Turkey ...... 24 Spain ...... 26 A Comparison of The Three Countries: The Share of The Wind Energy Among Other Renewables ...... 28 Smart Grids and Pricing Mechanisms ...... 29 What is the Affordable Electricity? To Whom? ...... 30 On The Way To A Functioning Electricity Market for The Affordability: ...... 34 The Market Deregulations Within The European Union ...... 34 THE BACKGROUND OF THE WIND AND ...... 38 ITS DEVELOPMENT IN GERMANY ...... 38 The Environmental Concerns for The Electricity Generation in Germany: ...... 40 The and The Nuclear Power ...... 40 The Promotion of The Wind ...... 46 The Government Support to The Wind Energy: ...... 53 Feed-in Tariffs and Reforms in Germany ...... 53 UNDERSTANDING THE WIND POWER POLICY IN TURKEY: ...... 58 The Electricity, Its Development and Market Structure in The Country ...... 58 The Emergence of The Wind Power and The Market Conditions ...... 62

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ARES - Alaçati Ruzgar Ajansi A.S. Case (Turkey)...... 66 THE CHARACTERISTICS AND THE DEVELOPMENT ...... 69 OF THE WIND ...... 69 CONCLUSION ...... 76 BIBLIOGRAPHY ...... 80 FIGURES ...... 91 Declaration of Honor ...... 96

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LIST OF ABBREVIATIONS ACER The European Agency for the Cooperation of Energy Regulators BEE The German Federation CDU-CSU Christian Democratic Union-Christian Social Union ÇEAS Çukurova Elektrik A.S. (electric firm) EEG Renewable Energy Sources Act EMM Energy Market Management EMO The Chamber of Electrical Engineers ESIA Energy Supply Industry Act EU The European Union EÜAŞ Turkish Electricity Generation Company FIT Feed-in Tariff FRG The Federal Government of Germany GDR The German Democratic Republic GWh Gigawatt Hour IDAE The Institute for Energy Diversification and Saving IRENA The International Renewable Energy Agency ISO Independent System Operators kWh Kilowatt hour LCOE Levelized Cost of Electricity MAR The Market Abuse Regulation MMS Market Management Systems MW Megawatt MWh Megawatt hour OPEC Organization of the Petroleum Exporting Countries O&M Operations and Maintenance PEN Spanish National Energy Plans PPA The Power Purchase Agreement PV Solar Photovoltaic Systems REMIT Regulation on Wholesale Energy Market Integrity and Transparency RES-E Electricity From Renewable Energy Sources RSK The Reactor Safety Commission

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RTO Regional Transmission Operators SED Sozialistische Einheitspartei Deutschlands SPD Social Democratic Party StrEG Law on the sale of electricity to the grid (Das Stromeinspeisungsgesetz) TEDAŞ Turkish Electricity Distribution Corporation TEK The Turkish Electricity Institution TETAŞ Turkish Electricity Trade And Contracting Corporation TFEU Treaty on the Functioning of the European Union UK United Kingdom US United States of America VDEW The German Electricity Association WMEP The Scientific Measurement and Evaluation Programme

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ACKNOWLEDGEMENTS

It is such a pride for me to write this thesis after a long journey. Today, I am at one of the last steps of my master education. It has never been easy to come to these days. Without constant effort and dedication, nothing would happen. It was a dream and it came true. I appreciate the guidance and support of my advisors Michael Glotz-Richter and Peter Falk. They have enlightened my view and I became available to conduct a better research.

I was a desperate and a stranded civil servant two years ago. Thanks to The Jean Monnet Scholarship offered by The European Union, I found that chance to study my master degree in Bremen, Germany. Many thanks to The European Union. I would like to travel in time 2 years back and find myself. I would like to salute that determined man, myself.

I would like to send my special thanks to The Jean Monnet Scholarship Team based in Ankara, Turkey. That dedicated, polite and hard working team supported me a lot during both the application process to the scholarship and after I arrived in Germany.

Of course, my mother who always supported me regardless the conditions... Her genuine support, love, dedication and ethical values will always be the greatest heritage of me. Thank you for your presence...

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Personal Background The author was born in a coal mining city in the Blacksea Region of Turkey, Zonguldak. He grew up in the biggest city of the country, in Istanbul since the age of ten. He studied Business Administration and became a visiting student in Lithuania between 2009-2010. After completing the second year of his bachelor study, he started his career as a civil servant at the government in February 2011. He completed his bachelor in 2012 and served for four and half years at the two different ministries of Turkey, namely Culture and Transport ministries. He moved to Bremen, Germany in October 2015, for his master study on the European Studies after he was awarded The EU’s Jean Monnet Scholarship. Since then, he lives in that city. The choice of the topic was a follow-up of his Jean Monnet Scholarship as the author had described the integration of Turkey to the EU’s energy chapter in the scholarsip exam he took in May 2015. The author evaluates the wind energy policy of the European Commission, Germany and Spain and his country Turkey and relates the EU and national policies with the developments in the wind energy sector.

Abstract The research aims to scrutinize the wind policies of, Germany, Turkey and Spain from the European perspective. It describes the necessities that prepared today’s electricity market conditions and the role of the wind installments on the way to a competitive electricity market. The costs of the electricity production from the wind and environmental concerns are discussed. The histrorical development of the environmental awareness is given. The important incidents are cited. The topic was chosen to comprehend the EU’s policies. The initial consequences of the policies are given and predictions are made for the future. The lacking points of the policies are critisized.

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Özet Bu tez; Türkiye, Almanya ve İspanya’daki rüzgar enerjisi politikalarını Avrupa Birliği perspektifinden mercek altına almayı amaçlamaktadır. Bu kapsamda, günümüzün elektrik piyasası koşullarını şekillendiren gelişmelerden bahsedilerek rüzgar enerjisi yatırımlarının rekabetçi bir elektirik piyasası oluşturma hedefindeki rolü ele alınmaktadır. Doğal çevre koşulları ve rüzgar enerjisinden elektrik üretimindeki maliyetler ortaya konarak mevcut durum tartışılmaktadır. Çevre bilincinin gelişimi ve bu süreçteki önemli olaylar anlatılmaktadır. Rüzgar enerjisinin elektrik piyasa koşullarına etkisi konusu AB’nin sürdürülebilir enerji politikalarını daha iyi kavramak için seçilmiştir. Mevcut AB ve ulusal politkaların ilk sonuçları masaya yatırılarak, bu politikalarda geliştirilmesi gereken noktalara yönelik eleştirel bir bakış açısı hedeflenmiştir.

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Methodology This research conducts a comparative and quantitative way to understand the preliminary results of the European and national policies for the wind energy. The data shows the evolution of the wind energy. The policies and their results are discussed in detail, their benefits and deficiencies are shown. It describes the market statics and dynamics that prepare today’s market structure and elaborates the historical development of the wind energy in each country. The legislative structure and its relation with the market are analyzed. The special conditions for each country is underlined. The research reveals the relation between the market development, the sustainability of the wind business and its contribution to the affordability for the consumers.

Introduction The electricity plays the main role in our lives in terms of energy. No development can be made in the absence of the electricity in today’s world. Its future now depends the sustainable generation methods more than any time before.

Various methods have been used to produce electricity –the leading energy source to the development- so far. Majority of them were fossil fuels such as coal, oil, gas and unfortunately the nuclear energy which may pollute the environment irrevocably. As the fossil resources are limited and the danger of the nuclear power is partly understood, a need to discover new sustainable sources to generate electricity has been emerged in the last decades. The emerging awareness about the unsustainability of the nuclear power both in terms of the environment and the economy, have accelerated the wind policies.

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Of all the forces of nature, I should think the wind contains the largest amount of motive power -- that is, power to move things.

Abraham Lincoln

As the 16th President of the U.S Abraham Lincoln foresaw the importance of the wind power years before, today we comprehend the accuracy of his prediction better.

This research evaluates the state of the from both the European Union and the national perspectives. To do that, the research focuses on the wind energy policies of two EU member states: Germany and Spain together with the EU candidate country Turkey. The national objectives and achievements are analyzed within the scope of national and The European Commission’s policy framework. How successful have been the national and European efforts on the wind energy? What are their contributions for the affordability? What special conditions does each country have? What are the preliminary consequences of the legislations? These questions are addressed within this research in the light of the statistical data and the historical background of the wind energy in the each country. For a sustainable future, environmental concerns and the historical development of the wind power are clarified. A comparative and scrutinizing approach is used to understand whether the policies on the course to enable an affordable electricity production for the business and residential consumers. To do that, the research grounds the sustainability of wind business as the core of the affodable electricity prices. The more diverse sources the market has, the more competitiveness emerges. Besides, to provide fair market conditions for the distrubiton of the electricity to the final consumers is a must for the functioning of a such mechanism.

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The Generation Costs Of Electricity By Wind Energy Initial Costs are the investments for a including the money paid for the land (rent or sale), the essential components, the wind turbine itself, control and power conditioning units, civil works, electrical infrastructure for grid integration and installation costs. 1

1 Figure 1

Operation and Maintenance Costs are mainly the money paid for the fuel and lubrication. Of course the fuel of a wind turbine –wind- is free of charge however, every turbine requires periodic and proper maintenance to be able to operate trouble-free. The more wind a turbine receives the more movement it makes and thus the operation costs increase due to its operation frequency. The insurance costs to protect wind turbines from a possible incident play also a role in the operation costs.2

1 Mathew, Sathyajith, Wind Energy Fundamentals, Resource Analysis and Economics (2006) p.222 2 Ibid, (p.223)

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The graphic below gives a clue about the types of costs of a wind installation3:

Figure 2: The Cost of Wind Energy3

Levelized Cost of Electricity (LCOE) and Affordability Levelized cost of electricity (LCOE) is a measure which indicates the competitiveness level of an electricity investment. It shows the building and operating costs of an energy generation plant per-kilowatthour during its financial life. Even though the wind energy doesn’t have its fuel costs to operate the wind farms, its operations and management costs determine the overall cost.4 Every wind investment has to a good LCOE rate to yield a profit and sustain the business, otherwise the wind companies cannot continue their businesses.

3 The European Wind Energy Association, The Economics of Wind Energy (p.30), accessed August 16, 2016 http://www.ewea.org/uploads/tx_err/pdf/Economics_of_Wind_Energy.pdf 4 U.S Energy Information Association, Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2016, accessed July 28, 2016 https://www.eia.gov/forecasts/aeo/pdf/electricity_generation.pdf

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That causes the diversification of the electricity sources to be damaged. The diversification brings the competitiveness. And the competitiveness brings the affordability. The formula of the LCOE is defined as:5

5 Figure 3: Levelized Cost of Electricity

Of course there are many aspects of the market when dealing with the cost measures such as the taxation, the subsidies offered and the feasibility analyses but this calculation that was introduced by the International Renewable Energy Agency’s publication gives a clue about whether a wind energy investment can sustain its operation financially. Thus, the market diversification is kept. That sustains the competitiveness. A more affordable market conditions emerge as a result.

5 International Renewable Agency, Renewable Energy Technologies Cost Analysis Series: Wind Power, accessed July 27, 2016 https://www.irena.org/documentdownloads/publications/re_technologies_cost_analysis- wind_power.pdf (p.3)

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Electricity Generation Costs by Fossil Fuels The LCOE can be an indicator to calculate whether the costs of electricity generation from the fossil fuels are high. The LCOE depends on annual full-load hours and a given technology’s capital and operating costs.6 7

Figure 4: 7

According to the findings, the wind energy is now in a competitive position in comparison with gas and coal-fired generations. The carbon costs play an important role here. As an example, in Germany the onshore wind installations had LCOE of $80 whereas the costs for the gas and coal $118 and $106 respectively in the second half of 2015.8

6 Agora , Comparing the Cost of LowCarbonTechnologies: What is the Cheapest Option?, accessed August 17, 2016 http://www.prognos.com/uploads/tx_atwpubdb/140417_Prognos_Agora_Analysis_Decarbonisationtec hnologies_EN_01.pdf 7 Energy Innovation, Comparing The Costs Of Renewable And Conventional Energy Sources, accessed August 17, 2016 http://energyinnovation.org/2015/02/07/levelized-cost-of-energy/ 8 Bloomberg, New Energy Finance, Wind And Solar Boost Cost-Competıtıveness Versus Fossil Fuels, accessed August 17, 2016 http://about.bnef.com/press-releases/wind-solar-boost-cost-competitiveness-versus-fossil-fuels/

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Internalisation of External Costs for Electricity Generation The external costs in the elecricity generation, (also known as ) can be defined as the major impacts that emerge as a result of the production and consumption of electricity. There are of course some indispensable effects when generating electricity.9 Especially, the environment is more prone to these effects caused by the fosil fuels such as coal, natural gas and oil. The air quality and the water are highly affected from waste disposal sites. If an area is highly polluted by the fosil fuels, the possibility of development in the area decreases considerably. That is, less investors become interested to invest on these areas. That brings negative effects for the economy and the development. These negative effects can ocur both in the construction and the operation periods of a power plant. That situation also brings negative effects for the human health and the economic life. That is, the externalities sooner or later affect the people. The environment is the home of all livings after all.

Power plants need heat either for to get hot air or steam. In that way they can spin power turbines to generate electricity. Burning fosil fuels cause not only exhaust gases but also a large quantity of water is needed when steam is used to spin the turbines. The water is provided from the nearby lakes or the rivers and a water shortage occurs as a result. The cooling operations also require much water in the power plants. The water consumption increases and that threats the future of the world. The groundwater is generally used to operate a power plant and surface water is preferred more for cooling the power plants.10

Greenhouse gases CO2, methane and nitrous oxide cause the atmosphere to heat. That changes the climates and that affect the agricultural products. Sometimes farmers are unable to get their products in time or they get low quality products with small quantity.

9 The European Commission, Community Research, External Costs, accessed August 23, 2016 https://ec.europa.eu/research/energy/pdf/externe_en.pdf 10 The Public Service Commission of Wisconsin, Environmental Impacts of Power Plants accessed August 23, 2016 https://psc.wi.gov/thelibrary/publications/electric/electric15.pdf

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That affects the farming industry adversely. Farming is sometimes the main economic activity in a country. In that case, the impacts would be greater.11

Even though its low green house gas emissions, nuclear energy in electricity generation has many external impacts due to its possible risks. Some of them are directly visible after a nuclear accident, however some of the others are beared by different groups so they may not be that evidential. The negative effects of the radiation to the human health is maybe the most known impact. Besides; water pollution, loss of biodiversity, soil degradation, abiotic resources, solid and dangerous wastes are directly beared by the environment. In the end, these negative impacts are borne by citizens.12 To combat these challanges, governments develop taxing policies and subsidies. The EU’s Emission Trading Scheme can be given as an example to that. Within the scheme, the companies can sell their allocated emission quotas to each other. By this way, the carbon emission allocations can be converted to an economic value and more importantly the total total amount of carbon emission is brought under control. Beside these measures, the EU also passes directives to protect the environment and human health by internalizing the externalities.

11 Ibid

12Lisbon School of Economics and Management, Internalisation of External Costs for Electricity Generation, accessed August 23, 2016 http://pascal.iseg.utl.pt/~jpais/naturalresources/Internalisation_of_external_costs__electricity_generati on.pdf

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Figure 5: Quantified External Costs [Euro-Cent / kWh] of

a Coal Fired (steam turbine)

As an example to the externalities, a coal fired power station brings some external costs for every kWh it generates.13 That can differs between 2 and 7 euro cents in the EU states. In the reference countries we take, this cost fluctuates between 2 and 3 euro cents. The number in Turkey is around 3,2 euros cents14 (3,6$).

Considering these, burning oil and coal can bring much more costs than it was expected. The extensive negative effects of the nuclear power are obvious. Thus, the contribution of the renewables for a more competitive market can be understood better. That contribution may show its real effects in the long run but today’s world needs greater visions like that.

13 Ibid 14 ÇETKO – Environment and Consumer Protection Association, accessed August 24, 2016 http://cetko.org/?paged=3

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THE STATE OF THE WIND POWER

The European Commission and The Wind Environmental concerns have been playing a role to decide the of each county to produce electricity. These concerns sometimes originate from the European Union perspectives. Despite the member countries are free to choose their energy mix, the countries decide their electricity projects to comply with the EU objectives. Today’s EU energy policies had been envisaged in the The White and The Green Papers which were published to underlined the importance of the change of the energy mix by the EU. If no precautions were taken, the consequences would be much worse as they were stated in the papers.

According to the White Paper which was published in 1997, the climate change consisted the center of the international discussions recently and that had to be tackled urgently. To do that the EU had an aim to reduce greenhouse gas emissions by 15% until 2010.15 It was also underlined in the paper that, the dependence of the EU to the fossil fuels -mainly oil and gas- was already 50% by 1997 and that would climb to 70% by 2010 if no measures were taken.

The Green Paper which was published in 2013 had emphasized the importance of the national support schemes for the wind investments. The paper actually was critisizing the absence of a detailed wind infrastructure plan in the 2009 Climate and Energy Package of the EU.16

15 The European Union White Paper 1997, accessed August 14, 2016 http://europa.eu/documents/comm/white_papers/pdf/com97_599_en.pdf 16 The European Union Green Paper 2013, accessed August 14, 2016 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52013DC0169

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Figure 6: The Wind Power Capacity In The World11

In some cases, financial worries form the renewable policies of the governments. In some instances, the society puts pressure on the government with demonstrations and campaigns and affects the political decisions. 17

Germany In the graph above, it is clearly seen that Germany is by far the leading country in Europe in terms of the wind energy capacity. It gives us a clue about the country’s investment to the wind sector. However, that does not clarify everything. The amount of the electricity generation through wind turbines are being highly affected from the

17 Global Wind Energy Council, Global Wind Statistics 2015, accessed June 4, 2016 http://www.gwec.net/wp-content/uploads/vip/GWEC-PRstats-2015_LR_corrected.pdf (p.3)

22 natural conditions, so the efficiency of the wind turbines may not be in parallel with the wind energy capacity. From the economic aspect, we can say that the investments are supposed to serve for the interest of the citizens, so it is important to sustain a balance between the purchasing power and the possible profits of the investments for everyone. Germany has the highest GDP among the three countries. As Turkey and Spain have GDP of 9.130$ and 25.800$ as of December 2015 respectively.18

Figure 7: GDP of Germany between 2000-201512

Even though between 2007 and 2015, the gross domestic product (at purchasing power parity) per capita (GDP) fluctiated between 41.000$ and 48.000$ in Germany, there is a continious increase since 2000. The country had seen its peak with 47.800$ in 2014.

The energy supply in the country has a constant increase in the renewable sources as the share of the renewables in the total electricity generation was 30% at the end of 2015. It was 25,8% in the previous year. The figure was only 6% in 2000.19

18 The World Bank, GDP per Capita, accessed August 15, 2016 http://data.worldbank.org/indicator/NY.GDP.PCAP.CD?contextual=default&end=2015&locations=DE&st art=2000&view=chart 19 Federal Ministry for Economic Affairs and Energy, Renewable Energy at Glance, accessed August 15, 2016 http://www.bmwi.de/EN/Topics/Energy/Renewable-Energy/renewable-energy-at-a-glance.html

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Figure 8: The Share of The Renewables in The Total Generation in Germany13

Turkey Although Turkey is not among the countries that have most wind energy capacity in the cumulative calculation, it has a rapid development in the sector in the last year. The wind power capacity statistic shows us that cleary. In the year 2015, Turkey became one of the ten countries in the whole world that increased their wind energy capacity most. That growth can be explained with the continuing efforts of Turkey to conform the EU energy criterias. The country is promoting the wind energy to be able to start negotiations with the European Commission in the Energy chapter. On the other side, the growing energy demand in Turkey as a result of the economic growth necessitates a sustainable energy flow for the businesses. The country aims to guarantee its electricity generation with sustainable solutions as Turkey is a foreign-dependent country in terms of the energy supply. Nevertheless, the nuclear projects of the government are worrisome. The investments on the nuclear plants and the pro-nuclear-power campaigns by the government are arguable. Despite there are local protests by the residents, one of the three nuclear projects is under construction. The other two projects are being planned. The growth rate of the renewable energy in the country can also be explained

24 mathematically: If the size of market is small, then the growth rate becomes larger compared to the bigger markets. Still, the growth in the wind investments is hopeful.

Figure 9: Electricity Generation by Energy Source in Turkey 14

The graph above shows the current the share of the sources in the electricity generation. The statistic is prepared according to data of the previous 365 days starting from 15th of August 2016. 20

The country has also a stable increase in its GDP together with the share of the renewables. According to the statistics of the World Bank, Turkey’s current GDP is more than twice its GDP in 2000.

20 Enerji Atlasi, Electricity Production in Turkey, accessed August 15, 2016 http://www.enerjiatlasi.com/elektrik-uretimi/

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Figure 10: GDP of Turkey between 2000-2015

Spain According to the graph on the page 14, Spain is the second country in the EU in terms of the size of the wind energy capacity. They are known with their investments in the sector. However, their growth in the capacity was not that much as they were not among the ten countries in the whole world that increased their wind energy capacity most. In 2015, there was not any new wind installation in the country. The Spanish Wind Energy Association evaluates the situation as a lack of investor confidence in the Spanish wind energy market. That is, the role of governments determine the positive conditions for the investments. The association underlines the importance and the need of an energy reform that restores the trust of the investors with the modification of economic conditions in the wind energy policies every six years. There has to be also a more accurate prediction mechanism of the government regarding the wind farms, by this way the investors can calculate their returns and foresee the market conditions based on 21 the policies of the government, according to the association. However, the example of

21 The Global Wind Energy Council, Zero wind power megawatts installed in Spain in the first half of 2015, accessed June 10, 2016

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Germany shows us even though the country has plenty of wind energy infrastructure, they keep investing. By this way, Germany is placed second in the ranking of the countries in the whole world that increased their wind energy capacity most. That can be explained as the country has a stable regulatory frameworks, thus the investors can see the future of their investments in the wind energy and that ensures a stable cash flow. The trust plays an important role in the market, as we see from that example.

The country had a stable increase in its GDP until 2008 (The World Bank), however after the global crisis which hit the markets, it has not yet reached the previous GDP levels and experienced a continuous decrease. Its share of the renewables in the electricity generation which make it a competitive country in the wind industry.

Figure 11: GDP of Spain between 2000-2015

http://www.gwec.net/zero-wind-power-megawatts-installed-in-spain-in-the-first-half-of-2015/

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Figure 12: Share of Renewables in Electricity Production

(excluding hydroelectric) in Spain between 2000-2014

A Comparison of The Three Countries: The Share of The Wind Energy Among Other Renewables (by end of 201422)

Figure 13:

The wid energy is today maybe not the primary source of renewable energy in the three reference countries, but the rapid growth in the wind industry makes it important in the

22 Eurostat, Primary Production of Wind Energy, accessed August 20, 2016 http://ec.europa.eu/eurostat/statistics- explained/index.php/File:Primary_production_of_renewable_energy,_2004_and_2014_YB16.png

28 future. It is important for the governments to decide whether they aim long term results. It is a distinction of what they want now and what they want most.

Smart Grids and Pricing Mechanisms The European Union makes regulations and sets targets for ensuring affordable, secure and sustainable energy to guarantee the future of the EU. 23 To institutionalize the electricity markets in the member and the candidate states is one of the priorities of the EU as a strategic tool. Still, there are differences among the member states in terms of final consumer electricity prices. These differences originate from the energy import need of each state, the size and the depth of the electricity market, the national tax policies, the pricing policies of local and national authorities and of course the cost of energy generation itself. In this context, the base priorities regarding the internal electricity markets necessitate new infrastructures and new pricing mechanisms. 24

With the development of the wind energy, the smart grids have become more important to manage the energy supply and the demand in the market. The wind power is difficult to predict as its enery production is fluctiating day by day, for that reason some companies develop some prediction systems and detect the idle wind turbines to save energy. That helps wind energy companies to generate electricity for lower costs.25 Due to its nature, the wind may stop suddenly. In this case smart grid operators may have to substitute the energy deficit with some other fuel, mainly the fossil fuels. Still, the smart grids are at least helping to a more planned electricity management with the support of the cutting-edge technology. Within this research, the comparative results of the three countries –Turkey, Germany and Spain– are provided and the developments in the markets are given in the light of the emergence of the wind energy.

23 The European Wind Energy Association, 2015 European Statistics accessed June 5, 2016 http://www.ewea.org/fileadmin/files/library/publications/statistics/EWEA-Annual-Statistics-2015.pdf (p.3) 24 Alternative Energy News, A Diagram of An Off-Shore Wind Power Station, accessed June 6, 2016 http://www.alternative-energy-news.info/images/technical/wind-farm.jpg 25 The University Corporation for Atmospheric Research, Ncar Wind Forecasts Save Millions Of Dollars For Xcel Energy, accessed June 10, 2016 https://www2.ucar.edu/atmosnews/news/5771/ncar-wind-forecasts-save-millions-dollars-xcel-energy

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What is the Affordable Electricity? To Whom? According to the European Union 2020 Energy Strategy, to keep energy affordable for the private and industrial consumers is one of the priorities to achieve. The industrial development depends always the availability of continuous electricity supply as it is the core of the production for all large and small and medium enterprises. The enterprises can keep their competitive position in the market not only with the presence of a continuous electricity supply but also with fair prices they pay for the electricity.

As the fate of the fossil fuels are difficult to predict, the EU promotes the renewable energy sources with its incentives within its strategy to reach the affordable electricity objective. That is, the more the availability of the renewable energy production the better the EU and the national governments can steer the future of their affordable electricity energy.26

In order to achieve this goal, a compatible electricity generation and transmission infrastructure and a more efficient electricity consumption are must. To do this, the European Union aims the state of the art electricity technologies to promote. At this point, the smart grids play a vital role. The smart grids enable a modern solution for the renewable energy sources from the source to the consumer (electricity generation, delivery and consumption).27 The development of the smart grids are helping to provide a better service for the electiricity market as they facilitate an easier electricity transition. Obviously, that makes the electricity market livelier and more competitive. The competition provides the affordability as the means of electricity resources diversify. Undoubtedly, the more options the consumers have, the softer market conditions emerge for the consumers and thus providers need to compete with each other. That yields a benefit for the consumer’s budget and also to the quality of the electricity supply. The diversification of the electricity market can only be sustained with supporting the investors that commit to generate electricity from renewable energy

26 EUR-Lex, Energy 2020 A strategy for competitive, sustainable and secure energy, acces. June 11, 2016 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1409650806265&uri=CELEX:52010DC0639 27 Ibid

30 sources (RES-E). So, there has to be affordable and suitable market conditions for the investors as well as the consumers. 28

Operation Chain of a Smart Grid21

With the development of the wind electricity generation, the technology such as the smart grids will continue to stand as a precondition to manage the day-to-day energy trading. Hence, the competitiveness and the reliability of the electricity markets are increasing. With the emerging smart grid technologies, the market management is becoming predictable and manageable. Market management systems (MMS) are helping to conduct true electricity markets. In such way, the power generations are being designed to meet the needs of the residential and industrial electricity consumption. That is changing the usual market’s value chain (generation, selling, transmission and distribution) which is decided purely by the governments. With the market deregulation, that is less intervention to the market by the government, Independent System Operators (ISO) and regional transmission operators (RTO) are playing roles in the competitive electricity markets.29

28 Silicon Semiconductor, A Diagram of A Smart Grid, accessed June 13, 2016 http://www.siliconsemiconductor.net/images/bank/image-1053-news.jpg 29 Siemens, Smart Grid Energy Market Management (EMM), accessed June 9, 2016

31

To sustain an affordable (as a result the competition) electricity market depends on the presence of a functioning Energy Market Management (EMM). A typical electricity market management system consists of four main elements: the governments, the market participants (the electricity generators, providers, suppliers), the market operators that coordinate the market operations according to the demand and generation and the public (the consumers).30 The role of the government policies affect the market conditions, such as the tax policy, government incentives, tariffs. Thus, the governments play a very important role to determine the direction of the energy investments.

Governments

Suppliers

Market Operators

Consumers

To run an energy market builds upon the collaboration of these four main elements. The consumers place emphasis on the reliability of electric supply and the lowest possible electricity price within the scope of the macroeconomic equilibrium. At the same time, the market participants aim to get maximum profit they can. This is their business, their financial sustainability depends on the profitability of their investments. So, it is understandable that their priority is the profitability. To do that, they invest to increase their operational efficiency with the new infrastrucutres. The market participants also https://w3.usa.siemens.com/smartgrid/us/en/transmission- grid/solutions/Documents/EMM_WhitePaper_POV.pdf 30 Ibid

32 need the availability of accurate market information in order to steer the direction of their business.

From this point forth, we should also emphasize the importance of the market operators as they are the third element of the Energy Market Management. The suppy-demand management within the Market Management Systems is the key of today’s electricity markets. They coordinate the market operations with the help of the accurate information and the state of the art technology.31

Today Energy Market Management (EMM) is done via systems that address multiple reasons that form the electricity demand and complexity influencing the grid. These systems are preferred to enable a competitive market in the light of the technology. With the help of these advanced applications (systems), now it is easier to optimize the assets in the electricity market. The electricity market operations are done with a clearer predictions thanks to these systems. The development of such systems are helping to create a more balanced supply-demand relation.

The majority of the responsibility to provide an affordable internal electricity market rests mainly with the national governments. Recently, the governments in the EU are deregulating the market regulations as the regulations were hindering a functioning electricity market, (its basics) namely; generation, sale, transmission and distribution chain. That new development is breaking the chain of the government monopoly in electricity markets. Market deregulations also prevent economic inequalities in the business and increases the quality of the electric supply that was before provided by the governments with superficial standards.32

31 Ibid 32 Siemens, Smart Grid Energy Market Management (EMM), accessed June 9, 2016 https://w3.usa.siemens.com/smartgrid/us/en/transmission- grid/solutions/Documents/EMM_WhitePaper_POV.pdf

33

A healthy market mechanism can only be achieved through a modern infrastructure. That will minimize the risks of a possible supply crisis and guarantee the sustainability of a functioning electricity market.

On The Way To A Functioning Electricity Market for The Affordability:

The Market Deregulations Within The European Union A functioning internal electricity market in the EU is one of the objectives of the union. To provide suitable conditions for an internal electricity market for the consumers lies in the regulations. In other words, these regulations help to remove barriers. They are called as electricity market deregulations. The EU’s internal electricity market objective addresses market access, transparency and regulation, consumer protection, supporting interconnection, and adequate levels of supply.33 That is; the electricity companies can carry on their businesses freely within the EU, the consumers can choose their electricity supplier among them, in case of a dissatisfaction the consumers can change their supplier without complicated transactions. The indicator of a such system is obviously the electricity prices and the share of the renewable energies.

The Article 194 of the Treaty on the Functioning of the European Union (TFEU) is the base of the electricity market deregulations in the EU as “ensuring the functioning of the energy market” is clearly stated in the article.34 Tax and pricing policies are playing important roles to conduct an electricity market policy which is compliant with the EU standars. A non-discriminatory conduct is a must as the new entrants to the electricity market can only be protected with providing them access to the grids.

Consumer protection is one of the most important obligations to achieve a functioning electricity market. The EU takes extra precautions to offer the EU citizens the optimum

33 The European Parliament, Fact Sheets, Internal energy Market, accessed June 10, 2016 http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_5.7.2.html 34 EUR-Lex, Consolidated version of the Treaty on the Functioning of the European Union, Article 194 accessed June 11, 2016 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E194:EN:HTML

34 rights in the electricity supply market, as the consumers are prone to be mislead in this sector due to lack of knowlede and the infancy of the free electricity markets. The efforts are being given by the EU aim the consumers to get an better price deal.

Every national electricity authority set out its own criterias, however they must comply with the provisions of the EU legislation. In order to provide a market mechanism that protects the consumers’ rights, there are some preconditions to succeed. These are35:

1) Connecting households and businesses to the local electricity network, 2) A free choice of the electricity supplier, 3) A trouble-free switching process among the suppliers 4) Understandability and clearness of an electricity contract which the consumers are aware of what they accept. In case of a change in the contract, the consumers should be able to object the new conditions and withdraw from it without obligations. The EU standars stipulate that, in case the electricity contract is made through telephone or internet, the consumers have right to withdraw from the contract within fourteen days. 5) The electricity consumption of a consumer should be clearly indicated in the bills, thus the consumers can check their consumption. 6) The citizens should be informed about their energy consumption habits. That is, how to use the electricity in an efficient way should be clarified to the public. The equipments and vehicles that consume renewable energy sources should be encouraged. 7) The vulnerable consumers should be considered at first hand. These are the consumers who are not in the posession to benefit from the electricity supplies due to mainly their low income. The vulnerability is a multi- dimensional notion. In some cases, the it originates from the consumer behaviours. Some old people may not be able to read and understand the contract conditions due to their small print. Some citizens may not have an adequate computer skills to use the internet to learn the latest regulations. Furthermore, non-native speakers may

35 The European Commission, Consumer rights and protection, accessed June 9, 2016 https://ec.europa.eu/energy/en/topics/markets-and-consumers/consumer-rights-and-protection

35

have difficulties to understand their consumer rights. Long-term sickness or disability may sometimes make a consumer vulnerable.36 8) The complaints and disputes should be solved fairly. In case of a consumer’s complaint was not accepted by the electricity supplier or the result of the complaint didn’t satisfy the consumer, the consumer should be able to bring the complaint to an independent body with easy procedures. 9) A certificate system should be implemented in houses. The prospective homeowners should receive information about the energy efficiency level of the home they intend to buy or rent. 10) In every country, there should be an information or contact centre that citizens find information about their rights and get consultancy.

Every member state is obligated to regulate its national laws to protect consumer rights and it is the duty of the national electricity regulatory authorities to provide a consumer protection conforming to the EU legislation.

The European Agency for the Cooperation of Energy Regulators (ACER) was established after The Third Energy Package of the EU in 2009. It is located in the capital city of Slovenia, Ljubljana. The agency is also responsible to overcome the disagreements in the way of a functioning internal electricity market (together with the other energy markets) that the national electricity regulatory authorities cannot solve (among its other duties in the other energy sectors).37 It gives advices and takes part in process of making the electricity network rules (beside other energy networks). It has a coordination role. The market integration and the harmonisation of the national energy frameworks are in the realm of the institution.

36 The European Commission, Understanding consumer vulnerability in the EU's key markets, accessed June 2, 2016 http://ec.europa.eu/consumers/consumer_evidence/market_studies/vulnerability/index_en.htm 37 The European Parliament, Fact Sheets, Internal energy Market, accessed June 10, 2016 http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_5.7.2.html

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The institution monitors the electricity markets in order to provide the consumers fair and cost-reflective prices by detecting abusive market practices attempted by the suppliers.38

Implementation of 10 years network development plans, wholesale energy trading, the retail prices, access to the electricity network from renewable energy sources and the compliance of the practices with the consumer rights are also the monitored by the agency. 39 Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) (Regulation EU No. 1227/2011) was accepted in October 2011 by The EU to combat against insider trading and market manipulation. The regulation was designed to cover all energy markets as well as the ACER. The term of the insider trading can be explained as trading a public company’s stock or other securities with the accessing to secret information that is known by only specific individuals. Thus these individuals take advantage of the situation as a result of inequality of the trading opportunities. In other words, it is a practice of an unfair profit through the financial instruments and the privileged position in an institution (company). Market manipulation can be defined as an artificial increase or decrease the price of an asset or a market benchmark thus profiting from these fluctuations. In the recent years, the finance sector has taken it into consideration. The energy sector follows it. Within The EU, The Power Purchase Agreements (PPAs) are signed preferably based on trusted indices instead of fixed terms, as the financial turbulences to prevent market manipulations. 40 Furthermore, REMIT regulates the registration system of the market participants as they are obliged to register with their National Regulatory Agency. The market participants are generally the traders, the transmission system operators, the regulated exchanges for electricity markets and energy brokers.41 In a similar manner, the regulation obliges the market participants to report their transactions and publish their insider information to prevent practices such insider trading and market manipulation as mentioned above.

38 The Agency for the Cooperation of Energy Regulators (ACER), accessed June 13, 2016 http://www.acer.europa.eu/EN/THE_AGENCY/Pages/default.aspx 39 Ibid 21 40 NERA Economic Consulting, At A Glance Market Abuse in Energy Markets, accessed June 12, 2016 http://www.nera.com/content/dam/nera/publications/at-a-glance/AAG_Remit_1015.pdf 41 Regulation (EU) No. 1227/2011 (REMIT), Official Journal of the European Union, Article 2 (7), L326 (December 08, 2011), p. 7, accessed June 3, 2016

37

The ACER stands in the monitoring position for the implementation of the REMIT and it collects the transaction reports from the national regulatory authorities. By doing that the regulation aims to publicize the information against the possibility of an insider trading.42 The Market Abuse Regulation (MAR) is applicable since July 2016.43 The regulation aim to ensure a more more efficient, transparent and trustworthy European financial markets, including The Energy Market. It introduces new common definitions for criminal offences of insider dealing and market manipulation together with penalties for serious market abuses. The objective is that the sanctions should equally be forced in the EU.

After all, the affordability can only be provided as long as the market deregulations are in force. The fair market conditions bring fair prices. In order to keep the market conditions fair, it is natural to take a scrutinizing approach by The EU to handle with the manipulations, ambiguousnesses and every single possibility that may affect a functioning and tranparent electricity market before they ocur. The main point is here that whether these efforts towards the affordability salvage the day by providing economic benefits or provide a real sustainability for the future of the energy.

THE BACKGROUND OF THE WIND ENERGY POLICY AND

ITS DEVELOPMENT IN GERMANY

Germany has been standing in a leading position in the world for the wind and research as more than 10% of total installed wind energy capacity (Megawatt) of the world comes from Germany according to the statistics by the end of 2015. 44 Since more than a quarter-century, the wind energy development is being

42 The Official Journal of the European Union, October 25, 2011 (p.2) accessed June 5, 2016 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:326:0001:0016:EN:PDF 43 The Euroean Commission, Press Release, accessed May 29, 2016 http://europa.eu/rapid/press-release_IP-16-2352_en.htm?locale=EN 44 The Global Wind Energy Council, The Global Wind Energy Capacity 2015, accessed June 7, 2016 http://www.gwec.net/wp-content/uploads/2012/06/Global-Installed-Wind-Power-Capacity-MW- %E2%80%93-Regional-Distribution.jpg

38 supported by the government incentives. To understand the history of the wind power in the country, it is better to focus on the necessities behind this relatively new electricity generation method. Why is Germany giving a priority to the wind power plants and investing on it?

Germany has 16 federal states (German: Die Bundesländer) and the wind energy production is today supported by both these 16 federal state governments and The Federal State Government (Die Bundesrepublik). Despite today the wind energy production takes place in the current national politics, there was not a similar trend until 1970s. The journey of the wind energy was not that easy and it faced number of barriers on the way.

The country had an energy mix that consisted predominantly of coal, oil and nuclear energy by the beginning of 1970s.45 Only coal was a domestic product, as it was being extracted from the Ruhr Area (Ruhrgebiet) and . Today, Ruhr Area is still an important coal mining region whereas the mines in Saarland were closed. 46 The government relied on the fossil fuels and the nuclear energy and there were incentives to promote the nuclear energy researches during those years.

At the time of the first oil crisis in 1973, West Germany was importing 94% of its oil from the OPEC (Organization of the Petroleum Exporting Countries).47 That situation was in question and the increasing concerns about the security of the oil supply from the external resources after the oil crisis had strengthened the significance of the internal resources namely, coal and newly emerging nuclear energy. Still, there was not a serious effort to increase the renewable sources despite the consequences of the crisis.

45 Deutsche Bank Research, The changing energy mix in Germany, accessed June 20, 2016 https://www.dbresearch.com/PROD/DBR_INTERNET_EN- PROD/PROD0000000000337663/The_changing_energy_mix_in_Germany%3A_The_drivers_ar.PDF 46 The Newspaper: The Local, Last coal marks end of Saarland Mining, accessed June 14, 2016 http://www.thelocal.de/20120629/43463 47 Zitzer, Suzanne E. (2009) : Renewable energy policy and wind energy development in Germany, UFZ-Diskussionspapiere, No. 8/2009

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Thanks to the presence of abundant coal resources in the country, The Federal Government of Germany (FRG) leaned more on the fossil fuels and nuclear researches rather than making a revolution in the electricity production from renewable energy sources (RES-E).

The Environmental Concerns for The Electricity Generation in Germany:

The Coal and The Nuclear Power The beginning of the environmental concerns about the electricity production through coal burning corresponds the same time. The burning coal was causing acid rains, so that was risking the future of old forests nearby the mines. The emerging awareness among the society led the anti-nuclear and environmentalist civil organizations to put pressure on the government. The organizations insisted on new renewable sources however the government kept investing on the nuclear energy researches and continued to rely on the coal energy. The investment on the electricity production from renewable energy sources remained limited.

The protests were arising in the country against the nuclear power too. The first major conflict against the construction of nuclear power plants had happened at Whyl (Baden- Württemberg) and (Schleswig-Holstein) in 1975. The protests were escalating in the two rural settlements. The protests became an example of a fight against the nuclear industry by a local community action and a civil disobedience. Especially the second round of the Whyl protests became very influential nationwide after the support of the university students from Freiburg. 48 Even though a construction licence was granted for the construction of the nuclear plant, the intended Whyl nuclear power plant was never built and today the area remains as a national preserve. 49

48 Karapin, Roger 2007 Protest Politics in Germany: Movements on the Left and Right Since the 1960s : (p.117) 49 Deutsche Welle, : a chronology, accessed June 13, 2016 http://www.dw.com/en/nuclear-power-in-germany-a-chronology/a-2306337

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On the other hand the Brokdorf nuclear power plant didn’t have the same destiny. It started operating in 1986, however the demonstrations against it were not vain as they would become influential in the politics in the later years. Furthermore, the Brokdorf nuclear power plant is today among one of the nuclear power plants scheduled to be phased-out.50 The Nuclear Power Station TMI-2’s workers and the front side of the power plant seen in the photos. The Three Mile Island44

The criticisms towards the nuclear energy increased after The Three Mile Island Accident51 in 1979 in the United States. It was the most serious accident of the U.S commercial nuclear power plant operating history. One of the reactors at the power plant partially melted down on March 28th. The accident was explained by The United States Nuclear Energy Commission as “A combination of equipment malfunctions, design-related problems and worker errors led to TMI-2 reactor's partial meltdown and very small off-site releases of radioactivity.” 52 Around 120.000 people participated in the demonstration against the nuclear power on October 14th, 1979 in Bonn.53

50 The World Nuclear Association, Nuclear Power in Germany, accessed May 16, 2016 http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/germany.aspx 51 The Patriot-News, Three Mile Island, accessed June 12, 2016 http://www.pennlive.com/midstate/index.ssf/2015/03/three_mile_island_36_years_ago.html 52 The United States Nuclear Regulatory Commission, Backgrounder on the Three Mile Island Accident, accessed May 31, 2016 http://www.nrc.gov/reading-rm/doc-collections/fact-sheets/3mile-isle.html 53 Kitschelt Herbert P. 1986 : Political Opportunity and Political Protest: Anti-Nuclear Movements in Four Democracies, British Journal of Political Science, Vol. 16, No. 1, , (p.71)

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The people gave utterance to their dissatisfaction towards the nuclear policy after The Three Mile Island accident. Even though there were no deaths54, they feared that the same thing would happen to Germany.

After the emerging civil movements, in 1980 a new political opposition was emerging against the government’s insensitive stance to the environment. The Greens (German: Die Grünen, today it is called The Alliance '90/The Greens, German: Bündnis 90/Die Grünen after the merger in 1993) was developing as a new left-wing party in the country. With the effort of the Greens, the electricity production from renewable energy sources would start to take part in the politics more than before in the next years.55

Chernobyl Nuclear Power Station and its surroundings after the disaster45

The Chernobyl Disaster on April 26th, 1986 led some major energy and environmetal policy changes in Germany. The citizens were afraid of being victims of a similar disaster. Actually they were already being partly affected from the Chernobyl Disaster. While there was a great deal of nervousness in The West, The East didn’t have an official state of alert. Instead The German Democratic Republic – former East Germany – was in the effort of dissimulation. There is a cencorship towards the real

54 University of California, Santa Cruz, Case Study: Three Mile Island Accident, accessedn June 1, 2016 https://classes.soe.ucsc.edu/cmpe080e/Spring05/projects/energy/Case_study.htm 55 The British Broadcasting Corporation (BBC), accessed May 25, 2016 http://news.bbc.co.uk/nol/shared/spl/hi/guides/456900/456957/img/1145613908.jpg

42 consequences of the disaster. The disaster was reported in the newspaper that was controlled by the communist party "Neues Deutschland" after three days. 56 On the contrary, people in West Germany were suspicious about their health. They had stopped buying fruit and vegetables due to the concern that the rainfalls brought the radiation to the products.57 The increasing concerns in West Germany resulted the foundation of The Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety, (German: Bundesministerium für Umwelt, Naturschutz, Bau und Reaktorsicherheit) in West Germany.

The ministry was a direct consequence of the disaster as it was formed just after five weeks following the disaster on 6th of June 1986. The German Democratic Republic (GDR) had already its Ministry of Environment (Umweltministerium) since 1971.

Although its implementation was questionable (as we also see from the Chernobyl example) there was a more so-called environmental sensitivity which was being supported by the constitution at the eastern side of the Wall. The Socialist Unity Party of Germany (German: Sozialistische Einheitspartei Deutschlands, SED) as the one and only party of the country was outwardly implementing the necessities of the 1968 constitution of the German Democratic Republic as it was entailing the responsibility of state and society for the protection of nature and the environment. 58 The legal framework of the country to protect the environment was very detailed one and that was making them the second country in Europe that had a legislation on the environmental protection after Sweden. However, these efforts often remained in the legislation and it was very difficult to act according to it most of the time. Dependence on foreign energy

56 Der Spiegel, East Germany and Chernobyl: The Censorship of Fear, accessed June 5, 2016 http://www.spiegel.de/international/east-germany-and-chernobyl-the-censorship-of-fear-a- 412211.html 57 Der Spiegel, East Germany and Chernobyl: Looking Back at Chernobyl: In Germany, Fears of Food Contamination, accessed June 5, 2016 http://www.spiegel.de/international/spiegel/looking-back-at-chernobyl-in-germany-fears-of-food- contamination-a-411272.html 58 The Constitution of the German Democratic Republic 1968, accessed June 2, 2016 http://www.documentarchiv.de/ddr/verfddr1968.html (Artikel 15)

43 sources was hindering the implementation of the policies. Since the oil crisis in 1979, the country had to use its domestic energy source, the brown coal. The devastating effects of the crisis in the imported oil prices were forcing the government to do so. The coal was used excessively to generate electricity power thus it resulted more acid rains and air pollution likewise in West Germany. The government stopped publishing the environmental data by the beginning of the 1980s. The data were accepted as the secret of the state. But this implementation was actually an obvious censorship. The government aimed to cover its failures and the entire effects of the pollution could become evident after the reunification in 1990.59

If we look at the statistics60 of the air pollution sources in 1988, we understand the extent of the air pollution in the both sides of Germany. The GDR had by far a more polluted air comapared to West Germany as a result of the heavy reliance on coal. The sulphur dioxide pollution was one of the most dangerous damages to the environment as it caused acid rains and led the Forest Dieback which was known as “Das Waldsterben” in Germany. This name is gave because of the death of the trees have an obvious reason. In this case, it is the sulphur dioxide. The term was widely used in the politics and the media besides its technical definition. The heavy industrialization was endangering the future of the forests as it is understood from the statistics on the air pollution levels by source in 198861. During those years, a public awareness campaign which was called “Rettet den Wald” (Save The Forest) started in West Germany. That was a fight against the Forest Dieback (Das Waldsterben) and public environment debates were organized within the campaign.

59 Turnock D. Carter F.W. Environmental Problems of East Central Europe– (2002) : (p.141) 60 Ibid., 142. 61 Ibid., 142.

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A Forest that was affected by The Forest Dieback62

Figure 14: The Air Pollution Levels in Germany By Source in 198863

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As we see from the statistics, the sulphur dioxide played the major role in the Forest Dieback (Das Waldsterben) 62 63.The other crucial point in the data is that the huge difference between the GDR and West Germany in terms of the extent of the air pollution. The GDR had total 5.325 kilotonnes sulphur dioxide particules whereas West Germany had only less than a quarter of that amount. Another argument from the statistic is fact that the nitrogen dioxide which was emitted by the cars in West Germany also contributed a lot to the acid rains. We understand that West Germany had more than four times more Nitrogen dioxide emissions than GDR. This data is a contra to the factual situation of the other pollution sources. It is known that the nitrogen dioxide is emitted mainly by motor vehicle exhaust.64 That clearly reveals that West Germany’s contribution to the the Forest Dieback (Das Waldsterben) should not be overlooked as it is the fact that the car industry in West Germany was much more developed.65

The Promotion of The Wind Energy in Germany The wind energy was actually not completely unknown to the country. However, total capacity of the wind tribunes remained at 20 MW until the end 1989.66 The critisisms, civil awareness and the efforts of the Greens had finally come to fruition in that year. The Federal Ministry of Education and Research (German: Bundesministerium für Bildung und Forschung) inaugurated an incentive to create a market for the wind energy. The Ministry first announced the program for the installation of wind power plants up to 100 MW capacity. After the successful applications of the wind power stations, the incentive was extended and regulated as up to 250 MW capacity in 1991. The program offered a guaranteed payment to the producers. The Electricity-Feed-In

62 Environmental Problems of East Central Europe / edited by F.W.Carter and David Turnock – (2002) : (p.142)

63 Historisches Lexikon Bayerns, accessed June 20, 2016 https://www.historisches-lexikon-bayerns.de/Lexikon/Waldsterben 64 The World Health Organization, Nitrogen dioxide, accessed May 26, 2016 http://www.euro.who.int/__data/assets/pdf_file/0017/123083/AQG2ndEd_7_1nitrogendioxide.pdf 65 Stewart, Paul (1996) Beyond Japanese Management: The End of Modern Times?: 164 66 Jacobsson and Lauber, 2006

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Law further incresed the capacity objective to 250 MW in December 1990.67 By this incentive the government aimed the producers to gain practice on the wind power applications and to form the first steps towards a renewable energy market. The program also aimed to yield new and innovative wind turbine technologies, for that reason "The Scientific Measurement and Evaluation Programme" (WMEP) was incorporated in the program. With the technological support provided by the government, the newly installed wind turbines were monitored to assess their technical performance. 68

The act known as Das Stromeinspeisungsgesetz (StrEG) was enacted on 1st of January 1991.69 It supported the wind energy sector together with other kind of renewables. Although the StrEG was a great move to promote the wind energy, it couldn’t help RES-E to become a serious alternative to conventional electricity as it was expected due to fact that the ongoing oppositions to it. The existing energy giants in the country were using their existing advantaged position and opposing against the emerging wind power sector by using their political links.70 Despite the challenges, the wind energy capacity grew more than twenty times its size in ten years between 1990 and 1991. There were no plants available between those years, so the wind energy capacity of Germany was only bound to the onshore wind turbines (Windenergie an Land) 71

67 Energy Foundation China, The German 250-MW-Wind-Program, Dr. Ole Langniss, acces. June 8, 2016 http://www.efchina.org/Attachments/Report/reports-efchina-20070629- en/German_250MW%20Wind%20Prog_Ole%20Langniss.pdf 68 Ibid 69 Deutscher Bundestag, Gesetzentwurf der Fraktionen der CDU/CSU und FDP, accessed May 21, 2016 http://dip21.bundestag.de/dip21/btd/11/078/1107816.pdf (p.2) 70 Zitzer, Suzanne E. 2009 : Renewable energy policy and wind energy : 6 71 Bundesministerium für Wirtschaft und Energie, Bruttostromerzeugung aus erneuerbaren Energien in den Jahren 1990 bis 2015, accessed May 22, 2016 http://www.erneuerbare-energien.de/EE/Redaktion/DE/Downloads/zeitreihen-zur-entwicklung-der- erneuerbaren-energien-in-deutschland-1990- 2015.pdf;jsessionid=DA5B48F06E3381C17F6D36C7E8DDC357?__blob=publicationFile&v=6 (p.6)

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Figure 15: The Wind Energy Capacity in Germany (MW) 1990-199971

The German Renewable Energy Federation (BEE) (Der Bundesverband Erneuerbare Energie e. V.) was founded in December 1991 as an association to bring different renewable associations togeher nationwide. The organization gathered the interest groups under a single roof to tackle with the oppositions in an organizational way.72

With the growth in the wind energy sector, a new problem has emerged in the settlements. The wind turbines emit a great deal of noise, that is the combination of aerodynamic and mechanical noises. While aerodynamic noise is generated by the rotation of the turbine blades through the air, mechanical noise is emitted from the internal components of the wind turbines.73 To prevent possible conflicts between the residents of the wind turbine installed settlements and the contractors, the government prepared a legislation. The legislation (Baugesetzbuch, BauGB §35, 1996) aimed to promote the construction of the wind turbines outside of the settlements, on the other hand the local communities are required to spare a specific amount of space for the wind power plants within their administrative zone.74

The German electricity producers demanded the StrEG to be adjusted due to fact that their concerns to lose the market share. In 1996 Verband der deutschen Elektrizitätswirtschaft (VDEW) (The German Electricity Association) lodged a complaint to The Directorate Générale Competition (a subdivision of The European Commission) that they state aid rules. After a couple of discussions and demonstrations a new legislation was encacted in 1998. Gesetz zur Neuregelung des

72 Bruns, Elke; Wenzel, Bernd; Ohlhorst, Dörte; Köppel, Johann (2009):48 73 David A. Rivkin, Kathleen Toomey, Laurel Silk (2013) : 164 74 Zitzer, Suzanne E. 2009 : Renewable energy policy and wind energy

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Energiewirtschaftsrechts (Energy Supply Industry Act, ESIA) aimed to solve the ongoing problems that caused by the StrEG.

The electricity marked had been liberalized under the new legislation. The government had responded the demands of the monopolist electricity industry. The legislation had decreased the electricity prices for the consumers, so the subsidies for the renewable energy generation had decreased concordantly.75

With the coalition government of SPD (Social Democratic Party of Germany) and The Greens in 1998, which was run under Gerhard Schröder, the renewable energy would have a significant part in the politics. The promotion of the renewable energy would also create new job opportunities and partly help to increase the affordability level of the citizens. The unemployment was a serious problem in those years, especially in the eastern part of the country. The government took actions for the Solar Photovoltaic Systems. 100,000 new PV installations was aimed in the government’s incentive to reach 350 MW capacity in 2003. In the same year, the electricity consumption tax had become €0.0206/kWh for the private electricity consumers. The industrial consumers had paid 50% less tax. However, the renewable electricity generation was not exempted from the tax apart from the consumer-generated electricity.76

The Gesetz für den Vorrang Erneuerbaren Energien (EEG, Renewable Energy Sources Act, RESA) was approved in 2000. This was the continuation for the feed-in tariffs. The conditions were improved and special rates were applied for each type of RES-E based on their investment costs. The tied rates that depend on the value of the electricity in the market was repealed.77

75 Ibid 76 Zitzer, Suzanne E. 2009 : Renewable energy policy and wind energy 77 Ibid

49

The economic crisis and rising unemployment rates led the renewable energy investments raised criticisms in the country in 2008. Even though Angela Merkel was the Environment Minister from 1994 to 1998, she had a variational stand toward the renewables since she became German chancellor.

After the activities at the international level, it was necessary to establish an agency to handle with the renewable matters. Germany supported The International Renewable Energy Agency (IRENA) to be founded in 2009.

The Fukushima Nuclear Accident78

Following The Fukushima Nuclear Accident 78 in Japan which was caused by the massive earthquake on 11 March 2011, the government increased its determinance on the renewables. As Germany has also nuclear power plants, a crisis unit was set up by the Federal Ministry for the Environment. Even so the initial objective of the crisis unit were to protect the citizens from the contaminated foods from Japan, to make aware of the people about the impacts of the nuclear accident and to keep the citizens from any other radiological effects of the nuclear disaster, the actions taken would lead a fundamental change in the energy policy of Germany. The first action was to review of

78 Suffolk University, Fukushima Nuclear Disaster accessed May 20, 2016 http://blogs.cas.suffolk.edu/jstraka/files/2015/10/Fukushima-Daiichi-Nuclear-Plant.jpg

50 the safety conditions of the nuclear power plants. Based on the observations of The Reactor Safety Commission (RSK), it was announced that the German facilities were resistant to a possible flood which happened in Japan. However, the commission recommended the role of the nuclear power plants in the electricity generation to be limited. The commission reported that only in case of the presence of the alternative electricity generation sources would make a possible nuclear phase-out realistic.

The discussions and reports over the safety of the nuclear power plants would lead the 'Thirteenth Amendment to the Atomic Energy Act' to be approved by the Bundestag on 30th June 2011. According to the act, the nuclear phase-out is planned to be concluded by 2022.79

Even though the Fukushima Disaster was far away from Germany, its effects in the energy politics was profound. The phase-out was named as Energiewende which means energy transition.

79 The Federal Ministry of Environment, Nature Conservation and Nuclear Safety, Developments in Germany following the nuclear disaster in Japan, accessed May 25, 2016 http://www.bmub.bund.de/en/topics/nuclear-safety-radiological-protection/nuclear-safety/response- to-fukushima/overview/#

51

Figure 16

After the Energiewende the share of the coal in the energy mix of Germany remained same between 2010 and 2014.80 The first step of the phase-out had given its positive results. The increase in the renewabables clearly reveals that fact.

The decrease in the gas also shows that. The most importantly, the decrease of the nuclear energy’s share in the energy mix by 7 percent was the principal result of the energy transition policy.

Germany has another problem regarding the nuclear power. The country has to deal with the nuclear wastes. These are special nuclear wastes that are kept in the repositories which are typically kept below 300 meters underground. They are called “Endlager” (deep geological repository). The government is trying to find solutions for the wastes as they can be very dangerous in some cases.

80 Deutsche Welle, How far along is Germany's nuclear phase-out? accessed June 1, 2016 (from ag-energieblanzen.de) http://www.dw.com/en/how-far-along-is-germanys-nuclear-phase-out/a-18547065

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The Asse-II repository (Endlager) is an example for that. It served as a salt mine between 1967-1978 and later it was started to be used as a radioactive waste disposal site. However it is now being flooded. It was now understood that the mine was actually not suitable for the disposal of radioactive waste. 81 A commision was formed (Endlagerkommission) to tackle with that issue. The environmental consequences together with huge external costs to get the waste out are huge. It takes millions of euros and that brings an enormous fiscal burden to the government. That will stand as a challenge in the process of the energy transition. That may delay a fully functioning sustainable electricity market structure.82

Asse-II Repository 82

The Government Support to The Wind Energy:

Feed-in Tariffs and Reforms in Germany With the amenments in The Act on Granting Priority to Renewable Energy Sources in 201283 it was decided that for per kilowatt-hour from the wind power installations, the government would pay 4,87 EUR cents. This is the basic tariff.

81 Öko Institut e.v, What now for the Asse II repository?, accessed 16 August, 2016 http://www.oeko.de/en/research-consultancy/issues/nuclear-engineering-and-facility-safety/what- now-for-the-asse-ii-repository/ 82 Robin Wood, Asse-II, accessed 16 August 2016, https://www.robinwood.de/typo3temp/pics/1acb5424d4.jpg 83 Renewable Energy Sources Act – EEG, accessed July 24, 2016 https://www.clearingstelle-eeg.de/files/node/8/EEG_2012_Englische_Version.pdf

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In addition to that, the promotion of the wind installations was supported with a further feed-in tariff which pays 8,93 EUR cents for per kilowatt-hour that was generated from newly installed wind power station for the first five years.

This is the initial tariff. These tariffs are applicable to onshore wind installations. The government prepared the tariffs and conditions for the offshore wind farms under another title.

The old wind power installations were also encouraged to be replaced under the “” title of the same amendment. In case one ore more wind installations are replaced permanently within a specific wind installation area, the tariff increases by 0,5 cents per kilowatt-hour. 84 The wind installations to be replaced must have been built before 2002 to benefit from this scheme.

The aim of this amendment can be thought as phasing-out the old wind installations and modernize the wind energy capacity.

The offshore wind installations are also supported with a basic and an initial tariff. The basic tariff was decided as 3,5 cents per kilowatthour. The initial tariff for the offshore installations was decided little bit differently compared to the onshore initial tariff. For the electricity that is generated from a newly installed offshore wind installation is decided to be paid 15 cents per kilowatthour for the first twelve years.85 This is a very long time compared to five years which is applied to the onshore wind installations. From that tariff, we can understand the significance level of the offshore wind farms for the government. The government intends the offshore installations to develop. It is obviously more challenging to build offshores installations than onshore ones. The difficult building conditions and the economic burden for the

84 Ibid 85 Renewable Energy Sources Act – EEG, accessed July 24, 2016 https://www.clearingstelle-eeg.de/files/node/8/EEG_2012_Englische_Version.pdf

54 investors can only be eliminated through such promotive government policies like these feed-in tariffs. The promotion of the offshore installations also help the citizens and local communities to use their lands and residential areas stress-free. This development also decreases a possible noise level within the villages or any other settlements eliminating the possibility of a noise pollution.

The offshore wind installations are usually more steady that is they receive more regular wind thanks to their positions in the oceans and seas. 86 That makes them a more predictable source of energy. One of their biggest disadvantage can be the connection of the offshore windfarms to the grids and to the consumers. Germany has been experiencing difficulties to link its offshore windfarms to the consumers who are in the south of the country, via long-distance cables. The water depth in the sea is also another challange to set up the windfarms. That raises the installation costs a lot. The submarine cables must have a specific capacity in order to be able to connect the electricity which requires a financial burden.87 The cable prices are much and in case the windfarms are connected the grid capacities must be arranged accordingly too. These are complementary costs.

The reform of the Renewable Energy Sources Act in 2014 helped to sustain the government support in the wind energy together with the other renewables. The support has been namely, the purchase guarantee of the renewables by the government with fixed tariffs and the priority given to the renewable energy sources to feed in to the grids. The rapid expansion of the wind turbines also brought some challenges for the grids, as their capacity were at a certain level.88 That might have risked the security of the grids and endanger the security of the electricity supply, which is one of the most

86 Deep Water Wind, Why Offshore Wind? accessed August 22, 2016 http://dwwind.com/why-wind/ 87 Federal Ministry for The Environment, Nature Conservation, Building and Nuclear Safety, Offshore Wind Power in Germany, accessed August 20, 2016 http://www.bmub.bund.de/fileadmin/bmu- import/files/english/pdf/application/pdf/eupol_referat_kuhbier_en.pdf 88 2014 Renewable Energy Sources Act, accessed July 25, 2016 http://www.bmwi.de/EN/Topics/Energy/Renewable-Energy/2014-renewable-energy-sources-act.html

55 important objectives of the European Union energy policy. So, it is better for the industry to grow in a planned way calculating the capacity of the grids. To understand the latest condition of the wind energy sector in Germany, let’s look at the chart below which was prepared by Strom-Report89, which is a statistic service for the electricity generation and the latest situation. The website benefits from various statistical data from Federal Ministry for Economic Affairs and Energy, Federal Network Agency, Federal Statistical Office of Germany and so on.

89 Strom-Report, accessed July 29, 2016 http://strom-report.de/renewable-energy/

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Figure 17

57

Today, Germany is the leading country in the EU in terms of the wind energy capacity building. That is, 47% of the all new wind energy installations of Europe was realized by Germany in 2015. Poland, France and the UK became the second, third and fourth respectively among the most developing countries in the wind power generation installations in that year.90 To understand the importance of the investments and to give a market view, it is better to present the GDP per capita of the countries. The countries had following GDP values as of December 2015: France 36.200$, Poland 12.500$, UK 43.700$ and Germany 41.200$. According to the statistics from the World Bank, these countries had shares of renewable energy in the total electricity generation (at the beginning of 2015): 5,12%, 11,1%, 17,6% and 23 respectively. The rate increased from 23% to 30% percent at the end of 2015 (see p.16).

UNDERSTANDING THE WIND POWER POLICY IN TURKEY:

The Electricity, Its Development and Market Structure in The Country To understand the wind energy policy of Turkey, it is essential to have a look at the short history of the electricity in the country. The electricity policy has formed today’s wind energy policy in Turkey. Besides, the energy policies have always been in parallel with the economic policies. As known, the period after The Second World War was a time of which the capitalist system was restructured in the world. The situation was not so different in Turkey as well. The government had an important role to regulate the social and economic life during this time and that became the characteristic of that period. So the government control on the electricity market was much more at the beginning.

The country experienced its first electricity generation installment in 1902 in Tarsus. That was a dynamo which had a capacity of 2kW. It was operating with the movement

90 The European Wind Energy Association, 2015 European Statistics accessed June 5, 2016 http://www.ewea.org/fileadmin/files/library/publications/statistics/EWEA-Annual-Statistics-2015.pdf

58 of a water mill. The first big power plant was built in 1913 in Istanbul.91 In 1935, the total installed power capacity was 126,2 MW, the power capacity was 213.000 MWh and 43 city centers were able to benefit from the electricity. In 1948, (Çatalağzı Termik Satral) a new power generator was built in the north-western city of Zonguldak and that contributed to Istanbul’s electricity with a 154 Kilovolts transmission line. In 1950s, the private sector entered the electricity market and they benefited from the government incentives as the government needed the privates sector’s support to increase the power generation capacity nationwide. Çukurova Elektrik A.S. (ÇEAS) in and Kepez Elektrik A.S. in Antalya were such companies to took part in the power generation investments. After these efforts, the total installed power capacity reached 407,8 MW and the power capacity became 789.500 MWh. With the increase of the production and the increasing Population during 1970s, it was essential to have an organizational structure to administrate the power generation, distribution and transmission. TEK (The Turkish Electricity Institution) was established as a result. The total installed power capacity reached 2234,9 MW and the power capacity became 8.600.000 MWh.92 93

Çatalağzı Thermal Power Station – Zonguldak93

91 The Chamber of Electrical Engineers (EMO), Turkey, The History and The Development of Electricity , accessed June 19, 2016 http://www.emo.org.tr/ekler/0082ac261d74f5a_ek.pdf 92 Ibid 93 The Real Estate Encyclopedia, Çatalağzı Thermal Power Station – Zonguldak, accessed May 27, 2016 http://emlakansiklopedisi.com/images/wiki/catalagzi-termik-santrali-cates-zonguldak_%20712477.jpg

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As Turkey has always been dependent on the foreign supply to run its power plants, the country was affected from the energy crisis that had its effects worldwide between 1970 and 1980. It was an inevitable consequance to Turkey during those years due to the nature of the fossil fuel power plants which were installed. The worldwide energy crisis affected the supply and demand equilibrium thus Turkey had to take some precautionary restrictive measures to sustain its electricity policy. Despite these hitches, the total installed power capacity reached 5118,7 MW and the power capacity became 23.300.000 MWh. 94 That can be explained with the increasing population and the growing industry.

Even though in 1982 the all electricity generators, transmitters and distributors were merged under TEK (The Turkish Electricity Institution), the private sector investors were able to undertake these electricity transactions starting from 1984. The monopoly of the government was prolonged a few years more, most probably due to fact that the ongoing coup d'etat (1980 Turkish coup d'état) and its political consequences in the country. That is, the politics was affecting the free market economy as well. Due to the political atmosphere, the economy was lagging. 95

Between 1988 and 1992, ten equity companies were appointed by the government to undertake generation, transition and distribution operations within their assigned areas. By this way, the economic recession followed by the coup was tried to be eliminated. These development promoted the electricity generation and made a clean break.96 In 1993, TEK (The Turkish Electricity Institution) was privatized. After the privatization the government founded two state-owned enterprises TEAŞ and TEDAŞ. In 2001, The Act of The Electricity Market (The Act 4628) was legislated to provide an electricity market which has a quality, sustainable, affordable and environment-friendly electricity

94 The Chamber of Electrical Engineers (EMO), Turkey, The History and The Development of Electricity Energy in Turkey, accessed June 19, 2016 http://www.emo.org.tr/ekler/0082ac261d74f5a_ek.pdf 95 Karacan, Elifcan (2014) : (p.77) 96 The Chamber of Electrical Engineers (EMO), Turkey, The History and The Development of Electricity Energy in Turkey, accessed June 19, 2016 http://www.emo.org.tr/ekler/0082ac261d74f5a_ek.pdf

60 supply for the consumers. In order to that, the market was designed to operate in line with the competitive market conditions. The market was to aimed be financially strong, stable and transparent as well. By this way, the electricity market was set to be regulated and monitored independently. That legislation also involves the procedures and principles of establishment of The Electricity Market Regulatory Authority (today a part of The Energy Market Regulatory Authority).

The authority is responsible for the rights and obligations of all natural and legal entities regarding electricity generation, transmission, distribution, imports, exports, wholesale and retail. The legislation has determined a road map for the privatization of the electricity generation and distribution assets as well.97

In the same year, Türkiye Elektrik İletim Anonim Şirketi (TEDAŞ), Elektrik Üretim Anonim Sirketi (EÜAŞ) ve Türkiye Elektrik Ticaret ve Taahhüt Anonim Şirketi(TETAŞ) were found after the council of ministers’ decision. TEİAŞ serves as a body to implement the policies such organizing the operation of the electricity transmission, the new infrastructures that fit the modern market conditions, the supply distribution, electricity market stabilisation and reconciliation operations for the privatized electricity market.98

After the privatization of the electricity distribution operations in 2003, TEDAŞ’s responsibility was divided into 21 private electricity distribution companies. The new market was structured as follows:99

97 Ibid 98 Ibid 99 The Privatization Agency (OIB), Turkey, Privatization of Turkey’s Electricity Distribution Industry, accessed June 19, 2016 http://www.oib.gov.tr/tedas/bilgi_dokumani_turkce.pdf (p. 13)

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99 The Development of The Market Structure in Turkey

The Emergence of The Wind Power and The Market Conditions After the brief history of the evolution of the electricity market in the country, it is better to have a look at the causes that form the market structure. The country has always depended mainly on foreign energy supply to generate its electricity. Even though today the renewable sources are on the rise, there is still a long way to sustain a functioning electricity market based on the renewable energy sources. The natural gas and fossil fuel based thermal power stations are still today determining the electricity prices. The efforts in the recent years helped the entrepreneurs to get aware of the wind energy potential in the country. Today there is an increasing trend in the wind installations. 100

100 The Chamber of Electrical Engineers (EMO), Turkey, The Electricity Statistics, accessed August 1, 2016 http://www.emo.org.tr/genel/bizden_detay.php?kod=88369#.V59ibPmyOkp

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Figure 18: The Evolution of The Installed Electricity Capacity

100 in Turkey 1970-2014

The Turkish goverment has its 2023 target which is the centenary of the Republic or Turkey. Within these targets the installed wind energy capacityis aimed to be increased to 20.000 MW. The total electricity generated from the wind power is also aimed to be 7.558 GWh by 2023.101 The Ministry of Energy also gives priority to diversify of the energy sources within its 2015-2019 Strategic Plan. To overcome the integration problems of the wind power to the grids are vital. A monitoring system for the wind sources is one of the objectives of the ministry. The ministry aims to create a more investor awareness with new financial tools. The subsidies will always keep its importance. The feed-in tariffs will be developed.102

101The Ministry of Energy, The Strategy Document of The Security of Supply, accessed June 29, 2016 http://www.enerji.gov.tr/File/?path=ROOT%2F1%2FDocuments%2FBelge%2FArz_Guvenligi_Strateji_Bel gesi.pdf 102The Ministry of Energy, The 2015-2019 Strategic Plan, accessed June 29, 2016 http://sp.enerji.gov.tr/ETKB_2015_2019_Stratejik_Plani.pdf

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The share of the wind power generated electricity in the total domestic generation and naturally in the consumption were very low at the beginning of the century. The share of the wind energy in the total electricity that Turkey consumes has dramatically grown, that is more than 162 times between 2000 and 2016 (the first six months). The rate has exceeded 5% as of 15th of August 2016.

103

Figure 19: The coverage ratio of electricity consumption with wind power generation

103 In Turkey

The extraordinary acceleration that the wind energy market gained in the recent years is further encouraged with the subsidies by the government. It is the fact that the initial investment costs of the wind installation are very high. The current subsidies and purchase guarantees which were offered by the government after the approval of The Renewable in 2010 aim to reach the 2023 targets which to have 30% of electricity generation from renewable sources until that year. The investors are striving to overcome the initial investment costs with the benefits of the law. The legislation also included some bonus payments to support the domestic produced wind installation components.

103 Enerji Atlasi, The Statistics of The Electricity Generation from Wind, accessed July 24, 2016 http://www.enerjiatlasi.com/elektrik-uretimi/ruzgar

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By this way, the purchases from the internal wind hardware manufacturers were encouraged. The investors get extra payments for their domestically installed as long as the duration of the feed-in tariff.

The current tariff (The Act 5346) stipulates the payments as follows104:

Figure 20: The Current Feed-In Tariff in Turkey104

104 Figure 21: The Bonus Payments For Domestically Installed Wind Turbines

104 International Energy Agency, Renewable Energy Law 2011 in Turkey, accessed July 27, 2016 http://www.iea.org/policiesandmeasures/pams/turkey/name-24961-en.php

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It is always difficult wheter a specific electricity generation method is cheaper under all conditions. However; the initial investment costs, the feed-in tariffs, the energy policy of the government (the energy mix), the market statics and the market confidence determine the investments in the wind industry. Turkey, today tries to overcome the technological and political challenges to bring the sector further. By doing that the government also aims to create suitable market conditions for its domestic investors with the bonuses paid to the companies that use domestic hardware components for the their wind installations. With that support, the government aims to accelerate the wind installations to be built.

ARES - Alaçati Ruzgar Ajansi A.S. Case (Turkey) The of the company in Alacati (Izmir) supplies the electricity demand of the neighbourhood at the first hand. The coastal town of Cesme supplies its electricity demand during winters only with the electricity that generated by that wind farm. As Cesme is a touristic town, it is many times more populated during summers and the electricity demand is much more higher concordantly. Thus, it is impossible to supply the demand during summers.

The manager of the wind farm explains that they need wind which has minimum speed of 4,5 meters per second to operate the wind turbines and they get the maximum efficiency from when they receive wind that blows with a speed of 15 meters per second. They have to stop operating the wind turbines when the wind’s speed reaches 25 meters per second in order to protect the wind turbines from a possible collapse due to the gale force as a result of the storm. The most efficient period for electricity generation happens in April, May, September and October whereas they have to stop operating the turbines a few times a year and that causes the productivity to decrease. The manager says the wind turbines work with 30-35% within capacity, however he underlines the capacity increase from 0,6 MW to 3,0 MW level thus there is a substantial development in the generation.

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The manager also finds the bonus payments meaningful within the Turkish feed-in tariff scheme for the domestic wind productions as the wind firms face delays in the deliveries of the wind farm components when they order them from abroad. The delivery time of the wind components used to take 2-3 years but with the help of the feed-in tariffs for the domestic product, now the estimated delivery times have decreased to 6-8 months. That is a great development he says. Currently they invest 1 million euros for per MW he adds.

He explains basically the possibility of Turkey to meet the national 2023 objectives which are more or less parallel with the EU 2020. He describes the current sitation as: A typical wind turbine which has 2,5 MW capacity can produce 60 MWh electricity daily with its maximum power. That means, it can produce 21.900 MW per year. However the tribunes work with their 30% capacity and that results 6.500 MW electricity generation instead of 21.900 MW.

According to the current feed-in tariff the electricity generated by the wind turbine receives 5,5 euro cents for per KWh and that makes an annual turnover of 371.250 euros despite its investment cost 2.500.000 euros. Thus, it pays for itself in 7 years.

Another problem the investors face is the painful and slow process of getting permission from the authorities. The investors have to get permission from 18 different authorities to build a wind turbine and the process takes between 1,5 and 2 years. There are over 180 investors in the wind turbines in the country who suffer these processes. As the bureaucracy takes time, the company expect an additional time to benefit from the government incentives in the wind energy. The manager underlines that it may take up to 5 years to start operating a wind turbine due to long bureaucratic processes.

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To reach the objectives, it is demanded by the investors that the application period for the government incentives to be prolonged until 2023. Every year average 500 MW wind capacity is added. It should be between 800-2.000 MW to reach the objectives.105

The predictions of the manager of the wind power company were more or less correct as he had mentionaed about these in an interview three years ago. The development speed of the Turkish wind market is still not developed as it was expected. The share of the wind energy in the total electricity generation is still limited as it consists 5% of the total electiricity generation. According to the 2023 objectives, it is aimed to reach 100.000 MW installed power and the wind energy is expected to consist 20% of the total installed capacity.

Today the installed capacity is 73.550 MW and if we look at the difference between 2014 and 2015, we see 3.627 MW capacity increase in the total electricity capacity from all sources.106 It seems Turkey needs little bit more acceleration to reach the desirable wind energy market conditions to be able to contribute the electricity market. The diversification of the sources and the priority for the wind energy in the grid entrance will help for a faster market integration. The government should be aware of the bureaucratic problems. An integrated application process for the wind farms should be implemented to overcome these obstacles.

105 Enerji Enstitüsü, The Interview with Alaçati Ruzgar Ajansi A.S. , accessed July 29, 2016 http://enerjienstitusu.com/2013/05/06/ruzgar-hem-turkiyeye-hem-yatirimcisina-kazandiriyor/ 106 The Chamber of Electrical Engineers (EMO), Turkey, Statistics of Electricity Energy in Turkey, accessed June 19, 2016 http://www.emo.org.tr/genel/bizden_detay.php?kod=88369#.V6e0tvmyOko

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THE CHARACTERISTICS AND THE DEVELOPMENT OF THE WIND ENERGY IN SPAIN During the last decades, the wind energy became one of the fastest emerging renewable energy source in Spain in parallel with the development of the wind energy in the world. By the time, the country has become a good example in the wind power for the other countries.

Actually the country has similar concerns that the rest of world has, in order to improve the wind energy sector. The most obvious reason is the negative effects of the green house gas emissions. For that reason Spanish energy market has sought to steer its energy market strategies into the wind energy sector as an alternative resource so far. The growth in the sector didn’t arise only with the internal business mechanisms in the country. The international Spanish companies had also big roles in the promotion.107

Spain has always had distinctive characteristics in promoting the wind power. It used feed-in tariffs with showing their credibility in the business. With the political and the institutional success in the feed-in tariffs, the country somehow managed to reach a sustainable wind energy policy. The country has always conducted a balanced policy between being flexible and stable in the feed-in tariffs. 108

Like other states, Spain has been investing on the wind energy sector to secure its energy supply as it is one of the countries that depend on the foreign fossil energy supply. The country also cares about its local environment and climate. A possible change in the climate may result irreparable consequences therefore the government has always been aware of that fact and taken its actions accordingly.

107 Pindado S. , Aminzadeh F. (2011) 108 Perez Y. , Real FJR. The public promotion of wind energy in Spain from the transaction costs perspective 1986–2007 (2008)

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The government first aimed to comply with the EU directive on the on the promotion of electricity produced from renewable energy sources in the internal electricity market (Directive 2001/77/EC).109 The direction was requiring a stable market condition for the wind energy together with other renewables. The market penetration of the electricity generated by wind power installations was the liability of the national governments within the EU. That is, the entry to the grids with equal prerequisites.

Furthermore, the share of the total electricity consumption produced from the “newly” installed renewables had to reach at least 12% by 2010 within the EU 2010 objectives. Besides, the entry of the renewables to the grids were obliged to be transparent, especially non-discriminative compred to the fossil fuels.110 It was not clearly described which of the renewables had to be supported but the emergence of the wind power was a good opportunty for Spain to fulfill the objectives. To reach these objective, the Spanish government sets targets and prepared a roadmap.

The political and institutional structure to promote wind energy needed to be well- prepared as a first step. In addition to this, there was an obvious need of a technological development on in the wind industry. The government’s role was much more important than it was thought. The external costs of the wind installations had to be compensated by the government to encourage the investors at the first hand. Only with that way a competitive market could be enabled. It was not that easy to achieve that in a short time as there were three main reasons that bring bias to the market against the wind energy together with other renewables. One of them was (and has always been) directly linked with the wind power. Due to the nature of the wind power, it was not clear to estimate how much wind power would be produced as it has always provided an irregular power according to the variation of the wind in the long run.

109 Directive 2001/77/EC, accessed July 30, 2016 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32001L0077 110 Ibid

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The second reason was related with the technological development as it required extra costs for the electricity generation business. The third was the small size of the newly emerging wind industry. It was a kind of a demand side management issue. 111

It is better to have a closer look at the basics of the demand-side policies and innovation efforts in the wind energy technologies to understand the obstacles and the opportunities in the wind industry in Spain. These are generally the renewable energy standards, clean energy standards, transmission guidelines, etc. These policies also guarantee the investors for minmum of five years after they commission their projects related with renewable energy technologies.112 Even though the demand-side policies help to promote wind energy, the exact impact are sometimes are not predictable as the private investors find a room to continue their businesses with the fossil-fuel technologies within a policy which is actually supposed to serve for the renewable energy promotion. The example to that can be given as the Emissions Trading Scheme.

Within the scheme, some companies try to develop their fossil-fuelled installations to emit less carbon instead of steeming their businesses into renewable energy technologies. The example mainly happened in Germany, so the market in Spain had also concerns towards the possible results of such demand-side policies.113

The wind energy has become the symbol of the renewables in the country as the economic instruments to support RES-E have mainly served for the development of the wind installations. The photovoltaics and mini-hydroelectrics have not yet reached an equal level of success. Today, Spain is the second biggest country in Europe in terms of the installed wind energy capacity after Germany. According to the statistics at the end

111 Perez Y. , Real FJR. (2008) 112 The New North: Policy and Manufacturing: Demand-Side Policies Will Fuel Growth in the WindManufacturing Sector, accessed August 1, 2016 http://www.thenewnorth.com/resources/mwgpolicypaper.pdf 113 International Renewable Agency, Renewable Energy Innovation Policy, accessed July 27, 2016 https://www.irena.org/DocumentDownloads/Publications/Renewable_Energy_Innovation_Policy.pdf (p.14)

71 of 2015, the country has 23.025 MW installed capacity. 114 Even though a standstill period was experienced in 2015, the country still keeps its position in the ranking as the second.

The future of the wind energy in the country depends highly on the credibility of the feed-in tariffs. The lack of credibility may result similar consequences that the country experienced in 2015, with the dramatic decrease in the installed capacity growth. To sustain a sustainable wind policy is highly related to understand the roles of the political and institutional factors.115

The generous feed-in tariffs together with convenient geographical conditions for the wind farms made the wind industy in Spain profitable. 116 But, this policy was not succeeded in one day. There were many challenges to face. In a similar way in Germany and Turkey, the global energy crisis showed its negative effects in Spain during seventies as well. The goverment tried to take precautions towards the devastating results and the possible risks of the crisis. The country was preparing regular National Energy Plans (PEN) during those years and the plan used to be approved by the parliament. The demand and production analysis for the energy was made in these plans. With these reports, it was also aimed to put a spotlight on the citizens towards an environmental awareness, especially during eighties.117 The reason behind the enviromental concerns -undoubtedly- were the consequences of the nuclear accidents and future threats in the world.

114 The Global Wind Energy Council, The Global Wind Energy Capacity 2015, accessed June 7, 2016 http://www.gwec.net/wp-content/uploads/2012/06/Global-Installed-Wind-Power-Capacity-MW- %E2%80%93-Regional-Distribution.jpg 115 Perez Y. , Real FJR. (2008) : (p.1062) 116 Ibid 117 Perez Y. , Real FJR. (2008) : (p.1062)

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The government subsidies which offered guaranteed electricity purchase by the government helped to develop the wind industry starting from eighties. The government supported individual wind installation projects until nineties. The RD 82/1980 Energy Conservation Law was passed and the first classification was made regarding the criterias of the government support for the prospective wind installations. 118 The Institute for Energy Diversification and Saving, (IDAE) not only consulted to the government but also became responsible for the funds within the subsidiaries. By the time it became an autonomous body with technical autonomy.119

By 1994, the act “Royal Decree 2366” was approved and the wind energy sector benefited from a clearer feed-in tariff. That is, the avoided generation, transport and distribution costs were calculated in detail. With these implementations the risk for the entrepreneurs was tried to be minimized despite the investment risk was still high as there were no details on the design of the price and its evolution.120

The milestone in the -beyond any doubt- was The Promotion Plan for Renewable Energies (‘Plan de Fomento de las Energías Renovables en España’) in 1999. The plan stipulated that the country would generate at least 30% of its electricity from the renewables in 2010.

The feed-in tariffs in Spain has been criticized due to its cost to the government. As the government spends more for the FITs, the final electricity price for the consumer increases accordingly. The total cost for the FITs had increased from 270 M€ in 1998 to 620 M€ in 2003. That was the 4% of the total electricity sector turnover. As a consequence, it would have negative impact on the final electricity consumer price as it

118 Ibid 119 Institute for Energy Diversification and Saving, IDAE, accessed July 1, 2016 http://www.idae.es/index.php/mod.pags/mem.detalle/id.13/relmenu.32/relmenu.30 120 Dinica V. Support systems for the diffusion of renewable energy technologies—an investor perspective Energy Policy, 34 (2006) p. 461–480

73 would increase from 3.02 c€/kWh to 3.28 c€/kWh between 1998 and 2003. 121 It is somehow a very critical Aspect of the subsidies as one of the most important aims of the governments should always be to provide affordable electricity for the consumers after all.

As the wind power has always been the leading renewable source in Spain, the situation served well for the promotion of the wind industry in the country. 122

Figure 22: Annual evolution and total installed wind capacity in Spain (in MW)122

The country experienced its peak growth rate in the wind capacity in 2007. Despite its fast growth,123 the stagnation in the recent years starting from 2013 is not negligible. The decrease was a result of the lack of investor confidence in the Spanish wind energy market as it was stated in this study earlier. That is, the short-range market predictions from the government and the lack of the market confidence as a result.

121 Perez Y. , Real FJR. (2008) : (p.1063) 122 The Spanish Wind Energy Association (AEE), accessed 20 July, 2016 http://www.aeeolica.org/en/about-wind-energy/wind-energy-in-spain/installed-power/ 123 Ibid

74

Figure 23: Total Installed Wind Capacity İn Spain (in Mw)125

Even though the decline in the capacity, the country succeeded to reach 47,704 GWh electricity generation from wind which covers the electrical demand of 19.4% in the country in 2014.124 Despite the standstill situation of the capacity growth in the recent years, the cumulative installed wind capacity of Spain is still very competitive.125

124 The Spanish Wind Energy Association (AEE), accessed 20 July, 2016 http://www.aeeolica.org/en/about-wind-energy/wind-energy-in-spain/ 125 The Wind Power: Spain Production Capacity, accessed July 20, 2016 http://www.thewindpower.net/country_en_3_spain.php

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Figure 24: The Tariff Deficit and Increasing Prices in Spain126

The increase in the electricity prices is excessive since 2008 due to fact that the tariff deficit of the country. That example shows us the necessity of a balanced renewable energy policy. The benefits of the policies should not be prepared to salvage the day, they must serve for the future of the consumers both environmentally and affordability. 126

CONCLUSION Today there is an appreciable growth in the wind energy market in Turkey, Germany and Spain. Especially the current energy crises and the shortage of the fossil fuels led these countries to look for alternative, clean and renewable sources. The growth is being supported with applicable legal frameworks, monitoring and the update of the objectives.

The European Union is aware that the consumers are prone to overcharges due to their lack of knowledge in the electricity consumption. For that reason the EU takes a range of precautions with its regulations to create more transparent and competitive market

126 Deloitte, European Energy Market Reform, Country Profile: Spain (p.5), accessed August 16, 2016 https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Energy-and-Resources/gx-er- market-reform-spain.pdf

76 conditions. To do that it encourages the renewable energy sources. The wind energy has been one of the leading renewable energy source as a result of the policies. The freedom of choice and flexibe switch among the suppliers stand as the ultimate objectives within the EU framework. The last developments in the wind energy will help the diversification in the electricity market and provide the competitiveness.

The independence from the fossil fuels are vital to sustain these policies. The predictability of the electricity markets can be achieved in this way. That is, the energy sources to generate electricity should always under control of the member states. The dependeny of oil imports and the related risks pose a problem on the way to a sustainable future. The energy saving is as important as the promotion of the renewable energy sources for that objective. That will also help to reduce carbon emissions and support the climate protection.

The acceleration in the market growth is higly related with the government policies. Turkey’s installed capacity has suddenly grown following the 5346 Renewable Energy Law. The capacity growth following the ratification of the act has been nearly 5.000 MW and the total capacity before the act was only 20 MW. That clearly shows that the act was a milestone for the development of the wind energy market in the country. The Share Of The Wind Power in The Total Electricity Consumption as stated earlier in the research became 4,88% after the first half of 2016 as it was only 0,04% in 2005 the year which the act was passed. The total electricity consumption is increasing in parallel to the population growth. Even though there is a big development in the wind sector, its share can seem little due to the size of the electricity market. The fossil fuel and nuclear investments are still very present despite they don’t comply with the EU objectives. The majority of the market growth still comes outside the renewable sources.

The biggest obstacle now for Turkey is the long lasting procedures when an investor decides to install a wind turbine. That may result delays for the businesses to benefit from the feed-in tariffs. Until the contractors get the necessary building permissions sometimes the tariff expires. Some extensions are needed at this point.

77

Germany is taking the environmental concerns in its policies as priority. Actually the policies have been formed after the environmental concerns. had always been a concern but the nuclear threat has been emerged more after the Fukhisima Disaster. So, the recent policies have been formed according to the latest developments worldwide. The wind sector had already a history until the Fukushima, it only triggered a faster development in the wind energy and the most importantly led the nuclear phase- out. The objectives are on the track to reach EU 2020 goals. The nuclear plants are sometimes substituted with coal burning thermal power plants and that situation contradicts the environmental objectives. The decisions and tariffs are needed to be prepared carefully to prevent unintended results such as cutting edge thermal technologies. The realistic alternatives the phasing-out nuclear plants can be wind power plants. The feed-in tariff (EEG) keeps the market alive. The capacity growth increases the generation in parallel. The smart grid technologies and the new transmission developments help the wind power to be connected to the grids. That will help to create a more competitive market and affordable electricity prices. Besides, the wind energy market employs more than 150.000 people within the country. When there are more jobs, the affordability level of the people also increase.

The example of Spain is little bit different, as the national companies today invest a lot more outside the country. In the recent years the investors don’t prefer their own country to broaden their businesses. The unsatisfactory and untrusty government policies diverted the investors’ direction. The companies owe the government as the previous tariffs and legislations helped them worldwide brands. Even, the government sometimes gave priority the wind investments to scale up at the risk of the financial burden. We can understand that from the example of the generous feed-in tariffs between 1998 and 2003. The consumer prices had increased 0,26 c€/kWh in five years. The government was making long-term plans at the risk of the increasing consumer prices in the short run. These policies were made assuming that there would be a more diversive and competitive market in the future. Hovewer the policies helped the wind companies to become worldwide brands. This became after the successful run of the feed-in tariffs and the successful run of the companies. That situation can be critisized

78 as the companies serve for their own interests rather than the internal electricity market as it was earlier anticipated. From the Spanish example we can take lessons to conduct a more balanced feed-in policy taking the consumers’ interest first. So, the amount of the subsidies should be realistic. Otherwise, it is unlikely the consumer prices to decrease in the near future.127

Figure 25: Electricity prices for domestic consumers (in euros, kWh)127

After analyzing the effects of the wind energy to the electricity markets, we can say that the wind energy is still at its front-end in terms of the impact to an affordable electricity market. Its share in the electricity generation in the three countries is still limited. The preliminary results have mainly served for the interests of the investors. But we shoudn’t underestimate the sustainability of the businesses. A functioning market structure can only be achieved through the presence of alternative energy companies. The wind investments will help to steer that. In the long run it will for sure conribute the diversification of the electricity sources and enable a competitive market structure. That will be achieved through the EU vision.

127 Eurostat

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Figure 19: The coverage ratio of electricity consumption with wind power generation in Turkey, Enerji Atlasi, The Statistics of The Electricity Generation from Wind, accessed July 24, 2016 http://www.enerjiatlasi.com/elektrik-uretimi/ruzgar

Figure 20: The Current Feed-In Tariff in Turkey

International Energy Agency, Renewable Energy Law 2011 in Turkey, accessed July 27, 2016 http://www.iea.org/policiesandmeasures/pams/turkey/name-24961-en.php

Figure 21: The Bonus Payments For Domestically Installed Wind Turbines in Turkey

International Energy Agency, Renewable Energy Law 2011 in Turkey, accessed July 27, 2016 http://www.iea.org/policiesandmeasures/pams/turkey/name-24961-en.php

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Figure 22: Annual evolution and total installed wind capacity in Spain (in MW)

The Spanish Wind Energy Association (AEE), accessed 20 July, 2016 http://www.aeeolica.org/en/about-wind-energy/wind-energy-in-spain/installed-power/

Figure 23: Total Installed Wind Capacity İn Spain (in Mw)

The Wind Power: Spain Production Capacity, accessed July 20, 2016 http://www.thewindpower.net/country_en_3_spain.php

Figure 24: The Tariff Deficit and Increasing Prices in Spain

Deloitte, European Energy Market Reform, Country Profile: Spain (p.5), accessed August 16, 2016 https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Energy-and- Resources/gx-er-market-reform-spain.pdf

Figure 25: Electricity prices for domestic consumers (in euros, kWh)

Eurostat

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Declaration of Honor I herewith declare that I am the sole author of the current master thesis according to the regulation of Bremen University of Applied Sciences and that I have conducted all works connected with the master thesis on my own.

Furthermore, I declare that I only used those resources that are referenced in the work. All formulations and concepts taken from printed, verbal or online sources be they word-for-word quotations or corresponding in their meaning are quoted according to the rules of good scientific conduct and are indicated by footnotes, in the text or other forms of detailed references. Support during the work including significant supervision is indicated accordingly.

The master thesis has not been presented to any other examination authority. The work has been submitted in printed and electronic form.

I am aware of the legal consequences of a false declaration of honor.

Date Signature

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