Electricity restructuring in Turkey

Turkey implemented the electricity sector reform by which the Electricity Market Law no. 4628 passed in February 2001. Recently, all segments of the Turkish electricity sector are dominated by a vertically integrated, public-owned monopoly—Türkiye Elektrik Kurumu—the Turkish electricity institution. The Turkish electricity reform involves vertical deintegration of generation, transmission and distribution, introduction of competition into generation and retail sale, establishment of an independent regulatory authority and privatization of public generation and distribution entities. This article provides an overview of the Turkish electricity sector reform and defines some problems that may affect the reform success.     

Productivity growth and deregulation of Japanese electricity distribution

Deregulation of Japanese electric power industry began in 1995. After the amendment of Electricity Utility Industry Law in 1995, competition was partially introduced in a generation sector and retail competition started from 2000. Eligibility to choose suppliers was gradually extended from larger to smaller customers. As of 2008, almost all customers except households can choose their electricity suppliers. Based upon both previous implementation result of competition policy and review on their achievement, Japanese government will begin new policy debate in 2013 to assess further retail competition which includes household customers. To prepare for policy suggestion on the future electric power industry, this study examines the cost structure of Japanese electricity distribution. For the purpose, we estimate a multi-product translog cost function of Japanese electricity distribution from 1983 to 2003. Using the estimated cost function, we calculate several economic measures such as productivity growth, technical change and economies of scale and scope. The empirical results of this study indicate the improvement in productivity growth after deregulation.     

The Spanish distribution system for oil products: an obstacle to competition?

This paper examines why the formal liberalization of the Spanish market for automotive fuels did not introduce competition in the sector. Against the background of the transformation of the country's oil industry, it is shown how the Spanish distribution system emerged as the essential facility within the formally liberalized oil products market. ‘Light-handed’ regulation, in combination with the prevailing ownership structure turned the system into an impediment to newcomers’ activities and to competition. This suggests that an evaluation of regulatory options for distribution systems in specific markets should take into due account crucial market characteristics like concentration and specific ownership/control relationships.     

Restructuring of Turkey’s electricity market and the share of hydropower energy: The case of the Eastern Black Sea Basin

This paper presents the historical development of Turkey’s electricity power sector, the efforts for introducing competition in the power industry in Turkey, and the concerns regarding restructuring in Turkey. The contribution of the hydropower energy potential in Turkey to the reconstruction of the electricity structure in Turkey is also investigated. Then, among the 25 hydrological basins in Turkey, the Eastern Black Sea Basin located in the northeast of Turkey, which has great advantages from the view point of small hydropower potential or hydropower potential without storage, is chosen as the case study to carry out some investigations concerning its potential and to analyze the contribution of the private sector (the corporate body) in regard to the development of hydro potential in this basin within the scope of the 4628 Electricity Market Law. With this law, concerning the restructuring of the electricity market, private sector investments in this segment have increased. In total, 1524 hydroelectric power projects with 22 360 MW installed capacity has been implemented until January 22nd, 2009 and this figure is continuously rising.     

A CGE analysis for quantitative evaluation of electricity market changes

Risk and uncertainty entailed by electricity industry privatization impose a heavy burden on the political determination. In this sense, ex ante analyses are important in order to investigate the economic effects of privatization or liberalization in the electricity industry. For the purpose of fulfilling these quantitative analyses, a novel approach is developed, incorporating a top-down and bottom-up model that takes into account economic effects and technological constraints simultaneously. This study also examines various counterfactual scenarios after Korean electricity industry reform through the integrated framework. Simulation results imply that authorities should prepare an improved regulatory system and policy measures such as forward contracts for industry reform, in order to promote competition in the distribution sector as well as the generation sector.     

Power generation from geothermal resources in Turkey

This study provides information on power generation via geothermal resources and sector development. The first instance of power generation from geothermal resources was performed by a state-owned power plant at Kızıldere-Denizli, whereas the first private sector investment was the Dora-I power plant, commissioned in 2006. Legislation regulating rights ownership and certification laws was issued in 2007. The installed capacity of the geothermal resources is 311.871 MW for 16 power plants, and power generation licenses were issued for 713.541 MW at the end of 2012. The total potential geothermal power that can be generated in Turkey is estimated to be approximately 2000 MW. The geothermal fields in Turkey produce high levels of greenhouse gases, which have been deemed highly responsible for global warming. Due to high CO₂ emissions, the geothermal energy sector risks a carbon tax in the near future. For certain geothermal resources, multiple investors produce electricity from the same resource. The sector will inevitably experience severe damage unless permanent solutions are devised for problems related to sustainably managing geothermal resources and environmental problems.     

Multiple criteria evaluation of current energy resources for Turkish manufacturing industry

Energy is the main component of natural resources of developing, as well as developed, countries like Turkey. Because of economic and social developments, the demand for energy, in general, has increased considerably in Turkey. Since Turkey is not an oil or natural gas (NG) producing country, the energy resource usage for energy consumption should be effective. The Turkish industrial sector comprises approximately 36% of Turkey’s primary energy consumption, and the manufacturing industry is the largest industrial sector. In this study, the focus was on the manufacturing industry as the major energy consuming sector in Turkey, and it was analyzed in terms of efficient use of energy resources. The most widely used energy resources in the Turkish manufacturing industry, namely fuel-oil, coal, electricity, LPG and NG were taken into account. Evaluation and selection of current energy resources in this selected industry can be viewed as a multiple criteria decision making (MCDM) problem, including human judgments, tangible and intangible criteria and priorities and trade offs between goals and criteria. The analytic network process (ANP), one of the MCDM methods, was used to evaluate the most suitable energy resources for the manufacturing industry in this study.     

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.     

Towards a competitive market for electricity and consumer choice in the Indian power sector

The initial phase of reforms in the Indian power sector was primarily aimed at bringing regulatory reforms and unbundling of the vertically integrated State Electricity Boards (SEBs). Enactment of the Electricity Act 2003 led to deepening of the reform process by dismantling this monopoly in the power sector. Primary issues emerging on account of transition from a single-buyer model to a multi-buyer multi-seller model include, among others, policy and regulatory initiatives related to open access, power exchanges, and transmission allocation and its pricing. The paper provides an overview of the status of competition in various segments of the power sector. It also reviews the phased program for open access outlined by various State Electricity Regulatory Commissions, including their status and impact on competition. The paper highlights a number of residual issues for the wholesale and retail competition, and also discusses the approach to address the same. These include liberalization of fuel markets, market monitoring, unbundling of retail tariffs, universal service obligation, supplier of last resort and demand response.     

Divorce comes at a price: An ex ante welfare analysis of ownership unbundling of the distribution and commercial companies in the Dutch energy sector

Vertical unbundling in the electricity sector is a hot political topic in the European Union. The European Commission has decided that the ownership unbundling of transmission networks from other stages in the value chain is the most effective way to ensure fair network access and infrastructure investment. While this European unbundling debate has not ended yet and most countries still do not have an independent transmission system operator (TSO), the Dutch government has already taken one step further. In 2008, it decided that distribution companies should be completely separated from commercial activities that are part of the same holding (generation, trade and supply). This governmental decision has been fiercely debated. Although the goal is to improve competition as well as security of supply, these benefits are uncertain. Nevertheless, it is certain that ownership unbundling comes at a cost. In this paper we present an ex ante cost-benefit analysis of the Dutch unbundling act. We conclude that it is unlikely that this act is welfare enhancing: divorce comes at a price.     

Turkey's natural gas policy

This article deals with natural gas policy of Turkey. Natural gas became important in the 1980s. In recent years, natural gas consumption has become the fastest growing primary energy source in Turkey. Natural gas becomes an increasingly central component of energy consumption in Turkey. Current gas production in Turkey meets 3% of the domestic consumption requirements. Natural gas consumption levels in Turkey have witnessed a dramatic increase, from 4.25 Bcm (billion cubic meters) in 1991 to 21.19 Bcm in 2003. Turkish natural gas is projected to increase dramatically in coming years, with the prime consumers expected to be industry and power plants. Turkey has chosen natural gas as the preferred fuel for the massive amount of new power plant capacity to be added in coming years. Turkey has supplied main natural gas need from Russian Federation; however, Turkmen and Iranian gas represent economically sound alternatives. Turkey is in a strategically advantageous position in terms of its natural gas market. It can import gas from a number of countries and diversify its sources. Turkey's motivation for restructuring its natural gas ownership and markets stems from its desire to fulfill EU accession prerequisites in the energy sector.     

Profitability and productivity changes in the Korean electricity industry

The Korean electricity industry saw significant changes following the reform in April 2001. Until the last decade, the industry was monopolized by the Korea Electric Power Corporation (KEPCO), a state-owned, vertically integrated company. The 2001 reform divided KEPCO's power generation division into six power generation companies (GENCOs), with the aim of improving efficiency and introducing competition in the electricity industry. In this study, we used capital total factor productivity (KTFP) to analyze profit changes from fixed input capital, and an index number profit decomposition (INPD) to examine the sources of the profit changes. We investigate the industry thoroughly from three points of view: the overall industry over time; the power generation sector by company; and the transmission and distribution sectors of the Korea Electric Power Corporation (KEPCO). Next, we measured how the profits from productivity growth were distributed to consumers, fuel suppliers, employees, and company owners. The results suggest that a more reasonable price system for both wholesale and consumer prices needs to be implemented prior to the privatization and deregulation of the Korean electricity industry.     

A decarbonization strategy for the electricity sector: New-source subsidies

An expedient phase-out of carbon emissions in the electricity sector could be facilitated by imposing carbon fees and applying the revenue exclusively to subsidize new, low-carbon generation sources. Since there would initially be no “new sources,” fees would be substantially zero at the outset of the program. Nevertheless, the program would immediately create high price incentives for low-carbon capacity expansion. Fees would increase as new, low-carbon sources gain market share, but price competition from a growing, subsidized clean-energy industry would help maintain moderate retail electricity prices. Subsidies would automatically phase out as emitting sources become obsolete.     

The inquiry into electricity supply in New South Wales

In May 2007, the Premier of New South Wales (NSW) announced the establishment of an Inquiry into Electricity Supply in that State to be undertaken by the author of this paper. Fundamental to the Inquiry was the perceived need for additional baseload generating capacity, the identification of the available technologies, carbon constraints and the policy options that would encourage the private sector to undertake the required investments. Although NSW is part of the competitive National Electricity Market, State-owned generators dominate baseload supply. In addition, the State operates three electricity retailing businesses, has a monopoly on transmission and distribution, and provides price stability for NSW residential consumers through the Electricity Tariff Equalisation Fund. Overall, therefore, the State dominates the industry and, not surprisingly, potential private investors are sceptical that its market roles may be based upon criteria other than the purely commercial. The Inquiry's report, which was publicly released in September 2007, recommended sale of all State assets in both electricity generation and retail. This paper provides a rationale for that recommendation.     

The impact of electricity market liberalization in Turkey: “Free consumer” and distributional monopoly cases

Electricity sector has grown substantially in Turkey since the early 1960s as a result of rapid industrialization and urbanization. The vertically integrated state-owned company had a legally established monopoly on the generation, transmission and distribution of electricity in Turkey. With the support and encouragement of international organizations like the World Bank, Turkey has initiated a comprehensive program to liberalize and privatize the electricity market in 2001. The liberalization of the electricity market in Turkey started in the distribution side of the market. The distribution network was divided into 21 distribution regions and in each of these, separate – initially state-owned – distribution companies have been authorized to distribute and sell electricity. The plan envisaged to complete privatization of all distribution companies until the end of 2006. This study compares the welfare implication of privatization of the distribution networks by comparing two extreme cases, a pure regional distributional monopoly case and a representative pure “free” consumer case, with a benchmark case of administered price regulation. For this purpose, we develop a simulation model of the Turkish electricity system, and use the data on generation and distribution costs. Our simulation analysis shows that substantial welfare losses occur if the distributional companies behave as regional monopolists. Our findings reiterate the importance of regulation and market design.     

Energy usage and cost in textile industry: A case study for Turkey

The Turkish textile industry holds a relatively important position in the world and thus plays a major role in Turkey's exports. Energy consumption is important for the textile industry in Turkey because it is the largest export sector. Energy usage in the textile industry in Turkey is inefficient, and energy consumption has been growing very rapidly due to population growth, rapid urbanization and industrial development. For future planning, it is important to know the current specific energy consumption (energy consumption/production) and the energy intensity (energy consumption/cost of energy) in order to estimate future energy consumption for the textile sector. In this study, a survey has been carried out to show energy consumption, energy cost and the relationship between the energy usage and textile production. The results of the energy survey have been presented in both figure and table form.     

Does environmental heterogeneity affect the productive efficiency of grid utilities in China?

China's electric power industry has experienced a reform whereby the generation sector is being opened up to competition but the transmission and distribution sectors are still under regulation. Efficiency and benchmarking analyses are widely used for improving the performance of regulated segments. The impact of observable environmental factors, together with unobservable characteristics, on efficiency has gained increasing attention in recent years. This study uses alternative stochastic frontier models combined with input distance functions to measure the productive efficiency of 29 grid firms of China over the period of 1993–2014 and investigates whether the observed environmental and unobserved heterogeneity factors affect the productive efficiency. The results indicate that adverse environmental conditions may bring negative influence to the production of grid utilities while the number of customers and the network length have positive impacts on the utilities' efficiency; Besides, the efficiency is sensitive to the model specification, which illustrates the presence of observed and unobserved heterogeneity; Moreover, there is no significant efficiency improvement in the grid utilities after the unbundling reform of 2002; Finally, the regional grids differ significantly in efficiency, and there is room for improvement, which could be achieved by incentive regulation taking due account of environmental heterogeneity.     

Government divestments and the regulation of natural monopolies in the UK: The case of British gas

The privatization of British Gas in December 1986 represented the largest transfer of ownership from the public to the private sector in the UK to date. Given the natural monopoly nature of many of British Gas's activities, the form of the privatization and the control of the industry after flotation have important implications for domestic consumers, and society generally. This paper examines these implications. In particular, the theoretical options for privatization and regulatory approaches are examined in general, followed by an examination of the approach adopted for British Gas. The initial experiences of the flotation are also discussed. The paper concludes that a different feasible form of privatization than that actually chosen could have improved the potentiality for increasing competition and that the regulatory formula adopted may allow excess profits to persist.     

Foresight analysis of wind power in Turkey

The Turkish wind energy industry is one of the most competitive and fastest growing industries in the energy sector. Industrial energy demands, Kyoto agreement and carbon trade are shown as probable causes. Currently, Turkey has a total installed capacity of about 48.5 GW for electricity from all energy sources. High energy prices and unstable suppliers have stimulated Turkey's growing interest in wind business and wind power. This paper analyzes Turkey's wind energy future perspective and power generation strategy with a view to explaining Delphi approach to wind energy development. In this study, the two‐round Delphi survey was conducted by experts to determine and measure the expectations of the sector representatives through online surveys where a total of 70 experts responded from 24 different locations. The majority of the Delphi survey respondents were from 23 different universities (60%), electricity generation industries (21%), two different governmental organizations (11%), nongovernmental organizations (6%) and other institutions (2%). The article discusses not only the expert sights on wind energy technology but also all bibliometrical approaches. The results showed that Turkey's wind power installed capacity is expected to exceed 40 GW by the end of the 2020 s and in the middle of the 2030 s, and Turkey would be the European leading country in the field of electricity generation from the wind. Copyright © 2011 John Wiley & Sons, Ltd.     

Efficiency assessment of Turkish power plants using data envelopment analysis

The performance of electricity generation plants in Turkey are analyzed and compared. The data set contains inputs from 65 thermal, hydro and wind power plants, owned by private and public sectors. Data envelopment analysis (DEA) is used as the primary mathematical tool. Two efficiency indexes, reflecting operational and investment performance, are defined and pursued. Constant returns to scale, variable returns to scale and assurance region type DEA models are used in the analysis. Scale efficiency is also considered. Performance comparisons include public versus private sector plants, and natural gas versus coal versus oil fired plants. Also, relationships between efficiency scores and various input/output factors are investigated and some interesting trends are identified.