Turkey has one of the fastest growing energy markets in the world. The share of domestic production of energy in Turkey accounts for about 30% of the national demand and this makes Turkey an import dependent country on energy. As end of June 2012, the total installed capacity of electricity approached to 54 GW in Turkey. Currently, various state owned enterprises continue to dominate the sub sectors of the electricity market, such as EUAS with around a 55% share in installed capacity basis in generation and TETAS with over 50% in market share basis in electricity trade, including import and export from neighbouring countries.
As a developing country, Turkey took the initiative to open its electricity market to competition in 2001. For this purpose, electricity market law was passed by the Turkish Grand National Assembly to start a new period in the market. The design and legal framework of the new market is adapted from that of the European Union. To give further impetus to the liberalisation process, in 2004, the Turkish government issued a strategy paper, aiming at speeding the liberalization of the electricity market as per the provisions of the law in 2004. Later on, in 2009, the government decided to enact a new strategy paper to accelerate the liberalisation process as well as introducing some measures required for the security of supply.
Any legal entity established in accordance with Turkish Commercial Law may engage in electricity market activities through obtaining relevant license from EMRA. Separate licenses are required for each market activity and for each facility. Furthermore, license holders are obliged to keep separate accounts for each activity.
In accordance with the provisions of the Law, EMRA regulates the tariffs of TEIAS, TEDAS and TETAS for transmission service, distribution service and energy selling price, respectively. Revenue cap for the income of TEIAS is being implemented currently. The types of tariffs under the regulation of EMRA are connection and use-of-system tariffs, transmission tariffs, distribution tariffs, wholesale tariffs, and retail tariffs applied to captive consumers.
By the law, the activities in the market, except for network activities are open to competition under the supervision of, and regulated by EMRA. The electricity market is based on bilateral agreements complemented with the balancing and settlement market. The private sector may participate in all segments of the electricity market, except for transmission, by obtaining the relevant licences from EMRA. Third party access to the network without discrimination is in place under the supervision of EMRA. The law foresees an independent transmission system operator. According to the law, the ownership, operation, and maintenance of investments in the national grid remain in the hands of TEIAS. TEIAS also acts as the market operator. In addition, TEIAS will remain as the sole transmission system operator and asset owner.
The law makes distribution utilities responsible for distribution network planning, construction and operation, and assigns them the responsibility of 'supplier of last resort'. Distribution companies are entitled to engage in retail business and/or retail sale services for consumers, and generation activities subject to a separate license and accounting unbundling. In addition, distribution utilities are allowed to establish or participate in electricity generation utilities as a shareholder and purchase electricity from these utilities at a price not higher than the Turkish electricity wholesale price as determined by the regulator. On the other hand, distribution utilities holding retail sale licenses could import electricity from the distribution level. However, it is thought that this is technically not feasible because international interconnection lines between neighbouring countries are high voltage lines. Distribution companies are required to prepare regional demand forecasts, and submit them to TEIAS. TEIAS is required by the law to prepare its transmission planning and capacity generation projection based on these demand forecasts and submit them to EMRA for approval.
The electricity market was opened on March 3, 2003. All customers directly connected to the transmission system as well as consumers with consumption of more than 25.000 kWh for 2012 are deemed as eligible customers. The corresponding theoretical degree of market opening is around 77%.
Turkey is giving high importance to the electricity generation from renewable energy sources in order to utilize the domestic sources and lower the import dependency on energy sources. For this purpose, a renewable promotion law was enacted in 2005. RES based power plants are supported by feed-in tariff. In addition, up to 500 kW of renewable based power plants are exempted from licensing.