Turkish economic growth that had been going on for more than a decade have created a strong economy that is based on high demand for energy. However as a country that is heavily dependent on energy imports Turkey is investing on the means that will provide it with a more diversified energy base. This report is intended to provide an extensive analysis of such an effort on the part of Turkey by laying out the energy map of the country. It puts a specific emphasis on combining the sector specific dynamics with the legal knowledge of the Turkish energy market. The report should be read in conjunction with the recent developments in the region including new discoveries of energy resources in the Eastern Mediterranean and their resonances for the Turkish energy policy as well as the energy policies of the regional players.
GENERAL MACRO ECONOMIC OVERVIEW AND POLITICAL ANALYSIS
Turkey's Economic Outlook 2013
Turkish economy has been growing in unprecedented rates during the course of the last decade. Its macro economic restructuring and reforms following the economic crisis of 2002 had paid off and led the country to an economy based on solid macro-economic foundations. Throughout the last ten years the country has been increasingly associated with the emerging economic power houses of BRIC and has been regarded as an economic hub in its region.
- GDP per capita increase from 3,492 USD in 2002 to 10,497 USD in 2013
- Economic growth by 3.6% in 2013
- Inflation rate 7.4% in 2013
- Annual Exports of 151.3 USD billion in 2013
- Annual Imports of 248.3 USD billion in 2013
- Budget deficit to GDP 1.2%
Outstanding Turkish economic performance which has spread out to the last decade has a keen connection with the political situation in Turkey. Once a country of an unstable politics that is marked by ever changing coalition governments, Turkey has managed politically to transformed itself in to a stable and reliable country with a single party government capable of implementing much needed political and economic reforms. Throughout the last decade Turkey had experienced no major political crisis and the stable political situation had found an expression in the country's unprecedented economic growth almost reaching double digit numbers in its heyday.
The year 2014 is a year to watch for the Turkish politics to see if the country will continue to proceed in a stable course or two ballot boxes that will be brought before the Turkish electorate will change the political landscape in Turkey. Turks will go to the polls both in March 2014 local elections to determine who will run the Turkish cities and August 2014 to directly elect their President for the first time in their history. What is crucial for these two elections are two events that have the potential to change the Turkish politics.
Turkish Energy Market in Perspective
- Turkish energy market has been structured through the liberalization policies of Turkish government with intent to form a competitive energy market.
- Despite the latest monetary policies of Central Bank of Turkey on interest rates which were implemented against to currency risk, Turkish electricity consumption rate is estimated to mount up to 4.5 % annually in parallel with GDP.
- Turkish natural gas market is sharply expanding with substantial privatizations in recent years. In line with economic growth, Turkish natural gas consumption augmented circa 5% compared to 2012.
- Electricity consumption performed a sustainable growth throughout 2007 to 2013. Although it was very soft winter season last year, the electricity consumption increased 1.3% in 2013. This is a fundamental indicator that electricity demand is mostly related to industrial consumption.
Overall Distribution of Energy Resources
- Turkey has become one of the fastest growing energy markets in the world and has been experiencing rapid demand growth in all segments of the energy sector for decades.
- Turkey comes in possession of the most dynamic energy economies of the world in terms of increase in energy demand.
- Having a substantial potential for the renewable energy resources, Turkey ranks seventh in the world and first in Europe in terms of geothermal energy.
- Turkey aims at further increasing its use of hydro, wind and solar energy resources and Turkey has potential producing 30% of its electricity need from the renewable by 2023.
- Turkey is geographically located in close proximity to more than 70% of the world's oil and gas reserves.
- Annual electricity generation is approximately 179, 5 billion kWh in Turkey.
- Renewable energy and energy efficiency projects are assisting to reduce CO2 emissions in Turkey by more than 3 million tons annually.
- Turkey has different kinds of energy sources which Turkish energy sector is becoming more active, competitive and attracting the attention of investors.
Annual energy consumption
In comparison with 2012, annual electricity consumption in Turkey has risen by 1.3% and climbed to 245K GWh. The highest energy consumption revealed on July by 22K GWh due to the cooling off items usage.
Total Energy Supply Sources
- Electricity demand has been growing in line with economic developments which driven by industrialization and urbanization in Turkey.
- Growing demand is driven by population and industrial growth which in emerging markets calls for a rise in the supply capacity as well as diversity in the energy generation mix.
- Diversification of primary energy supplies decrease dependency on a single source and contributes to supply security.
- Developing countries which is Turkey to constitute 93% of the growth in demand.
- According to the International Energy Agency (IEA), shale gas caused a decline in gas prices which increase the demand on natural gas and LNG.
- Turkish electricity market has been increasing in size with its economic developments which industrialization and urbanization make room for the importance of electricity in Turkish market.
- The Turkish electricity market is one of the fastest growing in the world with an average of approximately 9% annual growth in 2010 and 2011.
- Turkish electricity market play a crucial role in terms of natural gas demand since it is expected to grow by 2.9% annually until 2020 according to the Ministry of Energy and Natural Resources.
- Turkey has the second highest energy consumption growth after China and is highly dependent on external energy resources.
- There is a competitive global market place in which energy cost is a significant competitive factor. Turkish economy is an aim of becoming more competitive in the global market place.
- The geographic position of Turkey and its proximity to the energy sources is its biggest asset.
- The energy intensity of Turkish industry is higher than any modern standard. Energy intensity of Turkish industry is two times higher than the OECD average and four times higher than Japan's average. Turkish industry has to increase energy efficiency in production and increase the share of the renewable energy in its energy mix in line with the EU regulations and standards.
- Turkey is located in a region that holds 72% of the world's proven gas reserves and 78% of proven oil reserves. Countries to the west of Turkey consume 50% of world's oil and natural gas while countries to the east produce 70% of world's oil and natural gas.
- Turkey is located at the crossroads of energy in the middle of five seas. In regard to this, this position makes Turkey an indispensable energy corridor between the two regions of energy production and consumption.
- The limits of Turkey's domestic energy sources in light of its growing energy demand have resulted in dependency on energy imports, primarily of oil and gas.
- Turkey aims at fully utilizing its indigenous hard coal and lignite reserves, hydro and other renewable resources such as wind and solar energy in order to meet the demand growth in a sustainable manner.
- Integration of nuclear energy into the Turkish energy mix is also one of the main tools in responding to the growing electricity demand while avoiding increasing dependence on imported fuels.
- Turkey imports about 90% of the hard coal mainly from Russia, Australia and the United States. The volumes of imported coal will rise in the future as coal's importance for electricity generation increases.
- Turkey's lignite reserves make a significant contribution to Turkey's energy sector and power mix. The government has begun a policy to encourage exploitation of Turkey's domestic lignite reserves instead of natural gas for electricity generation.
- Progress in the liberalization process allowed Turkey to be a part of European markets in which political integration exists. After Norway, Russia, and Algeria, Turkey aims to become the fourth artery in energy imports.
Legislative Framework Summary
Legislation in Turkish energy market has been amended within the scope of the adaptation of Turkish Law with the European Union's Directives and Regulations and within the frame of the energy market liberalization policies. The energy market legislation supports the access of private sector companies into energy market and accordingly, the energy market has been opened to competition to a large extent. The most essential is that the legislation has been amended in accordance with the changes and requirements in each market. The last legal reforms have been made in Natural Gas Market.
Oil & Gas
Due to the Resolution of the Council of Ministers from 05.12.2013, the support mechanism for power manufacturing from renewable resources, feed-in tariffs and local equipment incentives have been extended to 2020.
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