More Obstacles to the Growth of ESCOs in Turkey: Stumble In the Midst of a Financial Distress

More Obstacles to the Growth of ESCOs in Turkey: Stumble In the Midst of a Financial Distress

Esin Okay (Istanbul Commerce Unversity, Turkey)
DOI: 10.4018/978-1-7998-1196-1.ch008

Abstract

Sustainable and clean sources of energy is an issue of financial challenges for developing countries. Turkey has a considerable potential for a sustainable and cheap form of energy. As a developing country, Turkey implemented policies to improve renewables and energy efficiency in line with EU requirements. But there is incompetence of policy making and practice in which lack of familiarity with infrastructure investment and financing methods challenge renewable energy utilization in Turkey. The weak rule of law does not help to obtain culture, awareness, and consciousness of energy efficiency in Turkey. The enactment of raising awareness of energy saving projects and companies for reducing costs of energy efficiency should be the first priority of government. Beyond infrastructural problems, the key failure of ESCOs is lack of risk culture and poor risk management. Nowadays, the ongoing economic obstacles enhanced and ESCOs are facing financial distress and corporate debt restructuring which will affect the growth of energy savings in Turkey.
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Background

Energy continues to be an important and urgent topic of discussion whenever economies gather to speed up renewables or climate action. High energy consumption with huge carbon emissions still raises the threats of global warming and climate change. Therefore, energy is a non-stop hot issue having a strong impact on both economy and environment. Global economy still needs to obtain sustainable and clean sources of energy, which is an issue of financial challenges. On the other hand, developing countries more challenged by costs and risks face problems of energy sourcing and financing. But it is widely accepted that using the natural sources of renewable energy is cheap and clean. Therefore, developing economies must develop energy strategies based on renewable energy solutions.

Key Terms in this Chapter

Turkey: Turkey is a country located between Europe and Asia.

Energy Saving Contracts: A partnership between an agency and an ESCO. ESPC means a contractual arrangement between the beneficiary and the provider of an energy efficiency improvement measure, verified and monitored during the whole term of the contract, where investments (work, supply or service) in that measure are paid for in relation to a contractually agreed level of energy efficiency improvement or other agreed energy performance criterion, such as financial savings.

ESCO: Energy service company that guarantees energy savings and solutions including retrofitting, energy conservation, energy infrastructure outsourcing, power generation and energy supply, and risk management.

Energy Risk Management: Risk management concerning companies in energy sector and mainly the ESCOs that majorly work for energy industry mitigating the risks revolving in energy efficiency projects.

Energy Saving Solutions: Low cost and effective energy solutions and reductions of carbon.

Corporate Financial Distress: It is a term or a condition in which a company is unable to meet its financial obligations. It leads to bankruptcy if the financial inability is not relieved.

Energy Finance: Financial solutions for renewable energy, efficient energy projects and technologies in the energy market.

Debt Restructuring: It is a process that allows a company facing financial distress, debt crisis, and cash flow problems to reduce and renegotiate its delinquent debts to improve or restore liquidity so that the company can continue its operations.

Energy Efficiency: Low cost and effective energy solutions and reductions of carbon ensuring a safe, reliable, affordable and sustainable energy system.

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