Turkey: Cross-Border Energy Trading Legislation Further Liberalized

The past decade has witnessed a giant leap forward in the Turkish energy sector since the 2001 enactment of the Energy Market Law. Both the government and the relevant supervisory authority, the Energy Market Regulatory Authority (the "EMRA"), have been actively working to find legislative methods for gradually transforming the energy sector into a more investor- and trader-friendly business environment. This is especially the case for the domestic energy trade, the latest steps of which introduced the day-ahead market, a radical decrease in eligible consumer consumption thresholds from 100,000 kW to 30,000 kW annually (with the hint of even further decreases), and retailer licenses made available to all eligible license-holders (replacing the previous exclusivity for distributors). All of these have come to fruition in 2011.

Along with this flurry of activity in the national market, the EMRA has also upgraded the energy import and export legislation. Many local and foreign energy traders have been waiting for legislative changes that would allow them to trade electricity across Turkish borders at more competitive prices.

Legislative Limitations on Cross-Border Trade

Today, Turkey has interconnection lines installed with pre-determined transfer capacities to Bulgaria, Azerbaijan (Nakhchivan), Iran, Georgia, Armenia, Syria, Iraq and Greece. All electricity import-export activities are currently subject to the EMRA's approval.1 All interconnection allocations are granted for 1-year terms. As the construction of the cross-border interconnection lines is limited in nature, the EMRA closely monitors full exploitation of capacity by each respective right-holder. If the EMRA decides that a right-holder is not using the full capacity of the interconnection lines efficiently, it revokes the capacity allocation and reallocates the usage right of the lines to other interested applicants.

The EMRA, together with the Turkish grid operator, Türkiye Elektrik İletim A.Ş. ("TEİAŞ"), follow up the ongoing collaboration efforts with the European Network of Transmission System Operators for Electricity (the "ENTSO-E") to interconnect and synchronize the Turkish electricity network with the ENTSO-E. Once fully implemented, a network synchronized with the ENTSO-E will enable both networks to operate as a single energy market, where spot buy-sell transactions may be conducted on an hourly and daily basis. To this end, on 18 September 2010, TEİAŞ and ENTSO-E started test transmissions over existing lines in Bulgaria and Greece.

New Electricity Export Import Regulation

In an effort to provide a legal basis for the campaign for synchronization with the ENTSO-E, as of 01 June 2011, the EMRA renewed the governing regulation piece on cross-border energy trading, namely, the Electricity Market Export and Import Regulation (the "New Ex-Im Regulation"), annulling the Previous Ex-Im Regulation, identically named, dated 07 September 2005 (the "Previous Ex-Im Regulation").

The New Ex-Im Regulation does not directly pave the way for spot transactions, as the addressed transmission method applies to long-term capacity allocations. As was the case in the Previous Ex-Im Regulation, the New Ex-Im Regulation foresees that prospective import-export license-holders will be granted 1-year reserved capacities.

European and Non-European Connections

The New Ex-Im Regulation, as it was in the Previous Ex-Im Regulation, classifies cross-border electricity trade under two headings: (i) sales made over synchronous lines and (ii) sales made over asynchronous lines. What is referred to as a synchronous line practically addresses connections established with the ENTSO-E grid ("European Connections") and as ENTSO-E is currently the only synchronous line TEİAŞ has with its neighboring grid operators. What the New Ex-Im Regulation classifies as asynchronous lines refers to all cross-border connections other than ENTSO-E connections in place with Greece and Bulgaria ("Non-European Connections").

TEİAŞ is aiming to operate a synchronous grid using the ENTSO-E system. While much of the limitations imposed by the Previous Ex-Im Regulation still apply to sales on Non-European Connections, provisions applying to sales on European Connections have been further liberated.

Below are some points that are detailed for comparison purposes.

Right to Sell in Secondary Markets

Perhaps the foremost privilege granted by the New Ex-Im Regulation to traders on European Connections is the right to re-sell the allocated electricity capacities to third parties. Article 17 of the New Ex-Im Regulation resolves that capacity holders of synchronized parallel connections, having received the approval of the system operator, will be entitled to sell their capacity to third-party import export license-holders in "secondary markets."

Secondary markets may be considered as spot markets currently available for domestic trade (in day-ahead planning and real-time balancing). This right was not granted under the Previous Ex- Im Regulation, and still is not granted to traders operating under Non-European Connections.

Apart from the New Ex-Im Regulation, the EMRA issued another set of rules to help clarify the transfer procedures to secondary markets on 17 June 2011, namely the Electricity Market Export and Import Regulation Rules on Capacity Allocations and Secondary Commercial Transmission Right Market (the "Secondary Market Rules").

Transfers Exclusive to License-Holders

In the Secondary Market Rules, secondary markets are defi ned under the term "Secondary Commercial Transmission Right Market", that is stated as being mechanisms which allow for transfer of the commercial transmission rights (capacity allocations) of a license-holder to other wholesalers.

As a set-back, however, the New Ex-Im Regulation, together with the Secondary Market Rules, although having introduced a secondary market sale option, still require that the transferring wholesalers be EMRA-licensed wholesalers. Secondary Market Rules Article 10 states that a "Commercial Transmission Right" (a "CTR") may only be transferred to another licensed market participant.

Despite its novelties, the new legislation did not change the existing framework of the physical energy trade, where such physical delivery undertakings are still exclusive to the EMRA license-holders (and to eligible consumers). Furthermore, this transfer is subject to the prior approval of the system operator (system operator being understood to be TEİAŞ or the bordering distribution license-holder).

Spot Sales Not Yet Addressed

Under the New Ex-Im Regulation, the interconnection lines are still made available to applicants as long term capacity allocations, meaning that the transfer of this capacity to third parties may only be made similarly through long-term capacity transfers. Legal framework still does not address cross-border spot sales transfers.

No Physical Delivery Obligation

Sales conducted over European Connections are no longer required to fully exhaust their allocated capacity. Unlike the Previous Ex-Im Regulation that obliged the cross-border energy sales parties to honor their physical delivery obligations, the New Ex-Im Regulation appears to have created legal space for option sales for the parties. Parties of the sale are allowed to not fulfill their physical delivery commitments, should they reach an agreement to do so.

Article 11 of the Secondary Market Rules specifically outlines that the CTR holders who do not fully use their allocated capacities will not be charged any fines or penalties. The Previous Ex- Im Regulation foresaw that license-holders for all cross-border connections both for European and Non-European Connections were expected to fully honor their physical delivery obligations, and were subject to cancellation of their import-export license if their cross-border trade fell below 60% of their monthly commitments, or under 70% of their quarterly commitments.

Article 20 of the new Export Import Regulation grants a favorable exception to European Connections, imposing the above-stated commitment threshold only on license-holders operating on Non-European Connections.

Free Contract Terms

Another difficulty facing cross-border traders under the Previous Ex-Im Regulation was that the EMRA had the authority to intervene in all energy import export contracts. Import-export contracts had to be fully disclosed to the EMRA together with all of their annexes. Any amendment to the terms of the contract was also subject to the EMRA' s approval. As the term, capacity and transmission methods were stated on the license of the import-export license-holder, any amendments and changes to these figures would also trigger amendment of the license. This is no longer the case for sales conducted on the European Connections under the New Ex-Im Regulation. CTR holders are not obliged to disclose their agreements, nor are those contracts subject to the EMRA' s approval.

Derivatives Contract for Non-Physical Electricity Exchange

Besides the changes introduced through the Export and Import Regulation, the Turkish energy market saw another development in 2011, namely, the initiation of non-physical electricity exchange. The Turkish Derivatives Exchange (the "TDE"), in collaboration with the EMRA, and with the approval of the Capital Markets Board, issued a form contract for "Base Load Electricity" Derivatives Sales, numbered 601-613 (the "TDE Contract") dated 22 July 2001. As of 26 September 2011, market players are entitled to buy-sell electricity according to the terms of the TDE Contract.

The TDE Contract currently allows only for non-physical electricity sales. More accurately, the contracting parties position themselves for assuming buy-and-sell options fixed on index electricity prices that are calculated over the monthly average on the planning figures of the day ahead as defined in the Electricity Market Balancing and Settlement Regulation. So to speak, a transaction that is based on a TDE Contract will not affect the amount of electricity exchanged through the national grid or cross-border grids. Therefore, the current legislation allows all investors and traders to be a party to the TDE Contract, even if they are not EMRA licensed market players.

The TDE Contract may provide to interested parties, what the Export and Import Regulation lacks in defining secondary electricity markets: The transactional ability to freely exchange derivatized electricity across national borders between all interested parties, without requiring any permits or licenses to do so. However, one should remember that as of now, this ability is still limited to non-physical deliveries.

We are hopeful that the EMRA, with its current praiseworthy momentum, will continue to create more legal space to the liberalized energy market.


1 Before granting approval, the EMRA also seeks the technical opinion of the Ministry of Energy and Natural Resources, TEİAŞ and/or other distribution license-holders. Once the approval is granted, the application is announced on the EMRA's website for other potential purchasers. If there is more than one interested party for the same interconnection line allocation, the EMRA will decide on the winning contract in consultation with TEİAŞ and other relevant distribution license holders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions