A growing number of developing and developed countries have set a goal of phasing out coal in the power sector within the next few years. In Europe, only four countries (Bosnia and Herzegovina, Kosovo, Poland and Serbia), along with Turkey, have not yet established a timeline for the phase-out of coal-fired electricity generation. As a result of the decision by numerous banks and financial institutions to cease supporting coal-related investments, access to finance for new coal investments has become increasingly difficult. In advance of the 26th Meeting of the Parties (COP26) in Glasgow, the G20 countries, following China, South Korea and Japan, announced that they would no longer provide financial support for international coal projects. As a result of these developments, the growth of coal-based electricity generation was expected to slow down or decline worldwide.
In the second half of 2020, the spot market price of coal fell below $50 per tonne. The economic recovery following the outbreak of the coronavirus, issues with transportation and increased demand for coal in China led to a significant increase in prices. The economic crisis, which was further exacerbated by the invasion of Ukraine, also led to a significant increase in energy prices. In June 2022, the price exceeded $400, reaching the highest level in history.
Lazard’s analysis dated 28 October 2021 indicates that the levelised cost of electricity generation for coal plants ranges from 6.5 US dollar cents to 15.2 cents per kilowatt-hour (kWh). The same analysis also indicates that the cost of electricity generated by solar plants ranges from 2.8 to 4.1 cents per kWh, while wind plants cost between 2.6 and 5 cents per kWh. This has the effect of reducing the competitive advantage of coal. Prices in Turkey are aligned with global market trends. In the 2017 tender for the Çayırhan B Thermal Power Plant project, the Kolin-Kalyon Enerji-Çelikler Joint Venture Group submitted the lowest bid at 6.04 cents per kWh (the price at which they would sell the electricity they generated to the grid) and was awarded the contract. The project was subsequently cancelled. In the Renewable Energy Resource Areas SPP-4 tender held in June 2022, a solar power plant project to be built in Niğde was the successful bidder, offering a price of 37.5 TRY kuruş per kWh (equivalent to 2.1 dollar cents at the exchange rate of 12 July).
IEA projections for the share of coal in energy and electricity generation in 2030 and 2040.
Conversely, the difficulty in finding cost-effective alternatives to replace coal in meeting industrial energy needs, particularly in the iron, steel and cement sectors, suggests that coal will remain a significant source of energy for these sectors for the foreseeable future.
As in the world, the most consumed area of coal in Turkey is electricity and heat generation. Between 1990-2020, the use of coal in electricity and heat generation increased approximately 5 times.
Distribution of hard coal, lignite and asphaltite utilisation by sectors, 1990 – 2020. Source: Ministry of Energy and Natural Resources Energy Balance Tables
In 2020, 87 per cent of lignite supply, 62 per cent of asphaltite and 60 per cent of hard coal were used in thermal power plants to generate electricity and heat. 13% of hard coal was consumed to produce coke for steel production.
Sectoral distribution of lignite utilisation (1000 TOE) Source: Ministry of Energy and Natural Resources Energy Balance Tables
Sectoral distribution of hard coal utilisation (1000 TOE) Source: Ministry of Energy and Natural Resources Energy Balance Tables
Sectoral distribution of asphaltite use (1000 TOE) Source: Ministry of Energy and Natural Resources Energy Balance Tables
In 2020, 8% of lignite coal and 7% of hard coal were used for heating in the residential sector in Turkey. In 2000, the proportion of hard coal used in residential buildings exceeded 10%. In order to mitigate air pollution, natural gas has been increasingly utilized in the residential and service sectors. By 2020, natural gas accounted for nearly half of the energy consumed in residential buildings. Hard coal and lignite are significant energy sources for the production of cement and iron and steel. In the iron and steel industry, the use of lignite is significantly less than that of hard coal, with a greater reliance on coke and gas. In 2020, the quantity of hard coal utilized in these two sectors exceeded that of hard coal utilized in residences during the same period.
Coal utilisation due to steel production
Turkey is the second largest steel producer in Europe and the seventh largest in the world. Steel production all over the world is based on coal. 70 per cent of steel is produced using coal. In Turkey, 75 per cent of the energy used in iron and steel production is obtained from coal.
In Turkey, 98% of the coke supply is used in the iron and steel sector.
Distribution of energy consumption in iron and steel production by energy source, 2018. Source: Ministry of Energy and Natural Resources Energy Balance Tables
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