turkEy’s ElEctricity dEmand has
GroWn at an annual compound
ratE of 7.3% sincE 1985.
In 2010 and 2011, the country’s electricity demand increased 7.9% and 9%, YoY respectively; this strong demand growth continued in 2012 as electricity demand totaled 241,946.6 GWh, up 5.1% YoY.
In 2012, the share of natural gas power plants and coal power plants in Turkey’s total electricity generation had dropped to 43% (2011: 45%) and 27% (2011: 28%), respectively. Meanwhile, the share of renewable energy power plants (hydroelectric, wind and geothermal) in total electricity generation increased to 29%, up from 27% in 2011.
During first quarter 2012, electricity prices in the Balancing and Settlement market remained high as a result of the substantial increase in demand due to cold weather conditions, and also because of shortages in natural gas supply, the main source of electricity generation in Turkey. Compared to the previous quarter, in the second quarter of the year, prices remained lower due to low demand/high supply (especially from hydroelectric power plants) conditions resulting from seasonality.
During the third quarter,
electricity consumption increased due to seasonality and in July, consumption recorded a historical peak level; peak load demand reached 39,045 MW on July 27. As a result, electricity prices in the Balancing and Settlement
market remained higher in the third quarter compared to the second quarter. In terms of price regulation, the Energy Market Regulatory Authority (EMRA) raised electricity tariffs between 4.03% and 9.81% effective as of October 1. This price rise came on top of the 8.1% increase imposed on April 1, 2012. The Petroleum Pipeline Corporation (BOTAŞ) also increased natural gas prices by 9.8% on average, as of October 1, and again on top of the previous price rise of 18.72% made on April 1. As a result of these price increases, electricity prices in the Balancing and Settlement market remained at third quarter’s levels during the fourth quarter, despite the slowdown in demand.
Turkey’s electricity demand has grown at an annual compound rate of 7.3% since 1985, in line with economic development, industrialization and urbanization. According to Turkish Electricity Transmission Company (TEİAŞ) data, Turkey has total installed capacity of approximately 57,058 MW as of year-end 2012. Taking into account the estimated increase in electricity demand, Turkey will have to at least double its existing capacity over the next 10 years.
Within this framework, according to a report published by the Turkish Electricity Transmission Company (TEİAŞ) titled “Turkish Electrical Energy 10-Year Generation Capacity Projection,” Turkey is expected to face
electricity shortages by 2017. Taking into account the minimum three or four-year investment period required for energy investment projects, measures must be taken beforehand and investments must start immediately in order to stave off a supply shortage in the coming years.
The “Electricity Energy Market and Supply Security Strategy Paper” published by the Undersecretariat of the State Planning Organization stated that the primary target was to increase the share of local energy resources in new investments, and also to raise the share of renewable resources to at least 30%. This report indicates that by 2023, Turkey is targeting to:
• Fully utilize current domestic lignite and hard coal resources; • Raise the share of nuclear power
to at least 5%;
• Fully exploit hydroelectric power potential;
• Increase installed wind power capacity to 20,000 MW; and • Commission the entire 600 MW
in geothermal potential. Within this framework, the amendment to the Law on the Utilization of Renewable Energy Resources for Electrical Energy Generation, which aims to promote the generation of electricity from renewable resources, was enacted on January 4, 2011. The law provides a price guarantee for a period of 10
35
years to the generation license holders subject to the renewable energy resource (RES) support mechanism. In addition, the law also aims to encourage the use of local technology by providing additional incentives for the use of local equipment at the renewable energy facilities.
Pursuant to the efforts to increase the share of local resources in total electricity generation, power plants that use local coal and lignite were also included in the incentive package as per the Resolution of the Council of Ministers,
promulgated in the Official Gazette on February 15, 2013.
In line with the ongoing liberalization in the market, the “Electricity Market Law” was enacted in March 2013. The purpose of this law is to establish a financially robust, stable and transparent market structure that will operate in accordance with special legal provisions in a competitive environment, so that consumers can be supplied with adequate, high quality, uninterrupted, low cost and environmentally friendly electricity. The law also aims to ensure that the market is independently regulated and audited. The legal infrastructure required to establish the Energy Exchange has also been formed. The Energy
Exchange is critical in terms of creating a market structure that will assure investors of transparent reference prices while also securing the energy supply. Enabling a competitive
environment in the energy sector; establishing financially strong, transparent and stable energy markets; and regulating and supervising these markets are crucial to the development of the energy sector in Turkey and to the improvement of its competitive advantages on a global level. To this end, the developments in privatization are as follows:
tHE ConsumEr EliGibility limit WAs loWErEd to 5,000 kWh in linE WitH EmrA’s dECision mAdE At its mEEtinG on jAnuAry 24, 2013.
Production:
The privatization process of the production facilities owned by the Turkish Electricity Generation Company (EÜAŞ), which started in 2009, is ongoing. According to the 2011 EÜAŞ annual report, privatization of 52 small scale hydroelectric power plants owned by EÜAŞ and arranged in 19 portfolio groups was completed; out of these 19 groups, the share transfer processes of 10 groups (total of 28 HEPPs) were finalized. For the remaining five groups (total of 12 HEPPs), the Privatization Administration is currently conducting the transfer of shares. Meanwhile, the tenders for four groups (total of 12 HEPPs) were cancelled.
Additionally, the privatization process for power plants with a total installed capacity of approximately 16,000 MW, which are owned by Turkish Electricity Generation Company (EÜAŞ), was initiated. The target is to start the privatization of the four thermal power plants (Hamitabat, Soma A-B, Kangal and Seyitömer) in the first stage, and then of the nine portfolio groups that comprise hydroelectric and thermal power plants, and to complete the entire privatization process within the next two to three years. Within this context, the privatization tenders for the Seyitömer and Kangal power plants were completed
through a “Grant of Operation Right” on December 28, 2012 and February 8, 2013, respectively. The bidding deadline for the privatization of the Hamitabat Power Plant through a “Block Sale” was set as February 28, 2013. distriBution:
By the publication date of this report, privatization of 13 distribution grids have already been completed. The privatization of 100% of the shares of the remaining eight grids have also been completed through a block sale, and the share transfer processes are ongoing. Pursuant to the privatization of distribution grids as set out in the “Medium Term Program (2010-2012)” prepared by the Undersecretariat of the State Planning Organization, it was stated that in order to improve the degree of market transparency, the eligibility limit would be continuously lowered, and by 2015, all consumers will be eligible. Within this framework, the eligibility limit was lowered to 5,000 kWh in line with EMRA’s decision made at its meeting on January 24, 2013.