The Renewables Law and the Implications Of High Level Renewables Penetration

2. The Renewables Law and the Implications Of High Level Renewables Penetration A presentation to the 16th International Energy and Environment Conference Ebru Kurum 12 May 2010

3. About Pöyry Turkish Renewables Law Looking at European markets The impacts of wind intermittency The impacts of wind intermittency on CCGTs Agenda

4. Pöyry is a global engineering company Energy Forest Industry Transportation Water & Environment Construction Services (c) grafikdienst.com Core operations based on five know-how clusters Pöyry Plc • Listed in Helsinki Stock Exchange • 8,000 Consultants • EUR 820 mill / NOK 6,56 bill Turnover • Located in 49 countries • Management consulting • Hydropower • Power & Heat • Renewable Energy • Oil & Gas • Regional Services • ManagementConsulting • New Investment Projects • Rebuild Projects • Locall Services • - Rail Transportation Systems • Road, Tunnelling and Bridge • projects • - Other Transportation- related Engineering and Expert services • - New Service offerings, ie. Logistics and Airports • Project management • Architectural Design • Structural Engineering • Building Technology • Services • Construction Supervision • Consulting and Expert • Services • Engineering and Expert • services related to water and environmental technologies 4

5. (c) grafikdienst.com The Pöyry Energy Business Group is split into six Business Areas Pöyry Energy Business GroupPresident Richard Pinnock ManagementConsulting Hydropower RenewableEnergy Power & Heat Oil & Gas EmergingBusiness VilhoSalovaara Patrick von Essen GrantInnes DavidCox AngelRodero PhilippElkuch • Nuclear energy • Transmission and distribution • Industrial plants • Biomass-to-Energy • Waste management • Waste-to-Energy • Solar CSP & PV • Wind power • Geothermal • District heating • Strategy • Business operation • Valuation &financing • Sustainability • Reservoir storage schemes • Pumped storage schemes • Cascade schemes • Run-of-river schemes • Multipurpose schemes • Dam safety & environmental assessments • Technical & financial due diligence • Industrial and municipal power plants • Condensing power • Cogeneration and CHP • District heating and cooling • Power and desalination • Offshore facilities: fixed & floating • Onshore facilities: Oil, Gas, LNG, Petrochemical & Refining • Multi-discipline engineering • Specialist consulting services 11,500,000 t/a of waste treated > 40,000 MW of installed capacity > 1,000,000 bpd of upstream production > 100.000 MW of installed capacity

6. Pöyry Energy Consulting is the leading energy consultancy in Europe Over 250 energy market experts in 15 offices across Europe: • Copenhagen – Düsseldorf– Helsinki • London – Madrid – Milan • Moscow – Oslo – Oxford • Paris – Stockholm – Stavanger • Vienna – Villach – Zurich Strategy BusinessOperation Valuation & Financing Sustainability

7. About Pöyry Turkish Renewables Law Looking at European markets The impacts of wind intermittency The impacts of wind intermittency on CCGTs Agenda

8. 2005 Renewables Law No:5346 • wind; • solar; • geothermal; • biomass; • biogas; • wave, current, and tidal energy; • channel or river type hydro units; and • reservoir hydro with less than 15 km2 surface area • The renewable energy producers are issued with RES certificates which act as a proof of the electricity being generated by a renewable energy source. The following rules apply for renewables that are commissioned before 31 December 2011 : • retail license holders must buy a minimum proportion of their electricity from RES certificate holders that have been running for less than ten years (with renewable units older than 10 years move down the priority list for the buyer); and • the minimum quantity of electricity the retail license holders must buy is regulated by EMRA and is determined by the ratio of the quantity of electricity they sold in the previous calendar year to the quantity of total electricity sold in the previous calendar year by all retail license holders. • Generators receive a feed-in tariff set by EMRA which is the annual average of the wholesale electricity price during the previous year . However, this price which is a guaranteed price available to renewable generators has to be between 5 - 5.5 Euro cent/kWh. The renewable energy generators are free to bid in the market in order to try to sell their electricity for a higher price. It is due to this article that renewable generators could bid in the Balancing Market since it was launched in August 2006.

9. The proposed Renewables Law • In October 2008, a draft law proposal was submitted to the Parliament regarding some modifications to the Renewables Law; • Parliament energy commission submitted the final draft of the Renewables Law in June 2009; • The changes include revised prices for the renewable generation built by 31/12/2015. These are: • The generators may sell their power to the free market outside this scheme. • To be included in the scheme they must apply by 31 October each year for the next one year period. • Once they signed up for the year, it is binding. • The payments will be made in TL calculated with the Turkish Central Bank’s € exchange rate on the date of the invoice. * If the plant is built using Turkey sourced components, these prices will added on the above tariffs.

10. Existing renewable capacity and anticipated growth • In order to meet these targets Turkey needs; • a higher feed-in tariff; • an easier licensing procedure; • to simplify the Environmental Impact Assessment (EIA) process; and • to make grid connection easier;

11. About Pöyry Turkish Renewables Law Looking at European markets The impacts of wind intermittency The impacts of wind intermittency on CCGTs Agenda

12. Renewable incentive schemes in Europe - Greece • Greek renewable scheme is similar to Turkey; • There is a feed-in tariff in place; • Similar issues on licensing, EIA, grid connection; • Greece has renewable energy targets (20% for 2010) but already missed the 2010 target. • Currently Greece is revising their Renewables Law

13. Renewable incentive schemes in Europe - Italy • Incentive is based on technology; • Solar power earns a feed-in tariff on top of the wholesale price • Wholesale price (around €70/MWh) + Premium (€300/MWh) • All other technologies trade ‘Green Certificates’ (GCs) banded by technology • Wind 1 GC • Biomass (local) 1.8 GC • Current price is €86 per GC and its value depends on the trade • GCs are given to the renewable generators (similar to YEK) but they can be traded: • bilaterally between the renewable generator and the thermal generator, • at the exchange market • Thermal generators have 8% obligations, and the first 100GWh of their generation is exempt from this obligation • The obligation on thermal generators is increasing gradually as Italy has a target of 27% renewable share in its electricity generation by 2020

14. Renewable incentive schemes in Europe – United Kingdom • A feed-in tariff is added on the wholesale electricity price; • Wholesale price (around €42/MWh) + Renewable Obligation Certificate (ROC: currently set at €65/MWh) • Incentive is based on technology; • Onshore wind • Hydro • Biomass (with CHP) • EfW • Off shore wind • Biomass • The obligation is on Suppliers and they need to provide 1ROC per MWh generated • Renewables growth is steady but unlikely to meet targets 1 ROC 1.5 ROC

15. About Pöyry Turkish Renewables Law Looking at European markets The impacts of wind intermittency The impacts of wind intermittency on CCGTs Agenda

16. Intermittency Study • EU renewables targets are very challenging for many EU nations • Challenges are higher in the long term with Large Combustion plant Directive, 20% reduction in GHG emissions, new technically and/or commercially inflexible forms of low-carbon generation (nuclear, renewables and CCS) and intermittent renewable technologies (wind and solar) • We have carried out a study in 2009 to investigate the impacts of intermittent generation of renewables • The study covered UK and Ireland • With 6-8GW in Ireland and 35-45GW in the UK, wind generation has the highest growth • The study required to look at hourly wind data across both countries for 2000-2007, this meant over 2.5 million data points • We built a complex statistical model using Monte Carlo modelling technique • We have modelled wind intermittency looking at supply demand balance, wind generation growth based on 2020 EU renewable targets and the generation mix

17. Wind currently plays little part in shaping prices or dispatch Charts show January 2010 in GB, wind pattern based on 2000

18. Within the next decades, this could change significantly Charts show January 2030 in GB, wind pattern based on 2000

19. Intermittency will require responses across a range of timescales ‘Flexibility’ of different types can deal with all these system issues • Solutions to meet increased reserve and response needs • Short term active demand management • Lessen within day wind volatility • Diversify wind location • Improve wind forecasting • Increased interconnection • Reshape demand • Increase off peak demand • Reduce peak demand • Lower day to day volatility • Longer range interconnection • Other storage possibilities • Network capacity Real time New investment ½ hr 4 hrs Within day 3 days

20. About Pöyry Turkish Renewables Law Looking at European markets The impacts of wind intermittency The impacts of wind intermittency on CCGTs Agenda

21. The impact of wind intermittency on CCGTs • We have carried out a study for a leading turbine manufacturer • Study involved investigating CCGT running patterns in a high and low wind world, including Turkey • Thermal capacity (CCGT,Coal, possibly CCSCoal) was reduced as appropriate in the High Wind case • Some of these additional countries (Turkey, France and Poland) have relatively flat within day demand profiles. • Turkey, France and (to a lesser extent) Greece all have significant reservoir hydro capacity which (to some extent) further flattens the demand profile. France also has a lot of pumped storage capacity, though some is used for reserve/response purposes. • We would therefore expect slightly less MSG dispatch and possibly fewer starts.

22. Capacity Weighted Averages (for FRA, TUR, POL, GRE combined) Low Wind High Wind

23. Capacity Weighted Averages (for FRA, TUR, POL, GRE combined) – more efficient CCGT Low Wind High Wind

24. Ebru Kurum +44(0)1865 812221 ebru.kurum@poyry.com Pöyry Energy Consulting King Charles House Park End Street Oxford, UK OX1 1JD +44 (0)1865 722660 www.poyry.com www.ilexenergy.com Pöyry Energy (Oxford) Ltd. Registered in England No. 2573801. King Charles House, Park End Street, Oxford OX1 1JD.