The recent growth of the Turkish economy that had sprawled to
the entire last decade gave birth to a new phenomenon of energy
price hikes. The country's growing appetite for ever more
energy supplies necessitates a coordinated action on the part of
the regulatory authorities to make the energy prices to stay in a
stable and predictable course. Especially the pricing mechanism
should be based on a more liberal approach that would allow the
changes in demand and supply to be reflected in energy prices. In
order to ensure such an environment for the energy market to
operate the Turkish authorities has taken the steps towards the
liberalization of the energy market. The special emphasis was given
to the electricity market.
The Underlying Reasons for Liberalization
The drive for change on the part of the Turkish authorities came
as a result of various different developments. The rising demand
for the electricity as the result of increasing industrial capacity
was accompanied by financial problems that had led the authorities
to come up with new solutions. Moreover previously authorized
bodies; the municipalities were reluctant to funnel electricity
generated incomes for new electricity generation capacities that
would contribute to the reduction of prices. Also the rising costs
and very expensive purchasing guarantees had matched the ill
effects of dwindling investments that failed to match the increases
in demand. These recurring problems hastened the drive for more
change in the Turkish electricity market.
The New Regulatory Regime
Electricity Market Law No 4628 which was enacted in 2001 marked
the beginning of energy market liberalization in Turkey. During the
same year came the establishment of the Energy Market Regulatory
Authority that would later serve to enact critical regulations both
for the organization of the energy market and for its
liberalization. Following the distribution of first electricity
generation licenses in 2003, the critical step came in 2008 that
led to the privatization of distribution. The efforts for more
liberalization of the market had reached the zenith with the
introduction of the option for all non-residential consumers to
chose their suppliers. The efforts to establish an energy stock
exchange will take the liberalization of the Turkish energy market
in to the next level in which the inflexible nature of the
electricity prices will be replaced by a mechanism that would allow
the prices to be determined in a more stable fashion that would
bring forward a reference pricing system. This means a great deal
of predictability for the investors.
What will EPİAŞ
EPİAŞ is designed to serve as the energy exchange of
Turkey and is expected to be integrated in to Borsa Istanbul which
is the umbrella institution that all the exchanges in Turkey
operates within. There are different scenarios circulating around
about the partnership structure of the EPİAŞ, however
none of them have been confirmed yet. The only information
disclosed to the public regarding the partnership structure is that
the share of the public companies in EPİAŞ will not
exceed 15%. It is expected that certain specific roles that are
currently being carried out by TEİAŞ (Turkish Electricity
Transmission Company) such as balancing acts and some of its human
and technological capital will be transferred to EPİAŞ.
The prime task of EPİAŞ is envisaged in the relevant law
as working for the emergence and the formation of new markets
within the wholesale electricity markets. However it is also tasked
with even more crucial role for the market player which is the
determination of prices pertaining market operations. Moreover if
the standardized electricity contracts will managed to be exchanged
in international future and options markets, this will signify a
great deal of integration for the Turkish electricity market in to
the world markets.
Even though such measures are substantial steps for the
liberalization of the electricity market in particular and energy
market in general, for the desired changes to take place there must
be taken few more steps. Efforts should be done to reduce the
country's dependency to foreign energy resources since such
dependency might slow down the formation of a well functioning free
market where the prices can take shape freely. The measures taken
by the authorities such as increasing incentives for renewable
energy demonstrates that the authorities have already started to
take the necessary steps for reducing foreign energy
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