Political institutions of electricity regulation: The case of Turkey

Turkey has been going through a liberalization process in its electricity market over the last decade. So far, the regulatory content of the market reforms has been in the center of attention in the literature, to the negligence of regulatory governance. However, recent studies, which applied the theoretical insights of new institutional economics to utilities regulation, have demonstrated that political endowments of the country draw the boundaries to which extent such regulatory content can be effectively implemented. In line with these studies, this paper adopts an institutional approach and attempts to identify the political endowments of Turkey in order to further analyze whether the market reforms succeeded in bringing about sufficient checks to cure the institutional problems. In other words, the paper takes a picture of the overall regulatory arena. The results show that the current regulatory structure, especially government–regulator relations, yet fails to meet good regulatory governance criteria. The paper also provides some policy suggestions.     

Electricity demand analysis using cointegration and ARIMA modelling: A case study of Turkey

In the early 2000s, the Republic of Turkey has initiated an ambitious reform program in her electricity market, which requires privatization, liberalization as well as a radical restructuring. The most controversial reason behind, or justification for, recent reforms has been the rapid electricity demand growth; that is to say, the whole reform process has been a part of the endeavors to avoid the so-called “energy crisis”. Using cointegration analysis and autoregressive integrated moving average (ARIMA) modelling, the present article focuses on this issue by both providing an electricity demand estimation and forecast, and comparing the results with official projections. The study concludes, first, that consumers’ respond to price and income changes is quite limited and therefore there is a need for economic regulation in Turkish electricity market; and second, that the current official electricity demand projections highly overestimate the electricity demand, which may endanger the development of both a coherent energy policy in general and a healthy electricity market in particular.     

Views on Turkey's impending ESCO market: Is it promising?

Turkey's Energy Efficiency Law (EEL) came into force in May 2007. The EEL will transform energy policies implemented in the government and private sectors. The law and upcoming regulations will offer opportunities for the impending Energy Service Company (ESCO) market in Turkey. In this work, we briefly review the ESCO literature and its financing mechanisms in the world, and present our views with regard to the funding and related risks that are likely to be associated with the forthcoming Turkish ESCO market. These views are backed up with Turkish credit and banking market performance and the lessons learned from implementation of some EU-related projects involving the banking sector and small-and-medium-sized firms. We conclude that in order to create a promising competitive ESCO market, Turkey's policy must be to sustain its average 5% growth rate achieved lately for the coming decade, finish the structural reforms which will invite necessary capital inflows to ensure an economic stability and financing.     

The relationship between energy and production: Evidence from Turkish manufacturing industry

This paper investigates the relationship between energy and production at the industry level in an emerging market, Turkey, in a multivariate framework. The electricity consumption and value added relation is examined in the Turkish manufacturing industry, while also accounting for labor and fixed investment. We find that labor, fixed investment, electricity consumption, and value added are related via three cointegrating vectors. The VEC results indicate uni-directional causality running from electricity consumption to value added. Generalized impulse response and variance decomposition analyses confirm these results. Thus, energy input appears to be closely related to production. Hence, energy saving technologies and increased energy efficiency may increase the growth in manufacturing value added.     

Adoption of energy efficient technologies and carbon abatement: the electricity generating sector in India

A behavioral micro-economic framework was developed to analyze the impact of alternative mixes of policy reforms that eliminate existing regulatory distortions and a carbon emissions-tax on incentives to adopt energy efficient technologies and their implications for carbon emissions and output. An empirical application of this framework to the electricity-generating sector in India demonstrates that elimination of existing domestic and trade policy distortions has the potential to reduce carbon emissions even in the absence of an emissions-tax, by inducing the adoption of energy efficient technologies. In the presence of these policy reforms, an emissions-tax achieves a given level of abatement with higher output levels than in the absence of these reforms. This analysis indicates the potential for achieving a complementarity between the goals of reducing carbon emissions and increasing electricity generation by identifying the regulatory distortions that are hindering adoption of energy efficient technologies and tailoring policy reforms to specific distortions.     

Can the Shanghai LNG Price Index indicate Chinese market? An econometric investigation using price discovery theory

China became the world’s second largest liquefied natural gas (LNG) importer in 2018 but has faced extremely high import costs due to a lack of bargaining power. Assessments of the Shanghai LNG Price Index, first released in 2015, are vital for improving the understanding of these cost dynamics. This paper, using the LNG price index data from the Shanghai Petroleum and Gas Exchange (SHPGX) coupled with domestic and international LNG prices from July 1, 2015 to December 31, 2018, estimates several econometric models to evaluate the long-term and short-term equilibriums of the Shanghai LNG Price Index, the responses to market information shocks and the leading or lagging relationships with LNG and alternative energy prices from other agencies. The results show that the LNG price index of the SHPGX has already exhibited a long-term equilibrium and short-term adjustment mechanisms to reflect the average price level and market movements, but the market information transparency and price discovery efficiency of the index are still inadequate. China’s LNG market is still relatively independent of other natural gas markets, and marketization reforms are under way in China. The influence of the SHPGX LNG price index on the trading decisions of market participants is expected to improve with further development of China’s LNG reforms, the formation of a natural gas entry-exit system, and the increasing liquidity of the hub.     

The reform in the Turkish natural gas market: A critical evaluation

Turkey is in a strategically advantageous position in terms of its natural gas market. Being in the middle of Europe and energy-rich countries of Central Asia, it can be an energy corridor between these two regions. It can import gas from a number of countries and diversify its sources. This situation may also provide motivation for a competitive gas market. The recent reform in the market, which began in 2001, was an attempt to strengthen the natural gas market to this end. However, the reform has not worked out as expected so far. This article discusses recent restructuring efforts in the Turkish natural gas market. We focus on the legal structure and economic consequences of the legal change within the international economic relations. After presenting a detailed discussion of the legal framework, we draw attention to the problems of the industry and difficulties in the transition to a more competitive market structure. In the end, we touch upon some regulatory issues and potential conflicts.     

Nuclear power in open energy markets: A case study of Turkey

For many decades, like many developed countries, Turkey has controlled her electricity sector as a state-owned monopoly. However, faced with rapid electricity demand growth, Turkey started to consider nuclear option. The present paper aims at evaluating both the present status of nuclear power in general and its implications for Turkish energy market in particular. After examining existing nuclear power technology and providing a brief overview of nuclear power economics; it focuses on the repercussions of nuclear power for Turkish energy market. The paper concludes that, in the short run, it may be considered to keep nuclear power within Turkish energy mix because it is an important carbon-free source of power that can potentially make a significant contribution to both Turkey's future electricity supply and efforts to strengthen Turkey's security of supply. However, in the long term, nuclear power should be retained in Turkey only if it has a lower cost than competing technologies.     

The role of corporate reputation and employees' values in the uptake of energy efficiency in office buildings

Although office market actors in the United Kingdom show a growing interest in energy efficiency, the pace of takeup of energy efficient office features is slow. Previous studies have highlighted the roles of limited direct financial costs and benefits (‘efficiency gaps’) and market barriers in limiting the rate of technology adoption. This study provides further evidence on the importance of these factors, but the primary contribution is focused on the role of corporate reputation and on the importance of individuals' values in shaping corporate behaviour. The paper presents a theoretical framework to explain environmental decision making in firms and we present qualitative evidence drawing from sixteen semi-structured individual and group interviews with office market stakeholders in London, Glasgow and Edinburgh. The research finds that companies, despite gradually becoming more energy conscious, still regard energy costs as a negligible part of their business costs. Nevertheless, an increasingly important driver is the reputational gain obtained by corporate businesses implementing sustainable practices. All the interviewees agreed that the pace of change in the office market is slow and that only further policy interventions will accelerate it.     

Modelling the transport sector fuel demand for developng economies

This paper concentrates on the transport sector of six developing countries with similar common denominators, namely Turkey, Thailand, Pakistan, Morocco, Tunisia and Malaysia. By using standard econometric techniques, we analyse the evolution of oil demand for road transport in these countries in relation to independent variables such as income, population, price of gasoline and diesel etc. Unlike the treatment in the present literature on the subject, gasoline and diesel consumption are estimated separately due to the high share of diesel in the total transport sector consumption. On the basis of the estimation over the period 1970–1990, on a country by country basis, we forecast the demand for these six countries until 2010. The results of this study indicate that the transport sector will be the driving force for energy and oil demand as part of economic growth in these developing countries. Its share in the future energy market structure is expected to grow. Consequently, the (pricing) policies of oil products in this sector have a crucial role for shaping rational economic and energy strategies within the framework of rising environmental concern.     

Natural gas demand in Turkey

On average, energy demand of Turkey is mounting by 8% annually, one of the highest rates in the world. Among primary energy sources, natural gas is the fastest growing one in Turkey. Gas consumption started at 0.5 bcm (billion cubic meters) in 1987 and reached approximately 35 bcm in 2007. Turkish natural gas usage is projected to further increase remarkably in coming years. The present paper focuses the characteristics of this demand and estimates short and long-run price and income elasticities of sectoral natural gas demand in Turkey. The future growth in this demand is also forecasted using an ARIMA modelling and the results are compared with official projections. The paper reveals that natural gas demand elasticities are quite low, meaning that consumers do not respond possible abusive price increases by decreasing their demand or substituting natural gas with other energy sources. Since consumers are prone to monopoly abuse by incumbent, there is a need for market regulation in Turkish natural gas market. Based on forecasts obtained, it is clear that the current official projections do not over/under-estimate natural gas demand although past official projections highly overestimated it.     

A discussion on recent developments in Turkey's emerging solar power market

Market reform, energy security and environmental protection are three primary energy policy goals of Turkish government. Although Turkey's abundant solar energy resources can directly address the government's energy policy goals, Turkey has not utilized solar power yet. Utilization of country's huge solar energy potential would decrease dependence on imported fossil fuels and contribute to fulfill environmental commitments. However, lack of regulatory and financial support for the development of solar power has considerably delayed the utilization of country's huge solar potential. The government has taken only modest steps to promote investment in solar power until the end of 2010 when a new feed-in tariff policy was adapted. Turkey's solar energy potential, PV technology status and prospect for concentrating solar power in Turkey have been explored in a number of studies; yet literature dealing with recent policy developments, associated investment environment and opportunities for solar power investors are limited. The aim of this paper is to set out the latest legal framework for investment in Turkey's emerging solar power market and to provide some guidelines to potential investors who appreciated country's huge solar energy potential.     

Electricity restructuring in Turkey and the share of wind energy production

This paper presents the current status of Turkey's electricity power sector, efforts for introducing competition in the Turkey's power industry, and concerns with the restructuring in Turkey. Turkey include long-term high-cost agreements, low quality of power, and therefore restrictions for synchronization with UCTE network, increase in the reliance on imported natural gas, and the urgent need for highly qualified staff that would be capable of fast and reliable implementation of ongoing reforms in the electricity sector. The contribution of the exploiting wind energy potential in Turkey to reconstruction of Turkey electricity structure is investigated. The strong development of wind energy in Turkey is expected to continue in the coming years.     

Spillover effects of distribution grid tariffs in the internal electricity market: An argument for harmonization?

In many countries, distribution grid tariffs are being reformed to adapt to the new realities of an electricity system with distributed energy resources. In Europe, legislative proposals have been made to harmonize these reforms across country borders. Many stakeholders have argued that distribution tariffs are a local affair, while the European institutions argued that there can be spillovers to other countries, which could justify a more harmonized approach. In this paper, we quantify these spillovers in a simplified numerical example to give insight and an order of magnitude. We look at different scenarios, and find that the spillovers can be both negative and positive. To be able to quantify these effects, we developed a long-run market equilibrium model that captures the wholesale market effects of distribution grid tariffs. The problem is formulated as a non-cooperative game involving consumers, generating companies and distribution system operators in a stylized electricity market.     

Why and how to subsidise energy R+D: Lessons from the collapse and recovery of electricity innovation in the UK

The UK electricity sector liberalisation was a pioneer in the worldwide reform trend and its reform model and outcomes have been the subject of many studies. However, lesser known are the effects of privatisation, market based reforms, and incentive regulation of networks on research and development as well as patenting activities in the sector. This paper updates our previous studies of this subject and discusses the recent developments in the innovative activities in the UK electricity sector. We find that, in recent years, the initial absence of support policies and the subsequent decline in innovation efforts in the aftermath of the reform has resulted in efforts towards forming an energy technology and innovation policy. Although we already observe some positive outcomes from these efforts, we discuss whether the balance of the innovation efforts are calibrated appropriately and whether the institutional framework can be further improved to promote long term progress.     

Energy production,consumption, policies,and recent developments in Turkey

Turkey is geographically in the middle of the world, which means it is surrounded by the Middle East, Central Asia and Europe. This area is not only geographically, but also economically, very important. Turkey has a very young and increasing population. In addition to the increase in population, a growing number of city dwellers and rapid economic development are causing more energy consumption. In the last 20 years, Turkey has become a considerably sized, growing energy market in the world. The domestic share of total energy consumption is 37%, and between the years 2000 and 2010, the cost for needed energy will be approximately 55 billion US$. The government has been planning for 81% of this amount as an investment. Considering the country's economic conditions, Turkey must come up the plan which reduces the share of fossil fuels, increases energy production (including use of more alternative energy sources), and changes the coarse of long-term energy plans into very effective and applicable solutions. In this study, energy reserves, energy demand, energy production, energy consumption, energy policies, and recent developments are investigated and evaluated.     

Fuzzy TOPSIS method for ranking renewable energy supply systems in Turkey

Multi-Criteria Decision Making (MCDM) techniques are gaining popularity in energy supply systems. The aim of this paper is to develop the multi-criteria decision support framework for ranking renewable energy supply systems in Turkey. Given the selection of renewable energy supply systems involves many conflicting criteria, multi criteria decision methods (Fuzzy TOPSIS) were employed for the analysis. The Interval Shannon's Entropy methodology was used to determine weight values of the criteria. In this study, α = 0.1, 0.5 and 0.9 values based sensitivity analysis were performed. Three α-cutting levels were identical to the sequence of alternatives. According to result, the first criterion in preference ranking of renewable energy sources in Turkey is the Amount of Energy Produced, followed by the ranking systems Land use, Operation and maintenance cost, Installed capacity, Efficiency, Payback period, Investment cost, Job creation, and Value of CO₂ emission. Thus the multi-criteria analysis showed that the Hydro Power Station is determined to be the most renewable energy supply system in Turkey. Additionally, the Geothermal Power Station, Regulator and Wind Power Station are determined to be the second, third and fourth, respectively. The government of Turkey should invest, in order of priority, in these systems. The government should also evaluate the projects, which are related to these renewable energy resources.     

Development of geothermal energy utilization in Turkey: a review

Renewable energy is accepted as a key source for the future, not only for Turkey but also for the world. Turkey has a considerably high level of renewable energy sources that can be a part of the total energy network in the country. Turkey is located in the Mediterranean sector of Alpine–Himalayan Tectonic Belt and has a place among the first seven countries in the world in the abundance of geothermal resources. The share of its potential used is, however, only about 2–3%.The main objective of the present study is to review the development of geothermal energy (GE) utilization in Turkey, giving its historical development and opportunities. GE is used for electric power generation and direct utilization in Turkey, which is among the first five countries in the world in geothermal direct use applications. Direct use of geothermal resources has expanded rapidly last 36 years from space heating of single buildings to district heating, greenhouse heating, industrial usage, modern balneology and physical treatment facilities.Turkey presently has one operating geothermal power plant, located near Denizli City in Western Anatolia with an installed capacity of 20.4 MW_e and an electrical energy production of 89,597 MW h in 2001. Recently, the total installed capacity has reached 820 MW_t for direct use. The total area of geothermal heated greenhouses exceeded over 35 ha with a total heating capacity of 81 MW_t. Ground-source (or geothermal) heat pumps (GSHPs) have also been put on the Turkish market since 1998. Though there are no Turkish GSHP manufactures as yet, 207 units have been installed in the country to date, representing a total capacity of 3 MW.GE is a relatively benign energy source, displaying fossil fuels and thus reducing greenhouse gas emissions. So, it is expected that GE development will significantly speed up in the country if the geothermal law becomes effective.