Turkey has been very dependent on Russian natural sources for energy. Russia has been the major supplier of natural gas for Turkey through the pipelines crossing Black Sea and Eastern Europe. Turkey is importing over 60 billion m3 of natural gas mostly from Russia and partly from Algeria and Nigeria as LNG.
Significant amount of infrastructure investments has been realized since the 80s to cover the whole country with NG distribution network. The main reason for this aggressive investment was to reduce the dependence on coal for household and district heating as air pollution was a growing concern for the whole country particularly for the big cities in Turkey. These investments paid off and the air pollution problem was almost solved. However, with the increase in NG prices many people, particularly lower income groups, are switching back to coal for heating. Combined with the unusual winter conditions of this year, the urban air pollution has become a problem again.
Almost 33% of the country’s electricity production is from the natural gas fired power plants and the cost of the electricity production has been surging substantially due to increasing NG prices and decline of Turkish Lira against the hard currencies. The increase in electricity prices has pushed the prices of almost every product in the market and consequently boosted inflation. The uncontrollable increase of inflation, which is expected to exceed 60% as of March 2022, is creating pressure on the living standards of fixed income groups such as civil servants and working class. The cost of buying the electric cars in Turkey has substantially increased due to the devaluated Turkish Lira. Furthermore, combined with the huge increase in the electricity prices, the demand for new electric is low.
The Government of Turkey has implemented several precautions to reduce the adverse effect of increasing energy prices and inflation by providing subsidies for end users. The subsidies are being financed by the central budget which was already in deficit and resulted in severe cuts on Government spending in other sectors such as education and health services.
Russia and Ukraine were the two top countries for the Turkish tourism industry with over 9 million visitors per annum. The number of visitors is expected to drop severely due to the war. The loss in Tourism revenues is anticipated to exceed 6-7 Billion USD which will create a big burden on Turkey’s balance of payments.
Despite the adverse effect of the Russian invasion of Ukraine, in the long run Turkey’s production of renewable energy will likely increase as a result of the government policies to reduce the dependence on Russian energy sources.
This Post was submitted by Climate Scorecard Turkey Country Manager Dr Semih Ergur