Turkey has been interested in building nuclear power plants since 1970. However, progress has been very slow and neighboring countries including Armenia, Bulgaria, Romania and Iran have all brought nuclear power to their grid before Turkey which is just breaking ground for its first nuclear power plant.
Turkey believes that its economic growth and population growth will drive up demand for electricity in the next ten years. They also see nuclear power as a stepping stone in their transition to low-carbon energy sources. Nuclear power can replace coal while renewable energy is being explored. The intermittency of renewables such as solar and wind power need to be supported by base load power that could be provided by nuclear power plants. Government officials have been planning for the construction of two or three nuclear power plants.
Russia has been aggressively pursuing international markets for its nuclear power reactors. Turkey is moving into nuclear power. Russia is contracted to assist Turkey in the construction of the first Turkish nuclear power plant. Construction of the first reactor at the nuclear power plant has just begun.
The project began in 2010 and is expected to finish its first reactor by 2023. In November of 2015, a Turkish Air Force Fighter shot down a Russian attack aircraft that strayed across the Syrian-Turkish border. The pilot of the plane died on the ground after ejecting from the jet. This caused a serious rift in relations between the two countries. One consequence of the incident was the shelving of the nuclear reactor project. The split between Turkey and Russia was resolved in late 2016.
With the restoration of positive relationship between Russia and Turkey, the nuclear power project was reactivated. Four nuclear power reactors are being constructed which will come to provide around ten percent of Turkey’s electricity. On the surface, things seem to be going well, but there are problems that could impact the success of the project.
Following the resumption of normal relations in 2016, Russia managed to pressure Turkey into granting three billion dollars in tax breaks. The Akkuyu project is based on the Build-Operate-Own (BOO) model favored by Russia. This means that Rosatom, the Russian-owned nuclear company, will be responsible for the financial risks associated with the twenty billion dollar project. The Turkish Electricity Trading and Contracting Company (TETAS) has signed a contract to buy electricity from the nuclear power plant at a fixed price.
Rosatom is not capable of supplying the capital necessary to fund the project. Because of this fact, Rosatom transferred a forty-nine percent stake in the project to a Turkish Consortium consisting of Cengiz, Kolin and Kalyon (CKK) in June of 2017. Experts in the Turkish energy sector say that none of these companies have any experience or expertise in managing long term projects. The projects they have been involve with were state-funded construction and infrastructure projects where there was a quick profit.
By February of 2018, all three of these firms have withdrawn from the project. Sources inside Rosatom said that part of the cause of the withdrawal had to do the selection of a Chinese consultant by the consortium. In addition, the Turks want to be involved in the management of the project before they commit cash for their share.
In order for the project to move ahead on schedule, the Turks have to quickly find a strategic investor. The Turkish government may have to invest to move the project forward. Most projects in the world involving the construction of nuclear power plants have required some sort of government participation. In spite of the BOO model for the project, Turkey may wind up responsible for part of the funding. Rosatom has already signed contracts with suppliers and subcontractors for over four and a half billion dollars. This is far more than the three billion that Rosatom has invested in the project.
It will be difficult to raise money in the global capital markets, partly because of the sanctions that have been erected against Russia because of the seizure of the Crimea in 2014. The Russian government is most likely pressuring the Turkish government to provide funds or to find a minority shareholder to purchase the CKK share of the project. This might encounter difficulties if there is a downturn in the Turkish economy. Time will tell whether finances can be secured in time for the first reactor to come online in 2023 as intended.
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