Powering Turkey's Growth

A view of Izmir, Turkey at night. © Namik Ugur / World Bank

The energy sector remains one of the most dynamic in the Turkish economy.

Rapid economic growth, industrialization, and steady population growth in the country over the last decade have combined to rapidly transform this sector. Despite an 80-percent increase in electricity generation in the past decade, including a 90-percent growth in renewable energy generation, an average annual increase in demand of about 7 percent since 1990 means further efforts to ensure additional sources of clean and reliable electricity are required.

As the sector expands, policymakers are working toward the complementary goals of increasing energy production and security while mitigating the potential impacts of climate change. Faced with the challenge of providing more affordable, reliable, and clean energy, Turkey is looking to further engage the private sector to help meet this challenge. Officials in Turkey have implemented a series of measures designed to spur investment and innovation in the energy sector, including an ongoing liberalization program that ended electricity subsidies, improved the regulatory environment, and paved the way for the privatization of state-owned electricity distribution and generation assets.

IFC is supporting private sector investment in power generation in Turkey, where only 37 percent of the generation capacity is privately owned. During the last five years, IFC significantly increased its financing of renewable energy projects, including $2.3 billion invested and mobilized for five power generation projects. IFC’s investments in the power sector have reached nearly 8 million customers.

IFC has also supported several climate-smart projects, investing about $700 million in 17 energy efficiency projects, of which more than half has been channeled through commercial banks for on-lending, including Yapı Kredi Leasing, Is Bank, TSKB, Akbank, and Sekerbank. In the real sector, IFC financed projects with a focus on energy efficiency, including in cardboard, textiles, agribusiness, and packaging film.

Recently, IFC provided a syndicated loan of $170 million to ACWA Power, an independent Saudi Arabian developer of power projects and a long-term IFC client, for the construction of a new natural gas-fired power plant near the city of Kırıkkale, 50 kilometers east of Turkey’s capital, Ankara. With a capacity of 950 megawatts, the $1 billion power plant will help meet Turkey's growing demand for reliable, sustainable energy.

Such projects do not only help bolster energy production and mitigate the impacts of climate change, but also promote further investment by the private sector. Crucially, they represent strong examples of cooperation among international financial and development institutions and foreign investors who are contributing to Turkey’s efforts to fundamentally transform its energy sector and work to provide clean, reliable, and affordable energy for all.