Select Committee on Trade and Industry Twelfth Report


II GENERAL OBSERVATIONS

Ilisu in context

Demand

  12. The proposal to construct a hydro-electric dam at Ilisu has to be seen in the context of Turkey's rising demand for electricity, a result of its economic growth and rise in standard of living. Consumption is estimated to rise from 134 kWh in 2000 to 546 billion kWh in 2020. Demand - side management and increased energy efficiency, however desirable in themselves, cannot begin to make any serious impact on such a rise in demand, any more than reduced transmission losses. Rising demand on that scale evidently requires new capacity.

Policy

  13. We had hoped to discuss future policy on electricity generation, and its relevance to assessing the significance within that policy of the Ilisu project, at a meeting we had sought for the purpose with the Turkish Minister for Energy in Ankara. Unfortunately, this was instead given over to expressions of support for the Ilisu dam from several parliamentarians from the south east of Turkey.

Hydropower

  14. Over the past forty years, the growth in Turkish hydropower capacity has proceeded more or less in pace with the growth in use of thermal energy sources. The construction of hundreds of dams, many of them primarily intended for irrigation or flood prevention but endowed with a small generating capacity mostly for local use, has given Turkey remarkable hydropower capacity and vast experience in dam building.

Thermal power

  15. Over the last five years, however, most new capacity has been thermal, using imported natural gas and lignite, and, we understand for the first time, coal. The rise in thermal energy sources, with their well-known environmental consequences, could hardly come at a worse time. Hydropower is clean: "renewable" in UK terms. Plans for a nuclear power plant on the Aegean coast are occasionally brought forward, and then shelved again.

Long-term plans

  16. Long term energy plans anticipate a total installed hydro capacity of around 25,000 MW by 2010 and 30,000 MW by 2020, from the current capacity of around 10,000 MW. The target of ensuring that at least a third of electricity produced in 2020 is from hydropower — a target far beyond what could be achieved by most other European countries — lends a degree of urgency to getting more hydropower on line.

Energy policy and export credit

  17. In our February Report we warned against the tendency we had detected in evidence given to the International Development Committee by the Minister for Trade towards "making the grant of export credit unduly conditional on , for example, approval of the proposed fuel mix of another country".[11] The Government agreed that it was not for them "to seek to dictate the energy policy of another country" but that the project did have advantages "in terms of being a clean, renewable source of energy...".[12] We had noted then the prospects for exports to Turkey of clean coal technology, for UK interest in generation of electricity from natural gas, and the UK Government's potential commercial interest in a potential nuclear power option through BNFL and its Westinghouse subsidiary. Export credit is limited in volume for any one country, especially one such as Turkey which is or has been a "difficult market". In that context, it must be sensible to prioritise projects according to the individual project's merits, and to put them in a wider environmental and developmental context.

Recent and future construction

  18. The long term Turkish energy plan seems to foresee the construction of around 330 hydro power projects over the next 10 years, producing around 19,700 MW capacity. Most are small or very small, dependent on irrigation projects. There are 42 projects in the medium 100-250 MW range. There are only three to have installed capacity of over 500 MW; Ilisu is the only 1,000 MW plus project.

19. In recent years the Turkish administration has concentrated on the great Euphrates dams — Keban completed in 1975, Karakaya in 1987, Ataturk in 1992, and most recently Birecik. Much of the long-term Euphrates hydropower programme is now complete. The administration's attention is turning to carrying out long-matured plans for other rivers, including the Tigris. The Tigris and Euphrates combined account for around a third of the annual run-off by volume of the main 26 Turkish rivers, and a slightly higher proportion of current and planned hydropower capacity. There are nine other river basins where plans exist for installation of over 1,000 MW on each. These include the river system of the east Black Sea basin (Dogu Karadeniz) and the Coruh river basin in the north east corner of Turkey where it adjoins Georgia; there are plans for hydropower on each of these rivers of over 3,000 MW capacity.

20. Although Ilisu is the largest hydropower project in the 10 year plan we have seen, its capacity, even combined with that of the Cizre plant to be constructed downstream, accounts for only around 7% of total new hydropower capacity planned over the next ten years, and barely 4% of total planned hydropower capacity by 2020. That is not to say that Ilisu is not a key project for Turkey; but its political profile is far higher than is justified by its real significance in Turkish hydropower plans.

Construction and finance

21. In the early days most of the dams were built directly by DSI using Government funds. In recent times, other means of construction and financing have been used. Many have been or are to be constructed under cooperation agreements with other countries, prominent among them Canada, Austria and the USA. Some projects are constructed using foreign finance in various forms, including build-operate-transfer deals such as that at Izmir we refer to in our Report on Industrial and Trade Relations with Turkey.[13] The Dicle and Batman dams in the Tigris valley were, for example, constructed under finance arranged with Germany and Romania. Given the difficult financial situation facing the Turkish Government, it is likely that projects which can be financed other than through direct Government expenditure are more likely to find favour with the Turkish Ministry of Economy and the IMF.

22. Ilisu is not the only hydro-electric dam project with UK involvement. There are plans for a series of three major dams on the Coruh river in the north east of the country, which taken together will have a capacity of 1,200 MW, the same as Ilisu. The UK is actively involved in participation in the Yusefeli dam, through AMEC. We understand that an application for export credit is pending. Many of the issues raised in connection with the Ilisu dam may also arise over the Yusefeli dam. ECGD and Ministers must not only be even-handed as between the two projects, but be seen to be even-handed, in view of the strong feeling we heard expressed in Turkey that Ilisu is a political football.

23. In general terms, the construction of a hydro-electric dam intended to help meet in an environmentally friendly way the future energy needs of a country with a growing economy, with whom we enjoy excellent trading relations, and which is planning to join the European Union in the foreseeable future, is exactly the sort of project the UK would want to support in whatever way was appropriate. The caution which we have expressed in our earlier Report, and repeat and expand on here, does not run counter to that fundamental conclusion. If export credit were not to be granted, that should not be taken as a sign of unwillingness to back broadly comparable projects elsewhere in Turkey or in other markets.



11  HC 200, para 18 Back

12  HC 482, para (c) Back

13  HC 360, paras 40-42  Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 11 May 2001