A. Wholesale electricity trading
1. Background information
The developments on Turkey's electricity market have rapidly changed the rules of the game, pushing the sector towards progressive liberalisation, and the market players towards fast adaptation to the new environment. The process has been driven by the continuous development of the legal framework, the recent liberalisation programme (which is still an ongoing process), and the setting-up of the Turkish NRA as an independent regulatory authority - the Energy Market Regulatory Authority (EMRA).
The Electricity Market Act 2001 (Elektrik Piyasası Kanunu) sets forth the legal framework for Turkey's entire power market, whereas the Communiqué regarding Electricity Market Licences 2002 (Elektrik Piyasası Lisans Yönetmeliğ) and in particular the Communiqué regarding Electricity Market Balancing and Settlement 2009 (Elektrik Piyasası Dengeleme ve Uzlaştırma Yönetmeliği) provide ancillary and detailed provisions regarding wholesale electricity trading.
Turkey is currently an observer but it has expressed formally the interest to join as full member the Energy Community Treaty.1
2. Licensing requirements
Under the Electricity Market Act 2001 all Electricity Traders trading on the wholesale electricity market in Turkey and cross-border must hold a valid licence.
The licence is issued by EMRA for up to 49 years and covers cross-border trading as well.
Only companies incorporated in Turkey (either as a limited liability company (Limited Şirket) or as a joint-stock company (Anonim Şirket) can be licensed. There are no restrictions or special requirements with respect to these companies' share capital and/or shareholder structure.
Licences cannot be transferred to third parties, but there is no restriction on transferring the shares of the licensed Electricity Trader, provided that for transfers of more than 10% of the shares EMRA's approval is sought and obtained.
3. Trading requirements
3.1. Bilateral contracts market
About 85% of wholesale traded capacity is done through bilateral negotiated contracts. The contracts are not subject to the approval of the EMRA. Therefore, all commercial terms and conditions are freely negotiable.
The EMRA has announced that it intends to standardise these agreements in order to further facilitate bilateral trading by introducing framework agreements provided by EFET. Nevertheless, neither a timeline, nor an action plan is yet in place.
3.2. Power exchange
On the power exchange electricity can be traded day-ahead and in real-time. The Market Financial Settlement Centre (Piyasa Mali Uzlaştırma Merkezi – MFSC) operates the day-ahead market, as well as the balancing market. The gate closure time for the day-ahead market is 11:30 am of the previous day. All price bids are collected by the MFSC, which then determines a system day-ahead price applied to purchases to be made via the MFSC.
The real-time trading is operated by the National Load Dispatch Centre (Milli Yük Tevzi Merkezi), which acts as system operator. The gate closure time for this market is 15 minutes before dispatching.
Electricity Traders can join the power exchange platforms by signing standardised market participation agreements with the state-owned Turkish Electricity Transmission Company (Türkiye Elektrik İletim A.Ş- TEIAS).
3.3. Balancing market
Electricity Traders have to either (i) conclude a bilateral electricity purchase agreement serving as balancing agreement with another licence holder; or (ii) contribute to the balancing market themselves.
3.4. Market share restrictions
The total market share electricity traded by any private Electricity Trader active on the wholesale market (together with its affiliates) cannot exceed 10% of the total domestic electricity consumption of the previous year.
4. Cross-border trading
Although in principle there are no restrictions to cross-border trading, the Communiqué regarding Electricity Market Export and Import 2011 sets out certain technical requirements that need to be closely observed.
Turkey is engaged in inbound cross-border trading with Georgia, Turkmenistan, Iran, Bulgaria, Azerbaijan and Greece, and outbound with Azerbaijan, Iraq, Georgia, Syria and Greece.
5. Grid access
The Procedures and Principles regarding Capacity Allocation and Secondary Transmission Rights 2011 (Elektrik Piyasasi İthalat ve İhracat Yönetmeliği Uyarınca Kapasite Tahsisine ve İkincil Ticari İletim Hakkı Piyasasına İlişkin Usul ve Esaslar) entered into force only recently. In order to access the electricity grid, market participants have to apply to TEIAS for third-party access approval. Under the supervision of TEIAS, a capacity allocation tender takes place. A separate tender is called for each interconnection capacity.
6. Further liberalisation
In December 2010, approximately 125 different wholesale companies, including the state-owned Turkish Electricity Trading and Contracting Company (Türkiye Elektrik Ticaret ve Taahhüt A.Ş. – TETAS) with a market share of about 40%, were active on the wholesale market. TETAS's licence is due to expire on December 31, 2012 and it is envisaged that TETAS's market share will then be allocated among the other market players.
1 Treaty establishing the Energy Community was signed in October 2005 in Athens, Greece. It entered into force on 1 July 2006.
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.