The Coal Burden on National Economy

In addition to air, water and soil pollution, and the societal, social and ecological burdens coal mines and other coal power plant facilities create, coal-fired power plants also weigh heavily on national economies through various state subsidies and incentives.

Major state budget spending directed at investments, such as stack and flue purification systems, desulfurization units and boiler improvements, were only a part of the benefits provided to companies that had won the privatization bids. Soon after, with the amendment to the Electricity Market Law, privatized energy generation facilities were kept exempt from environmental regulations, and the postponement of environmental investments enabled new operators to make very significant savings.

Despite important subsidies such as guaranteed fixed-price, capacity payments and tax exemptions, private coal-fired power plant operators are facing serious financial risks. Most of the companies that took over the the power plants’ operations are currently having a hard time in repaying the foreign currency debts they acquired during the 2014 privatization period. Furthermore, even though these facilities generate electricity from domestic coal, the fact that they are import-dependent for machinery, equipment and sub-industry products increases their foreign borrowing cost.

Some subsidy items specific to Yatağan, Yeniköy and Kemerköy coal-fired power plants were analyzed (where actual data was available) for The Real Costs of Coal. They are the following:

  • Each of the three coal-fired power plants benefit from Customs Duty Exemption, Tax Reduction, Social Security Premium Support (Employer’s Share), Land Allocation and Interest Support through the “prioritized investments” scheme on the grounds that they produce electricity from domestic resources. The fact that these taxes, which are important national fiscal resources, are not paid brings about an important cost;

 

  • In 2017, 30% of the total electricity purchased pursuant to the guaranteed fixed-price scheme handed to power companies that produce electricity from domestic resources amounted to 1.10 billion Turkish lira and was purchased from Yatağan, Yeniköy and Kemerköy coal-fired power plant operators;

 

  • The capacity allowances, which were paid to these three coal power plants to enable them to keep a certain capacity in operation pursuant to the Regulation on the Electricity Market Capacity Mechanism that entered into force in January 2018, cost the state budget approximately 134 million TL for the months January-July.

Renewable electricity prices falling quicker than expected and emission restrictions implemented in several countries within the scope of climate change and air pollution measures constitute additional risks for the investors who are currently facing financial difficulties. These trends and recent financial analyses indicate that the stranded asset risk is not limited to new coal-fired power plants but also valid for these power plants that were privatized close to retirement.

© 2018 Climate Action Network Europe