Economical Sustainability and Social Stability Analysis of Renewables

Energy is one of the fundamental inputs of the economic and social development of the societies. Its consumption has been increasing parallel with the population and economic growth. Since the establishment of the Republic, population, GDP and energy consumption of Turkey have been growing steadily. In table 1 energy, population and economic situation of Turkey between 1973-2013 were summarized.

Table 1: Population, Economy and Energy Situation of Turkey Between 1973-2013

	Population  (*1000)	GDP Billion $ (1990 Prices)	GDP Per Capita $	Energy Demand (MTEP)	Electricity Consumption (TWh)	Energy Demand Per Capita	Electricity Demand Per Capita (kWh/Person
1973	38.072	76	1,994	24.6	12.4	646	326
1990	56.098	150	2,674	53.7	56.8	957	1,013
1995	62.171	178	2,861	64.6	85.6	1,039	1,376
2000	67.804	214	3,158	82.6	128.3	1,218	1,892
2005	71.000	212	2,986	90.1	132.7	1,254	1,849
2010	73.722	732	10.079	105.13	211.21	1,426	2,864
2013	76.667	823	10.807	122.79	245.48	1.601	3.201

As it can be seen from above table, the population of Turkey was 38 million in 1973, and it increased more than 2-fold and reached to 76.7 million at the end of the 2013. However, the primary energy and electricity consumption increased 5 times and 20 times respectively in last 40 years. In other words, energy and electricity consumption increase ratio of Turkey is higher than its GDP and population increase. Since Turkey does not have enough domestic resources, energy demand has been met by the import of fossil based energy resources. As a result, while the economy and population were growing, the energy consumption also grew and the balance of payment deteriorated. Because nearly 91 % of oil and 98.5 % natural gas and 12 % of coal, which is used in coal thermal plants, were imported in Turkey.

As of 2013, Turkey exported 151.8 billion dollars commodity and imported 251.66 billion dollars goods and services. The trade deficit was realized as 99.8 billion dollars. However, with the help of the tourism and other service sector’s revenues, the current account deficit realized as 65.1 billion dollars. In the same year, Turkey's energy import was 55.9 billion dollars and the share of energy in the total import was 22.2 %. With this level, energy import constitutes the 85.9 % of the current account deficit and 56 % of trade deficit. In other words, when the energy import was excluded, Turkeys’ current account balance can be sustainable without meeting any problem. Therefore, in order to decrease the current account deficit, it is necessary to find an urgent solution to the energy dependency of Turkey. In table 2, last eleven years current account balance and energy imports and their share were given.

Table 2:Energy Import and Its Share in Total Import and Current Account Deficit

Years	Energy Import (Billion $)	Total Import	The Share of Energy Import in Total İmport (%)	Current Account Deficit (Billion $)	The Share of Energy Import in Current Account Deficit %	Current Account Balance Excluding Energy Costs (Billion $)
2003	11.528	69.340	16,6	7.554	152.6	3.974,00
2004	14.384	97.540	14,7	14.198	101.3	186,00
2005	21.226	116.774	18,2	21.449	99	-223,00
2006	28.828	139.576	20,7	31.836	90.5	-3.008,00
2007	33.846	170.063	19,9	37.781	89.5	-3.935,00
2008	48.252	201.964	23,9	40.372	119.5	7.880,00
2009	29.889	140.928	21,2	12.124	246.5	17.765,00
2010	38.467	185.544	20,7	45.420	84.6	-6.953,00
2011	53.999	240.842	22,4	75.082	71.9	-21.083,00
2012	60.117	236.537	25,3	48.497	124	11.620,00
2013	55.915	251.661	22.2	65.066	85.9	-9.151,00

Since the establishment of the Republic, Turkey has been confronting with current account balance and energy deficit problems. When we examine the current account balance outlook of Turkey in above table, we see that except for the energy import, Turkeys’ current account balance can be sustainable and even sometimes it gives surplus. Apart from energy import, current account balance of our country can be positive five times, (in 2003, 2004, 2008, 2009 and 2012), with the contribution of the tourism revenues in last eleven years.

As mentioned in above chapters, there is a very strong correlation between the current account deficit, economic crisis and social stability of Turkey. Throughout the history of the Republic, Turkey experienced 15 economic crises and without any exception, all of the crises ended with the devaluation of the currency. In other words, nearly all of the economic crises are directly or indirectly related with current account deficit in the Republic history. As a result of these economic crises, lots of people lost their jobs, social stability was deteriorated and some of them ended with the military intervention. In table 3 the reasons, effects and results of the economic crises in republic periods are summarized.

Table 3: Reasons, Effects and Result of the Economic Crises in Turkey

	Economic Crises	Reason of Crises	Effects of the Crises	Results of the Crises
1	1929	Great depression, high current account deficit.	TL was devaluated	Statism was implemented and production structure of the economy changed.
2	1948	High budget and current account deficit	TL was devaluated	The government changed in the first election.
3	1954	High budget, current account deficit and high foreign debts	TL was devaluated	Some social turbulence was lived.
4	1958	High budget and current account deficit and high foreign debts	TL was devaluated	Some social turbulence was lived in Turkey and the first coup of the Turkish republic was done by Turkish Armed Forces in 1960.
5	1969	High budget and current account deficit	TL was devaluated	Some social turbulence was lived in Turkey and the second coup of the Turkish Republic was done by Turkish Armed Forces in 1971.
6	1974	Energy prices shocks, high current account and budget deficit.	TL was devaluated	Some social turbulence was lived and political instability was experienced.
7	1978	Populist public expenditures, public debts and high imports.	TL was devaluated	Some social turbulence was lived and political instability was experienced.
8	1979-1980	Oil crisis and high current account and budget deficit.	TL was devaluated	Some social turbulence was lived in Turkey and the third coup of Turkish Republic was done by Turkish Armed Forces in 1980. With the 24 January decision the import substitution policy was given up.
9	1986	High current account deficit and budget deficit.	TL was devaluated	There was no clear effect of the crisis on social or political life.
10	1989	High current account deficit and budget deficit.	TL was devaluated	There was no clear effect of the crisis on social or political life, however Turkish capital market was liberalized in 1989.
11	1991	High current account deficit and budget deficit.	TL was devaluated	The government changed the coalition periods were lived in Turkey.
12	1994	High current account deficit and budget deficit.	TL was devaluated	There was no clear effect of the crisis on social or political life but nearly 500.000 persons lost their jobs. Turkey was governed by coalitions for years
13	1999	Asian and Russian economic crisis and earthquake.	TL was devaluated	Because of the crisis and earthquake the social life was affected deeply.
14	2001	High current account deficit and budget deficit. Wrong prescription of IMF	TL was devaluated	The government changed in the first election and all of the coalition partners collapsed.
15	2008	Global economic crisis and decrease in demand in foreign markets.	Economic growth realized as (-4.7 %)	There was no clear effect of the crisis on social or political life.

When we examine the table 3, we see that apart from 2008 crises, all of the crises are related with the economic structure of our country. Three of the economic crises, 1958, 1969 and 1979, ended with military intervention and 7 of them caused serious social turbulence and 2 of them, 1929 and 1979-80, changed the economic structure of the country. In the multiparty period, with the effect of the economic crisis, political parties, which were governing the country until the election, were pushed to the background in political life, like being in 2001 crisis. In short, economic crises affect the Turkish economy deeply and cause serious social and political changes in the country. Therefore, it can be said that there is a direct correlation between the economic crises and social and political stability in Turkey.

Economic structure of the country, however, depends on the foreign resources. Because of the lack of capital accumulation and high energy needs, Turkey has to borrow to finance its investment and energy expenditure by attracting foreign resources. Since the production structure of Turkey depended on imported input, the contribution of export is very limited compared to previous periods. As a result of the globalization and internationalization of the production process, the dependency of the countries in manufacturing sector was increased enormously. In order to produce and export their goods, the companies have to import at least some part of the final product from other countries, where the needed intermediate goods can be obtained at a cheapest price. Otherwise, the companies cannot compete in the international market.

Compared to developed countries, population of Turkey is very young, and the domestic demand of our country is higher than those countries. Therefore, even if the companies work on export sector, when they sell their goods inside the country, the current account deficit are affected negatively from this situation. Since the foreign dependency of the manufacturing sector is more than 75 %, when the companies sell more than 25 % of their goods inside the country, the current account balance gives deficit.

The situation of energy trade is worse than other commodity trade, because the energy import is the net import of the country due to the lack of domestic fossil based resources. In other words, while some of the other produced goods can be exported, the energy import is largely consumed inside the country and creates the rigidity in current account deficit. Nearly all of the energy import is the “net import” of the country. However, since the energy is indispensable source of economic development, Turkey has to find a way to obtain its energy needs reliable and at an affordable price. In order to do this, domestic resources, both renewable and non-renewables, must be evaluated as soon as possible.

Turkey does not have enough oil and natural gas reserves but its coal and renewable energy potential is at a satisfactory amount. Nonetheless, Turkey cannot evaluate its domestic resources effectively. Today, nearly 65 % of hydraulic power, 7.25 % of wind energy, 59.7 % of geothermal energy and very small part of solar energy have been evaluating for the electricity production in Turkey. These ratio are the only economically potential of Turkey. In the technical side, the share of hydraulic decreased to 37 % in hydraulic, 4 % in wind 17 % in geothermal.  

Turkey consumed 245 billion kWh electricity in 2013. 239.497 GWh of this consumption was produced in Turkey from different kinds of resources, 7.425 GWh electricity was imported and 1.235 GWh electricity was exported. The share of natural gas is nearly 44 % in 2013 and with the effect of the drought, this share rose to the 48 % as of September. Besides, the share of imported coal was nearly 12 % in electricity production and 3 % of electricity was directly imported from abroad. Today, nearly 75 % of primary energy and 59 % of electricity needs are met by imported energy inputs or direct electricity import in Turkey.

Sustainability comprises the economic, environmental and social development of the countries. Sustainable energy, which is the sub branch of sustainable development, includes provision of energy in a secure way, at an affordable price and in an uninterrupted manner. To maintain security, the country should meet their energy needs by using domestic resources or by diversifying the energy supply. Although Turkey cannot meet its oil needs from domestic resources, our country’s oil import is relatively diversified compared to natural gas. Turkey has been buying oil more than six different countries and neither of these countries have a dominant share in the oil import.

However, today, nearly 48 % of electricity was produced by using the natural gas. Turkeys’ natural gas import composition was also very unbalanced because it is largely depended on Russia (nearly 58 %). Iran came in the second place in natural gas import and these two countries meet the 75 % of natural gas needs of our country. Due to the high dependency to these two countries, especially to Russia, natural gas supply of Turkey is under the risk. In case of any political dispute, like being in Ukraine and Syria, or technical problem, as experienced with Iran in recent years, natural gas supply can be interrupted by directly supplier countries or transition countries. In addition, the supplier countries may use the energy as a weapon against our country and this situation may threat the national security and international benefits of our country. Turkey experienced to these two risks with Russia in the Russia-Ukraine crisis and at the civil war Syria with Iran. Therefore, to increase sustainability in terms of security of energy supply and to decrease the high dependency to one energy resource and one country’s energy supply, Turkey has to take precautions in natural gas energy field.

As it can be understood from above mentioned situation, the current economic situation of Turkey mainly depends on the foreign inputs and foreign energy resources. The distribution of primary and secondary energy supply is not balanced and this situation directly threats the economic independence and energy security of the country. High dependency to foreign inputs and foreign energy resources increase the current account deficit of the country.   Since all of the economic crises lived in republic era are directly or indirectly related with the current account deficit, the structure of the country makes it vulnerable against the energy and economic crises. As seen in table 3, the economic crises cause serious social and political changes in the country. Therefore, our finding supports our third hypothesis that renewable energy investment can contribute economic, social and political stability of country by maintaining energy security, decreasing the foreign dependency and current account deficit in the economic structure.

The government understood the importance of the domestic resources in energy area and prepared a new strategic plan to decrease the dependency to foreign energy resources. According to this plan the share of natural gas in electricity production will be decreased to 30 % by the year 2023. At the same time, the share of renewables will be increased at least 30 % at the same year. If this target can be succeeded, the energy security can be maintained, dependency to foreign resources can be decreased and current account deficit can be limited at a sustainable level. As a result, the economy will become more reliable against external shocks and social stability can be provided easily.