I’ll have my Solar Energy without Incentives, Please

Business strategies dependent upon state incentives are scary. At least I find them to be so. Because what the state giveth, the state can take away. What is subsidized today may receive with a windfall tax the next. Perhaps the most lucid example of state unpredictability inTurkeyis in the biodiesel sector. In 2006, the state slapped a 0.64 TL/ litre ‘special consumption tax’ on biodiesel sales (later raised to 0.72 TL/ litre). The tax amounted to 36% at 2006 sales prices! Roughly 1 million tons of biodiesel production went offline. Investments worth millions of dollars were trashed.

A truly successful business strategy is one that is viable based solely on market forces. Such a business may not grow as fast as a state-subsidized one, true; but it will be infinitely more healthy. A business which burgeons on its own may at times be undernourished. But like a camel adapts to the harsh conditions of the desert, such a business learns to thrive in the toughest of conditions.

Viewed from this perspective, the new Renewable Energy Incentives Act recently passed by Parliament is a boon for the Turkish solar energy sector. The act is a misnomer, for it provides no incentives for solar energy. The feed-in tariff provided for solar is below grid electricity rates!

But why is this a good thing? Precisely for the reasons provided above. The solar energy sector inTurkeywill learn to walk (and then run) on its own. It is no secret that the price trend for grid electricity is upwards. Meanwhile, the price trend for solar electricity is downwards. It takes no genius to conclude that the two prices will in time converge. When that time comes, no one will be able to hold back solar energy. Regardless of whether incentives exist, or whether utility companies allow grid connections, or whether the Energy Market Regulation Committee requires licenses, people will utilize solar electricity… Because it will be economically viable… On its own…

The reader may be thinking, “What if the state slaps a capricious tax on solar energy? After all, it happened in the biodiesel sector.” The blunt answer is they wouldn’t dare. GivenTurkey’s bid to join the EU, no government can afford to alienate the renewable energy sector. Biodiesel is another story. There, the case can be made (though falsely) that biodiesel production causes price increases in basic foodstuffs. In truth, inflationary fiscal policy is what causes price hikes in foodstuffs. But that is another story…

To make a long story short, we need no incentives for solar energy. In (a short) time, solar energy will be economically viable. That is when the sector will experience exponential growth!