Liberalization Problems of Turkish Energy Market - Süreyya Yücel Özden

In this century we are living in, it is impossible to understand or interpret any issue or case without the energy perspective. Energy use is actually a life sustaining action. When looking at issues like lightning, education, heating, water, communication, transportation, health and industry every single part of human life bases on energy. Briefly, energy is the basic element of civilization. Until near past, basic elements for life were water, air and earth. It will be appropriate to say that electrical energy should be added to this list. In this sense, without denying the electrical energy developments in Turkey, it should be admitted that there are lots of minor and major problems in Turkey about energy. Two perspectives needed to understand when handling the national and international problems.

A- Internal affairs of Turkey
B- Conditions in Turkey’s International Relations

Internal Affairs of Turkey

1- Turkey is having problems with transforming public energy sector to private energy sector. To regulate energy use, production and transformation, many regulations and laws are enacted. Laws on energy and their dates of release are listed below.
- Law No: 4628, Electricity Market Law, 3 March 2001.
- Law No: 4646, Natural Gas Market Law, 18 April 2001.
- Law No: 5015, Oil Market Law, 20 December 2003.
- Electricity Sector Strategy, 2004,
- Amendment No: 5177 on Law No: 3213 Mining Law, 5 June 2004.
- Law No: 5307 Liquid Petroleum Gas Market Law, 2 March 2005.
- Law No: 5346 Law on use of Renewable Energy Sources to Produce Electrical Energy, 18 May 2005.
- Law No: 5627 Energy Productivity Law, 2 May 2007.
- Law on Geothermal Sources and Natural Mineral Waters, 13 June 2007.
- Law No: 5710 Law on Energy Export, Constructing and Managing Nuclear Power Plants, 21 November 2007.

Sector defined itself in many means and ambiguities overcame mostly. This transformation is important and Turkey has not full liberalized its energy sector yet. There is a lack of communication and cooperation between Ministry of Energy and Natural Sources which is the main responsible in the governmental level and Energy Market Regulatory Authority which is an another regulation body of energy. Communication and cooperation problems also occur in the other bodies related with energy too. Other private associations which are expected to invest on energy, have still many complaints about many issues.

2- Supply Security is an another important problem which still exists in energy sector. There is a 75% foreign dependency for answering the demand on primary energy. For instance there is a 50% dominance of natural gas use at producing electrical energy. Payments which nearly worth $ 50 billion is reported for the energy input of petroleum, LPG and natural gas. These payments are composing the ¼ of the imports and it is an important part of export which worth $132 billion.
Investment Demand

3- Another important problem is the increase of energy demand. If hesitation caused by economic crisis in 2009 does not taken into account, demand increase of primary energy is 5% per year and demand increase of electirical energy is 7% or 8% per year. The issue of answering this demand should be considered. It is predicted that electric consumption of 196 billion Kw/h in 2009 will be increased to 420 billion Kw/h in 2020. According to this prediction the established power of 43000 MW should be upgraded to 96000 MW by a 2 times increase. When all investment demand in energy sector is calculated, $130 billion of financial need is expected in the upcoming 10 years. It is hard the answer the question that How could this financial need problem solved?
4- Another important problem is in the use of energy. Illegal use of electricity, Lose of power while transmitting and distributing electricity and problematic energy structure of the industry causes the extra energy consumption when compared to energy production. In the light of this information expecting a productive use of energy from citizens becomes a senseless expectation.
5- There are other problems apart from building a continuous supply security, demand management, decreasing the foreign dependence, finding appropriate financial support for investments and environmental problems:
- Taxes on fuel consumption.
- In spite of consumers’ cheap energy demand, investors’ high selling price demand.
- Delays or idleness on using local resources for energy production.
- Cancellations of the bids which held for nuclear power plants.
- Lacking construction of natural gas storage facilities.
- Source diversification difficulties.

International Dimensions

Prominent issues in international relations analysis:

- Geopolitical location of Turkey: 70% of the world’s oil and natural gas sources are within the countries around Turkey. In other words Turkey is located between the countries which have hydrocarbon resources and the countries which demand hydrocarbon. Turkey is in the center of Caspian Countries, Middle East Countries and European Countries.
- Countries which have their own energy resources do not hesitate to use the energy card in international relations.
- Internal energy policies would affected from international relations or the world energy politics would have a huge impact on internal energy policies.

Problems and questions about Turkey’s energy policies come forward when the issues are analyzed with the facts listed above. Briefly these problems are:

A) What is the aim of Turkey in respect to its international position? Is Turkey want to become an energy bridge or energy terminal or both? Does Turkey make any preparations according to these aims? How does the future of Ceyhan City planned in respect to field use, transportation, industrial future, residential planning and all other perspectives?
B) What is the current situation at NABUCCO project? Which countries assured to transfer gas to Turkey?
C) How does the capacity increase of the Blue Stream project to 32 bcm affect the projects such as Iraq Natural Gas Pipeline, Egypt – Turkey Natural Gas Pipeline and Qatar Pipeline after the Baku-Tbilisi-Ceyhan Pipeline?
D) How does the issue of providing Turkey’s energy security finalized by agreements with Iran, Iraq, Azerbaijan, Russia, US and EU?
E) What kind of an approach will Turkey have after the KYOTO Protocol? CO2 and greenhouse gas emission is one of the contemporary problems of the world. How does Turkey behave towards this problem?

Each topic above have different dimensions in themselves.

While analyzing energy politics, this result comes forward: energy is the main engine of the economic and social development; energy should be produced in a competitive liberal market with qualified and safe conditions continuously at minimum cost. For solving problems which are explained briefly, Turkey needs to be governed successfully with the national and international consciousness.