Despite falling renewable costs, Türkiye has preferred to promote domestic coal power plants by 2030.

Over the past decade, the installation cost of wind power plants has dived down by 40%, while the installation cost of solar power plants has plummeted by 77%. This decline has reduced the cost of electricity generation from solar energy by 69%, making solar energy Turkiye’s cheapest source of electricity generation.

However, despite falling renewable costs, Türkiye has decided to provide incentives in USD for domestic coal power plants, despite their expenses being in TRY. The incentive price of $ 75/MWh is 12% above the average sales price ($ 67/MWh) over the past year and 36% above electricity generation cost of domestic coal power plants ($ 55/MWh). With this incentive, domestic coal power plants, whose costs are subsidised under the capacity mechanism even if they do not generate electricity, will receive a total of at least $ 8.7 billion over a four-year period. This amount is 53% higher than the five-year grid renewal budget, which has become an obstacle to new power plant investments due to limited capacity.

Although Türkiye has made significant progress in electricity generation from solar energy, there is still a long way to go before the country can fully realise its potential. In a time when access to finance has become increasingly difficult, it is crucial for Türkiye to focus its resources and efforts not on endorsing coal, but on removing bureaucratic barriers to renewable energy investments, strengthening grid infrastructure, and supporting new technologies. With these steps, Türkiye can meet its energy needs securely while also achieving its 2035 targets.

Türkiye could remove the barrier to new power plant investments by allocating the budget planned for coal subsidies, to grid modernisation and the construction of new substations. Moreover, by integrating rooftop, floating, hybrid, and storage-integrated solar projects into the system, Türkiye could accelerate the energy transition and achieve its target of reaching 77 GW of installed solar capacity by 2035.

The government had announced that power plants generating electricity from domestic coal, whose costs such as fuel, personnel, system usage, and transportation are in Turkish lira, will receive a purchase guarantee of $75 USD/MWh for 60% of their electricity generation until 2030. If the announced purchase guarantee begins in 2026, there will be a four-year implementation period until 2030. Without the incentive, domestic coal power plants sell the electricity at Market Clearing Price (MCP). Following the Ukraine–Russia war, the prices of fuels used in electricity generation, such as imported coal and gas, increased sharply, causing the MCP to rise by 1.65 times in 2022 compared to the previous year. 

Due to the impact of the crisis, electricity sales prices were capped for all sources during the period from April 2022 to September 2023. Excluding the period when sales prices were capped, the average MCP between 2018 and 2025 period was $ 56/MWh, while it was $ 67/MWh over the past year. With the purchase guarantee set at $ 75/MWh, the electricity sales price of domestic coal power plants will increase by 34% compared to the 2018–2025 period average and by 12% compared to the average over the past year. The $ 75/MWh purchase guarantee to be applied to power plants for four years is

estimated to cost $8.7 billion. The statement also noted that power plants using a mix of domestic and

imported coal would be eligible for the incentive. Even if power plants using imported coal source just 10% of their annual generation from domestic coal, the total support amount will increase by $ 1.2 billion, reaching $ 9.8 billion.

Coal power plants get paid even when they’re not generating:

Domestic coal power plants have also received payments under the capacity mechanism since 2018 to ensure long-term system and supply security. The total budget determined each year is distributed according to the installed capacity and capacity factor rates of the power plants. For each energy source covered by the capacity mechanism, fixed costs those which are unrelated to electricity generation, and variable costs linked to electricity generation are determined. The determined costs are updated monthly based on changes in the exchange rate, inflation, and transmission fees. The fixed costs of power plants are compensated when the MCP is below or equal to their variable costs. When the MCP exceeds the variable cost but remains below the total cost, they are compensated for the difference between the total cost and the MCP, even if they are not generating electricity.

Over the past year, a total of 7 billion TL ($188 million) has been paid to power plants under the capacity mechanism. When the costs in Turkish lira published by Turkish Electricity Transmission Corporation (TEİAŞ) in August 2025 are converted using the dollar exchange rate for the same month, the total cost determined for domestic coal power plants is approximately $ 59/MWh.

The purchase guarantee of $ 75/MWh set to be applied to power plants until 2030 is 27% higher than the total cost determined by TEİAŞ. The National Energy Plan published in 2022 projects that the capacity mechanism will continue until 2035. Although the details of the incentives to be provided until 2030 have not yet been announced, if the current support conditions continue, domestic coal power plants will sell 60% of their electricity generation at $ 75/MWh, and their fixed and variable costs will be covered regardless of whether they generate electricity or not. 

The unit cost of electricity generation from domestic coal power plants:

For the calorific value of the coal used in the power plants, data were obtained from the 2024 annual report of the Turkish Coal Enterprises (TKI), the “Provincial Mineral Potentials” dataset published by the General Directorate of Mineral Research and Exploration (MTA), the official websites of the power plants, and the annual reports of publicly listed companies. For the efficiency values used in the

calculations, sources included the 2009 report published by an eight-member research team that included Prof. Dr. Hasan Hüseyin Erdem, data from the official websites and investor presentations of the plants, as well as the 2011 article prepared by Muzaffer Başaran, former Deputy General Manager of EÜAŞ and Board Member of the World Energy Council.

The average calorific value of the coal used in electricity generation by domestic coal power plants and the average plant efficiency were calculated using data from Turkish Electricity Transmission Corporation’s (TEİAŞ) Electricity Statistics. Within this scope, the fuel consumption and calorific value data of lignite power plants were obtained to calculate the average kcal/kg value.

The annual total electricity generation (MWh) of lignite power plants was converted to kilocalories using a coefficient of 860,421; then, the calculated total kcal value was divided by the total fuel calorific value listed in the TEİAŞ data for the power plants to determine the average efficiency. 

To calculate the coal price used in coal power plants, the total sales revenue to power plants reported in the 2024 Annual Report of the Turkish Coal Enterprises (TKI) was divided by the total sales quantity stated in the same report, yielding the unit sales price. This value was then updated to September ‘25 prices by multiplying it with the inflation rate calculated for coal and lignite production based on the Producer Price Index (PPI) data by industry, as published by the Turkish Statistical Institute (TURKSTAT).

In calculating the unit cost of coal power plants, the system usage fee (including annual value), along with the fixed and system operation fees applied by TEİAŞ for 2025, were divided by the average USD/TRY exchange rate for 2025 and taken as $ 4.19/MWh. The operation and maintenance cost was derived from the 2024 report of the Turkish Coal Producers Association (KOMURDER) and assumed

to be $ 4.71/MWh. The total purchase guarantee amount to be provided for domestic coal over the four-year period.

In calculating the amount of subsidy to be provided to coal power plants, the electricity generation of plants using domestic coal between 2020 and 2024 was multiplied by 60%, and a purchase guarantee price of $75/MWh was applied to this amount.

Levelised Cost of Electricity (LCOE) Calculations:

In the LCOE calculation, for solar power plants, an investment cost of $ 420,000/MW, including operation and maintenance expenses, a DC/AC ratio of 1.2, and a capacity factor of 18% were assumed. For wind power plants, an investment cost of $ 1.4 million/MW and a capacity factor of 33% were used. For both sources, a plant lifetime of 25 years, an exchange rate of $ 41.2/TRY, and a WACC of 8% were assumed. The annual degradation rate was taken as 0.5% for both power plants.

In the LCOE calculation of a new 1.5 GW coal power plant, assuming that the plant would consist of 05 units of 300 MW each. The unit cost was calculated by applying a correction factor of 1.4 to the unit price of a 1,100 MW plant; in addition, as recommended a 12.5% discount was applied for the remaining 04 units. The plant’s efficiency assuming to be 42%, self-consumption rate 10%, capacity factor 80%, calorific value 1,100 kcal/kg, coal price $ 28/ton, and annual degradation rate 0.3%. The USD/TRY exchange rate (41.2) and WACC (8%) were kept consistent with those used for other sources.   

Team Maverick