Pricing of Sugar Beet Based Biofuels in Turkish Energy Market

Abstract

This study aims to investigate the pricing of biofuels in Turkish energy market. The traditional the Central Bank of the Republic of Turkey's discount rate pricing approach may not be applicable for pricing biofuels in Turkey. The weighted average cost of capital (WACC) expenditure approach, which was implemented by the MIT Energy Initiative for Natural Gas Monetization has been used in this study to model sugar beet based biofuels pricing in Turkish ethanol market. The results reveal that weighted average discount rate provides more realistic returns than the one offered by the Central Bank of the Republic of Turkey. The findings also indicate that investing in sugar beet based biofuels in Turkish ethanol market results negative returns. Biofuels technologies are stabilized and mature, and became viable and directly competitive with hydrocarbons when the crude prices started to increase during the period 2001-2014, especially ethanol, benefiting from the permanent improvement from the alcohol program in Brazil. A similar trend will probably be followed by biodiesel technologies, yet not for Turkey.