Turkey: Reforming The Electricity Market: A Balancing Act

The first effects of private sector involvement in the electrical power sector were observed in 1986 with the enactment of Law No. 3996 regulating the build-operate-transfer model and welcoming the private sector – including foreign capital – into the electricity market. Prior to that time, the electricity market was run by the state, following passage of the nationalization acts from 1938-44. Whereas the first attempts at liberalizing the electricity market had been observed long before, actual liberalization of the electricity market took place only with the enactment of Law No. 4628 on the Electricity Market in 2001.

New Mechanisms for Balancing Supply and Demand

Developments in the industry, high demand for good quality, and the need for liberal electricity pricing increased demand for a market with a high level of private sector participation, especially in the generation industry. Consequently, a need arose to restructure the electricity trading market to balance demand and supply, to prevent both consumers and generators suffering from volatile price fluctuations, and ultimately to create stable market pricing. Enactment of the Electricity Market Balancing and Settlement Regulation in 2004 – which entered into force on August 2006 by implementation of a cash settlement – created the initial structure of the so-called "spot market," "day-ahead market" and "electricity exchange market."

The Balancing and Settlement Regulation

As a consequence of the increase in the demand for electricity – as well as the rise in the level of private sector participation in the sector with the licensing mechanism under Law No. 4628 on the Electricity Market and the regime on operation of build-operate-transfer model facilities – a new Regulation on Electricity Market Balancing and Settlement was enacted and announced in the Official Gazette dated 14 April 2009 and numbered 27200 ("BSR"). This regulation establishes the rules and procedures for the "final balancing and settlement mechanism," abolishing the previous regulation for re-structuring purposes. It also sets forth the principles and procedures with respect to balancing systems and the settlement of payables and receivables arising from any inconsistencies between the supply and demand of electricity. Finally, it reforms several fundamental components of the electricity market, such as available electricity balancing and trading markets, balancing units, bilateral trading and collaterals. Until the market is operating effectively upon establishment of the necessary infrastructure, related transactions will be carried out through day-ahead planning, and relevant regulatory and technical work will be done. The date on which the day-ahead market is operative will be announced through an EMRA (Electricity Market Regulatory Authority) Resolution one month beforehand.

The Day-Ahead Market

A fundamental amendment introduced through the BSR is the establishment of a new market – a "day-ahead market" ("gün öncesi piyasası") – controlled by the Market Financial Settlement Center (Piyasa Mali Uzlaştırma Merkezi (PMUM)) as the Market Operator ("Market Operator"), balancing electricity supply and demand for the following day. Market participants are to be provided with the opportunity to sell and purchase electricity for the following day through acceptance of offers valid for a specific date, unit and time period. Market participants are the holders of generation, auto production, and wholesale and retail sale licenses. Those that join the balancing mechanism must be registered as balancing units, as essential market players obligated to comply with scheduling requirements. Balancing units are: (i) licensed generation facilities or their units; (ii) consuming units which can adjust or cut off their consumption according to the System Operator's instructions; and (iii) combined cycle plants, which can load and de-load independently and be metered independently on the basis of each settlement period. Due to their intermittent nature, canal or river-type hydroelectric, wind power, solar, wave, tidal power, co-generation and geothermal generation facilities do not have to be part of the balancing system. However, at the request of the respective generation company and the approval of the National Load Dispatch Center (Milli Yük Tevzi Merkezi (MYTM), the System Operator of these facilities can also be qualified as a balancing unit and participate in the balancing system. The day-ahead market raises expectations of achieving a stable current market where demand and supply are equalized through prior planning of the needs and availability of the generation facilities, with better cost settlement.

MYTM, as the System Operator ("System Operator"), operates the "real-time market" ("dengeleme güç piyasası") by accepting offers which are valid for a specific unit, region, date and time interval. The real-time demand and supply of electricity is balanced by the reserve capacity acquired in real time, through adjusting the volume of electricity generated within a 15-minute period.

Market Players as Balancing Units

Under the BSR, consumers are no longer passive acceptors of market prices. Consumers are included as market participants who can influence prices through lowering demand at high-demand intervals to strategically affect the demand factor of the equilibrium. As a result of their active role in the market, consumers must also pay a certain portion of the Residual Balance Adjustment Fee (Sıfır Bakiye Düzeltme Tutarı). This rule is expected to reduce the financial burden on generation companies, which increasingly complain about the higher costs resulting from the Residual Balance Adjustment Fee.

Another subject of BSR regulation is the guarantee to be obtained from the market players to secure cash flow, which is essential for a well-functioning electricity trading market. Market participants are obliged to provide a guarantee for the fulfillment of their obligations on settlement of payments under the BSR. The amount of such guarantee will be enough to cover any risks likely to arise from any and all market activities conducted by the relevant market player.

Furthermore, the BSR allows balancing units to form balancing groups, leading to the establishment of a portfolio and lessening deficiencies in either demand or supply, depending on the type of group formed. Creating balance within each group itself will have a significant positive effect on balancing the whole market. In connection with this, a new concept of parties and groups – liable to the System Operator for rectifying imbalances in the system created by certain market participants – is being introduced. Accordingly, one of the parties to the selling/purchasing arrangement will have to bear all financial costs arising from market imbalances resulting from their transactions.

An Untested System

It is beyond question that creation of a balancing and settlement mechanism is itself a huge step forward for liberalization of the energy market, and will provide a more liberal, stable environment for the market players. That said, the balancing and settlement system in Turkey is not conventional in set-up, and is unique in that it acts as a balancing market as well as a form of day-ahead market. It is therefore difficult to predict which of the recent amendments will have a beneficial effect on full liberalization, motivate market players to maintain their bilateral undertakings, and utilize the balancing and settlement market as a secondary option, maintaining an electricity market that achieves normal trading with stable and foreseeable prices. However, the essential question is whether harnessing the new market system will be possible under the current electricity market conditions, and how the governmental authorities in co-operation with the private sector will work efficiently to provide the related infrastructure to implement the rather complex new mechanism.

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”

Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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