IEA encourages Turkey to deepen energy market reforms

Since the last IEA in-depth review in 2009, Turkey has made significant progress in reforming its energy sector. Completing the reforms will allow Turkey to tap into its renewable and energy efficiency potentials, latest IEA report says.

With rising energy demand, increasing oil and gas imports, and an energy mix largely relying on fossil fuels, Turkey has a unique opportunity to tap into renewable energies, save energy and diversify its fuel mix, according to the International Energy Agency’s (IEA) latest survey of Turkey’s energy policies.

In its review, Energy Policies of IEA Countries: Turkey 2016 Review, the IEA called on the government to swiftly adopt an energy efficiency programme and create a one-stop-shop for the deployment of renewable energy in the country.

pwa9

Turkey’s energy sector has attracted substantial interest in the investor’s community thanks to privatisation and electricity market reforms. The country should continue down this path and reform its energy markets. During the last decade, electricity market reforms have advanced. The liberalisation and privatisation of electricity generation and distribution triggered a private investment boom (generating capacity doubled between 2007 and 2014) and secured energy access for its population.

“To attract more investments, the liberalisation of the energy markets needs to progress further,” said Dr Fatih Birol, the IEA Executive Director.

The report highlighted three avenues for reform: strengthening the independence of the system operators and regulatory authorities; abolishing market distortions in favour of market pricing; and continuing to invest in more flexible and modern gas and electricity infrastructure. These pillars are critical for securing stable and reliable electrical power supplies and ensuring sustainable economic growth, and ensuring much needed diversification, according to the IEA.

Turkey has a unique geographical location and is an important energy player in its region. The country’s regional integration is advancing, thanks to the construction of the Transanatolian Natural Gas Pipeline and the connection to the European electricity grid (ENTSO-E) with the Turkish Transmission System Operator for Electricity (TEİAŞ) becoming an observer of ENTSO-E.

“Turkey’s contribution is vital for regional and European energy security,” Dr Birol said.

With the drop in gas prices and the rise in the global LNG trade, the IEA also sees an important opportunity for Turkey to reform its natural gas market. Natural gas accounts for 40% of Turkey’s electricity generation; and gas demand has more than doubled in one decade, outpacing electricity growth. The review highlights the need for competition, diversification and investments in the gas infrastructure, given Turkey’s proximity to major resources and private sector interest.

One major issue to be addressed, however, is the country’s high import dependency on oil and gas and the fast increase in carbon dioxide emissions, which have more than doubled since 1990. Commendably, Turkey has for the first time set an emission reduction goal.

However, the plan to double coal-fired electricity supply by 2019 will require further investment in clean coal technologies and the swift refurbishment of old plants to reduce greenhouse gas emissions and curb air pollution in Turkey.

“With more energy efficiency and renewable energy, cleaner coal and nuclear can be part of a secure and low carbon mix, but the legal frameworks must be put in place to ensure high standards of environmental performance and safety,” said Dr Birol.

The report encourages the government to build on the Vision 2023 and set out a longer term energy policy agenda up to 2030 to guide private energy investments. Clear and long-term targets for renewables and energy efficiency, faster permitting procedures and enhanced grid integration rules can ensure long-term sustainable economic growth in Turkey.