Renewable energy investments, along with energy efficiency and other sustainable development goals (SDGs), are essential to reaching global climate targets.

At COP28 in Dubai, over 100 nations agreed to triple renewable energy investments by 2030. The London-based think tank Ember's "Global Electricity Review" suggests positive progress, with renewable electricity output increasing nearly 1% to exceed 30% globally in 2023, despite record electricity demands of 29.5 terawatts in 2024. Türkiye's renewable electricity share was 42%, significantly higher than the global average.

Investors unfamiliar with Türkiye’s energy mix might find this surprising. However, Türkiye has invested in renewables for four decades, starting with hydroelectricity projects in the 1980s and 1990s, notably the Southeastern Anatolian Project, and continuing with solar and wind projects in the 2000s. Türkiye maintains a high portfolio of renewable energy investments, supported by its diverse economy, limited energy resources, industrialized economy and strategic location between Europe and the energy-rich Middle East and Caspian regions. Türkiye's strategy to be an energy hub and global transportation corridor also relies on green energy investments.

The Ministry of Energy recently announced $73 billion (TL 2.4 trillion) in renewable energy investments until 2035, and the World Bank signed a $1 billion agreement to support renewable energy projects in Türkiye. The European Union also pledged further support for public, municipal and private sector projects in collaboration with EU-accredited international financial institutions, encompassing sustainable development goals.

These developments are positive for attracting foreign direct investments in renewable energy and energy-efficient green economic production.

Powering forward: Renewable potential

Türkiye's diverse economy clearly distinguishes it from Middle Eastern rentier states and less industrialized regional economies. With a population of 85.3 million in 2023, Türkiye's dynamic, production-intensive and services-based economy has a high demand for electricity. This demand is expected to rise with the growing number of hybrid and electric vehicles. Despite limited fossil resources, new reserves are being discovered, but extraction is ongoing. With an annual population increase of nearly 1 million, new energy capacity is crucial. Türkiye's seven geographical regions, each with distinct climatic and geographic features, make it suitable for various renewable energy investments, including solar, wind, hydro and geothermal.

Türkiye's strategic location at the crossroads of major energy consumer markets in Europe and producer countries in the Caspian Basin and the Middle East enhances its energy and transportation projects. Projects like the Baku-Tbilisi-Ceyhan crude oil pipeline, the Turkish Stream gas pipeline and the Trans-Anatolian Gas Pipeline (TANAP) benefit from these advantages. The development of a trans-Caspian pipeline in partnership with Azerbaijan, Kazakhstan and Georgia, along with the Development Road project with Iraq, aims to connect Türkiye with the energy-rich Gulf States, India and the Asia-Pacific region.

Türkiye's energy efficiency and consumption must align with the EU's Green Deal and Border Carbon Adjustment Mechanisms, which aim for a carbon-neutral Europe by 2050. As part of the EU Customs Union, Türkiye is subject to EU environmental regulations, presenting both challenges and motivation to adapt to renewable energy transitions. This adaptation enhances Türkiye's attractiveness for investments, including green industrial zones, serving as production bases close to the EU market.

Türkiye's recent months have shown positive increases in credit ratings and bonds from both government and private banks, while the Turkish lira has maintained relative stability. The conclusion of the 2023 and 2024 general and local elections raises hopes for a more stable economy, enhancing Türkiye's appeal for foreign investments. Traditionally, EU companies and more recently Gulf States like the United Arab Emirates, Qatar and Saudi Arabia have made substantial investments in Türkiye, with EU countries remaining key trading partners and sources of foreign direct investment. Under Finance Minister Mehmet Şimşek, Türkiye has demonstrated robust economic and fiscal policies.

With a large, young and skilled population, Türkiye serves as both a promising market and a production hub. Its strategic geographic position linking Europe, the Middle East, Caucasus, the Black Sea, Central Asia, Ukraine, Russia and Africa enhances its geo-economic significance. Türkiye has a key location advantage as a center of trade, logistics, supply chain and energy transition center, in addition to the infrastructure and experiences in the services sector. Last but not least, Türkiye is a NATO-member country. With the addition of Sweden and Finland to NATO, Turkiye’s traditional military-industrial cooperation with NATO allies (in addition to drone manufacturing capacity) will likely expand with new partners.

Fostering sustainable economic growth

To further attract foreign investors, Türkiye aims to strengthen regulations, transparency and rules-based economic systems. It requires increased infrastructure investments, storage capacity and technological upgrades in industrial zones to enhance environmental sustainability. Collaborations with institutions like the EU, the World Bank and the Organization of Turkic States (OTS), including Hungary as an observer, can facilitate effective investment mechanisms. Investor confidence is crucial for Türkiye's goal of attracting $73 billion in renewable energy investments by 2035 and achieving a greener economy. Sustainable economic development is integral to Türkiye's strategic objectives of becoming a global trade and logistics hub and regional energy leader.

Consistency in institutions, transparency and adherence to EU standards will be pivotal in securing major investments for infrastructure, energy, transportation and storage. Türkiye has committed to COP28 and is expected to take proactive steps for COP29 in Baku in 2024, as well as align with the EU's Green Deal and Carbon Border Adjustment Mechanism.

Türkiye's integration with European institutions and solidarity with NATO allies provide a framework conducive to boosting investor confidence and fostering renewable energy investments. Despite its location amid regional conflicts, such as Ukraine to the north and Gaza to the south, Türkiye has maintained its reputation as a safe haven in the region. NATO membership further enhances Türkiye's appeal to investors by reinforcing its commitment to security and stability. Cooperation between Türkiye and the EU is expected to persist, despite occasional challenges, due to shared democratic values and norms with European nations.

In conclusion, Türkiye's strategic geographic position, coupled with its demographic strengths and robust infrastructure, positions it as an attractive destination for renewable energy investments. Strengthening institutional cooperation and upholding democratic norms will further facilitate foreign direct investment inflows.