I am very pleased to be guest editor of this issue of Network Industries Quarterly-Turkey, entitled Electricity market in Turkey: How it is coping with demands from liberalization policies.
Electricity has maintained its importance as the main energy source in the modern world, and well-functioning electricity markets still lie at the heart of modern liberal economies. As common policy, almost all countries in the world prefer a liberal electricity market under which there is competition for electricity generation and supply. On the other hand, electricity markets have to be regulated strictly as they employ networks such as distribution and transmission and other complex technical matters. There are several challenges for electricity market regulators to stay up to date and manage constantly changing technological and economic developments. History shows that, in case of regulation failures, the effects will be catastrophic.
Like many liberal economies, Turkey has undergone a liberalization process in its electricity market. In the process, regulatory power has been given to the Energy Market Regulatory Authority (EMRA). Modern electricity regulation was first introduced in 2001 and, since then, there has been dynamic regulation to bring the electricity market to up to date and prevent large-scale economic and technical problems in the market.
This issue presents five articles covering latest developments in Turkish electricity markets. Topics are future contracts (Taner Şahin), electricity storage (Mehmet Kürkçü), competition problems in distribution networks (Caner K. Çeşit), renewable support schemes (Emrah Çelebioğlu), and private contract competition (Muzaffer Eroğlu).
Şahin examines futures electricity contracts and recent changes to regulations. He states that even though base load electricity futures contracts have been traded in Turkey since 2011, the electricity futures market, which is planned to start within EPİAŞ after June 2021, is a brand new and crucial step. Şahin claims that electricity futures market to be operated within EPİAŞ will be one of the most critical steps taken to provide adequate risk management tools for market participants. It is critical that electricity futures market complements the functions of the day-ahead and intraday markets operated within EPİAŞ.
Çeşit examines recent developments regarding competition in electricity markets from a competition law perspective by examining recent important decisions of the Turkish Competition Authority (TCA). He first shows approaches of the TCA by examining sector inquiry reports. Later he explains three decisions regarding the incumbent undertakings providing electricity distribution and retail sale services in various regions of Turkey. With these decisions, the TCA had heavily fined the investigated undertakings. Çeşit concludes that, in order to achieve a competitive market, the TCA will actively interfere either by sector reports or by imposing sanctions directly.
Kürkçü examines recent technical and regulatory developments regarding electricity storage. He indicates that one of the solutions for the flexibility required by the power systems is electricity storage. He then shows the importance of sound regulation as the deployment of electricity storage largely depends on the existence of sound and ambitious policies and clear legislative frameworks. He finally discusses the draft “Electricity Storage Activities Regulation” and accompanying proposals for changes in other secondary legislation, and indicates that the draft provide a comprehensive regulatory framework pertaining to grid-level electricity storage in Turkey, offering improved flexibility and renewables deployment, as well as opening up new opportunities for investments.
Çelebioğlu examines the potential effects of the new Turkish Renewable Energy Resources Support Mechanism (YEKDEM) for electricity generation facilities based on renewable energy resources, which entered into force on 30 January 2021. After providing necessary background information and a historical viewpoint, Çelebioğlu evaluates the potential impact of the new regulation on the market. He evaluates the effects of the new scheme, both for electricity generation industry and for consumers in the future.
Finally, I examine the latest developments in market openness and switching trends from ineligible consumer contracts to bilateral contracts in Turkish electricity market by examining regulation in the supply market and the level of competition in Turkey. I start by examining the current regulations regarding supply contracts and market openness and later outline recent decisions of the EMRA towards achieving supply side competition. I also present obstacles for market openness as the expected level of openness has still not been reached.
Assistant Professor, Kocaeli University