Turkey's liberalisation of the electricity market has
demonstrated its ambition to become an energy hub in the heart of
Europe and the Middle East.
According to the Türk Eletrik İletim Anonim
Şirketi (EPİAŞ) report, electricity demand in Turkey
will grow to 398-434 billion kWh by 2023.
The relaxation of state ownership has seen a growth in the
natural gas sector, but energy generation and distribution should
be bolstered by a functioning market for hedge effectiveness and a
competitive pricing mechanism.
Turkey aims to be a benchmark electricity market for spot
trading and derivatives in Europe, the Middle East and Central
Asia, and Turkish lawmakers have been gearing up for the
What brings the new exchange into the market?
Formerly, market players were able to buy or sell derivates
contracts in Borsa İstanbul at a fixed price based on cost
Apart from Borsa İstanbul, EPİAŞ is expected to
be the market operator for spot transactions. The Turkish
government is keen to create a harmonised energy market to inspire
investors' appetite for Turkey.
Determination of reference prices will be the key strategic
target for the energy sector in Turkey, providing more transparent,
liquid and competitive market conditions.
Also this new energy exchange will create new opportunities in
terms of energy portfolio optimisation, IT solutions, forecasting
and modelling processes.
EPİAŞ is expected to start operations by 2014. The
Turkish Energy and Natural Resources Ministry Undersecretary said
that it will be established with 30% share of EPİAŞ, 30%
share of Borsa İstanbul and 40% share of private sector
partnership structure for advanced corporate governance
Many economists believe that electricity prices will fall after
Incentives for renewable energy investments in Turkey
The Turkish Parliament adopted the Renewable Energy Law at the
end of 2010, including feed in tariffs and subsidies in the sector
(Law No: 6094).
Accordingly, renewable energy producers in operation between 18 May
2005 and 31 December 2015 are guaranteed substantial purchasing
power prices, determined by the ministry of energy and natural
The most striking subsidy is in solar energy and biomass power
plants with investment of $13.3 cent per kWh.
Providing that a renewable energy producer obtains an operations
licence before 31 December 2015, they are entitled to acquire
additional incentives on condition that they use local equipment
and technology for their plants.
Predictions indicate that fixed minimum electricity prices will
reach up to EU standards in the near future.
A new beginning with nuclear power plant projects
The Turkish government increased nuclear power plant projects in
order to meet the rapidly increased energy demand.
Initially, the Russian state atomic energy corporation, Rosatom,
was contracted to build Turkey's first nuclear power plant in
2010. The total cost of investment is around $20bn and is expected
to start operations in 2019.
Furthermore, Türkiye Elektrik Ticaret ve Taahhüt
A.Ş (TETAŞ) guaranteed the purchase 70% of generated
power from the first two units and 30% from the third and four
units for 12.35 cents per kWh.
The remaining power will be sold in the open market by the
producer. In addition to Akkuyu project, Turkey signed another
agreement with a Japan-France consortium led by Mitsubishi Heavy
Industries and Arveva.
The estimated cost for this project is $22bn and completion is
expected in 2023. Consequently Turkey anticipates 15% of power
generation from nuclear plants by 2030.
The Turkish government has introduced an investment model called
"Build-Operate Own", reducing the financial risks of
Challenges in Turkish energy market
Despite Turkey's long-term vision for the energy industry,
there are some drawbacks for potential investors. These are:
Turkey is highly dependent on imported natural gas.
Turkish renewable energy policies and legislation should be
more consonant with EU countries' practices.
Owing to Turkey's geopolitical, the government should
intensify surveillance to ensure energy infrastructure
Strict disclosure requirements on licensing procedure may
discourage investors to invest in large-scale energy projects in
Previously published in Global Trader
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Turkey has amended the Electricity Market Law numbered 6446 to promote use and security of domestic energy resources. Under the amendments, planned capacity mechanisms must give priority to local energy sources.
Turkey's energy regulator previously ruled (decision numbered 5709, dated 30 July 2015) that a total capacity of 2,000 MW would be reserved in the period up until 2020 for wind power pre-license applicants to connect to the grid.
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