Turkey is at risk of making an “historic error” in its energy policy that will put its economy at risk by investing heavily in a new fleet of lignite-fired electricity plants, urged the Institute for Energy Economics and Financial Analysis (IEEFA) in a report.

A lignite-fueled buildout being pursued by the Turkish government would cost at least 1.1 billion dollars, and around 2 billion dollars in annual public subsidies, which would lead to an increase in electricity prices by 19 percent to 29 percent, according to the report entitled “Turkey at a Crossroads: Invest in the Old Energy Economy or the New?”

The strategy would undercut recent progress in opening Turkish energy markets to competition, the report urged. “The rapid addition of new lignite-fired power plants would lock in plant costs at a time of slow or declining growth in the demand for power and damage, and would create excess generating capacity that would have to be paid for by consumers and businesses whether or not that capacity is needed” it added.

Turkey would be fighting a losing battle against the larger energy by trying to improve its energy security by increasing its dependence on coal, IEEFA urged in the report.

This way, potential for defaults and stranded assets associated with the buildout would undermine the Turkish banking sector, it added.

“Turkey is at a crossroads, deciding whether to invest in the old energy economy or the new, write the report’s authors” said Pelin Yenigun Dilek, an Istanbul-based IEEFA consultant, and David Schlissel, IEEFA’s Director of Resource Planning Analysis.

“The choice is stark: one path leads to a coal-fired past while the other points toward a brighter future rooted in renewables.”

“How Turkey will achieve these goals is uncertain, however, as policymakers weigh whether to push the country toward construction of a new lignite-fired fleet of generators or to take part in a global energy sector transformation fueled by renewables” Dilek and Schlissel stated.

The report concluded that solar and wind-powered resources combined with gains in energy efficiency continue to establish viable —“indeed superior”—alternatives to coal-powered electricity generation.

“The world is on the verge of an exponential—rather than linear—growth rate for new technologies, a trend that supports expansion of solar-supported battery systems especially and to which capital flows are adjusting accordingly” Dilek said.

“Renewables provide more than just an energy solution to any given economy. Their development drives innovation that is likely to spill over to into other sectors, raising the potential for skill-based development and providing vast employment opportunities” she added.

The report points out also that the global transformation in electricity markets is occurring fastest in developing economies, and that Turkey can learn much from this trend:

“China and India are at the limits of their coal-fired generation because of the unacceptable levels of air pollution it creates, and the growth of renewables in both China and India—and in several other emerging economies—is exceeding government expectations. This uptake of renewable energy is driven by the convergence of demand for capacity that can alleviate energy poverty, the desire for national energy security and the push for diversification. It is supported by a growing flow of investor capital.”

“Turkey is at risk of missing this boat” the report stated.

The report argued that renewables can make Turkey’s electricity-market pricing more competitive, leading to higher productivity and more “value-added growth,” and that renewables would avoid the damage lignite reliance would cause to the environment, public health, and public finances.

“Diversifying its energy mix by adding larger amounts of renewable resources would also enable Turkey to attract a bigger share of international institutional capital, which is flowing today in growing amounts to developing economies that have significant and serious plans for adding renewables,” the report said.

“Trying to achieve energy security through lignite subsidies, by contrast, is an economically unviable and financially insecure alternative to investing in renewables.”