Modernisation and expansion of an electricity distribution network in Türkiye
Image courtesy OEDAS
Commercial approach(es) used to catalyse investment: Tariff incentives associated with performance, efficiency, and quality of service
Technology approach(es) used to catalyse investment: Improved overall technology maturity (e.g., maturing IoT and 5G applications); implementation of a data platform or digital twin for greater transparency over performance; a change in data standards/architecture
Finance approach(es) used to catalyse investment: Other innovative financing instrument
|
Key benefits: |
|
|
Scale of deployment: |
Approximately 1,956 transformers with 1,688MVA of installed capacity, 4,980 km of electricity distribution lines, 3,782 km of low- and mid-voltage overhead lines, 9,785 km of underground lines as well as technology-enabled and digital infrastructure projects The network is currently servicing 191 towns and 1,596 villages serving a population of approximately 2.79 million and 1.88 million electricity users |
|
Project value: |
Approximately USD350-375 million in TRY equivalent, including VAT and subject to cost escalation and capex efficiencies |
|
Current status of the project: |
Project involves multiple activities under the TIP-4 capex program, which is planned, approved, and implemented on an annual basis for five years |
Since the liberalisation of Türkiye’s electricity distribution sector in 2004, its distribution networks have required substantial investment to meet the country’s growing electricity demand. This project is adopting and applying technology for a network expansion to improve network reliability, operational efficiency, and quality of service in the provinces of Afyonkarahisar, Bilecik, Eskisehir, Kütahya and Usak, in Türkiye. The project sponsor and operator is Zorlu Enerji.
The project benefits from a regulated asset base (RAB) tariff mechanism that facilitates the mobilisation of commercial and Development Finance Institution (DFI) capital. Some 19 technology-enabled or digital infrastructure projects are planned to be implemented during the TIP-4 capex program, with an estimated budget of TRY 28.5 million for each of the five years. Based on the joint MDB methodology on climate financing tracking, a majority portion of the project financing is qualified as Climate Mitigation by promoting network energy efficiency, T&L control, through brownfield grid renewal investments.
The project supports various technological improvements and digitalisation of the network, ranging from the rollout of state-of-the-art technology into the network, such as Automatic Meter Reading (AMR) and Supervisory Control and Data acquisition (SCADA) projects, to the development of latest IT technologies to improve data gathering and system integration, such as the Security Information and Event Management (SIEM) project.
Replicability
The use of smart metering and smart grid technology is largely tested and replicable. Electricity distribution is a sector typically requiring regular investment and upgrade, as infrastructure ages. The rehabilitation of extensive networks like this OEDAS network entails complexity due to the large geographical spread – in this case across a relatively low-density region. The sector shares similarities with other network industries such as water supply and gas distribution. The successful application of technology to this project can be replicated by some of the other 21 electricity distribution companies in the country.
Challenges experienced/overcome in implementation
Risk of delays due to funding: OEDAS needs to secure a substantial amount of financing at the start of each five-year tariff period to implement the project. The current macroeconomic situation in Türkiye presents challenges to electricity distribution operators, who require certainty of commitments, long-term availabilities, and long tenors. The availability of DFI financing is particularly important in this case.
Macro-economic volatility: The regulated asset base, capex, and opex are exposed to Consumer Price Index (CPI) movements. Interest rates present volatility. Funding in local currency is subject to the liquidity of the currency swap market.
COVID-19–related delays: OEDAS managed the implementation of the previous TIP during the pandemic. Business and work continuity plans, as well as an equipment delivery plan, were prepared to mitigate potential risks.
Other approaches that enabled investment
AIIB and its co-financiers have provided local currency (TRY) finance and liquidity for the development of distribution assets, facilitating the indirect mobilisation of private capital and supporting the development of the TRY funding market, at a time when other lenders have reached their limits and long-term financing in TRY is limited.
Note: This case study and all information within was submitted by Zorlu Enerji in response to our global call for InfraTech case studies.
Last Updated:
19 October 2022