Investors should hold off after Turkey troubles


August 8, 2016

This content is from our archive. Some formatting or links may be broken.

These are troubling times for Turkey.

In the wake of the failed coup last month, media outlets are being shut down. Schools are being closed. And, most importantly for investors, ties with the west are being severed.

“President Tayyip Erdogan angrily rejected Western criticism of purges under way in Turkey’s military and other state institutions … suggesting some in the United States were on the side of the plotters,” Reuters reported.

For those in the wind industry, it is a worrying turn of events. In May’s Renewable Energy Country Attractiveness Index, by the accountancy giant EY, Turkey ranked 19th worldwide for renewable energy investment, ahead of Belgium or Sweden.

Now, however, Turkey’s investment grade hangs in the balance as Erdogan’s crackdown on dissidents extends beyond the military and into the private sector.

Wind developers and investors, and particularly those based in western economies, would be wise to put plans on hold until the situation in Turkey becomes clearer.

In the meantime, however, the wind sector could take comfort from a possible long-term silver lining to the turmoil in Turkey.

Writing in Energy Post Weekly, European energy watcher Karel Beckman has noted that on its current trajectory Turkey is unlikely to play host to the Southern Corridor gas line planned to bring gas to Europe from Azerbaijan and beyond.

Removing a potential transit line for gas can only speed up Europe’s need for renewable energy.

Additionally, Turkey may end up building the proposed Turkish Stream line to obtain gas itself from Russia, removing the need to import supplies from Ukraine and depriving Ukrainians of a significant source of income.

As Ukraine’s current thermal fleet ages, a lessening dependence on gas could improve the case for renewables. Wind is a natural choice since Ukraine has high levels of pumped hydro for storage.

Whichever way you look at it, then, the current situation in Turkey serves as a further reminder of the dangers for European nations of relying on gas supplies piped in from outside the continent.

Conversely, it also highlights the desirability of exploiting energy sources closer to home, which in many cases means wind. And Turkey isn’t the only reminder right now.

The UK’s vote to leave the European Union in June is another clear example of current moves away from neighbourly, share-and-share-alike geopolitical relationships across Europe.

And if Donald Trump wins the US presidential race this year then we can expect to see isolationist policies taking a hold in the US.

Naturally, the idea that wind power might benefit from growing distrust between nations is something of an exercise in positive thinking. As Brexit has already shown, any upside can in reality easily be outweighed by the knock that investor confidence takes whenever global relations fall apart.

With Turkey, then, it is in almost everyone’s interests for the tempers to calm and for things to return as quickly as possible to their pre-coup state. With Erdogan taking an increasingly belligerent rather than conciliatory stance, however, it is probably best not to hold your breath.

Investment expertise. High-quality events. Exclusive content. Lead generation.

Talk to the Tamarindo team today to find out how membership would benefit your business.

Related content