OBG talks to Hasan Köktaş, President, Energy Market Regulatory Authority (EMRA)

Interview: Hasan Köktaş

What can energy regulators do to improve licensing procedures and dissuade speculation?

HASAN KÖKTAŞ: The new Turkish Electricity Market Law has created a structure that will attract more genuine investors. For legal entities that apply to engage in electricity generation, a preliminary licence will be issued so that these entities can obtain the necessary documents like permits and approvals, as well as usufruct rights for land use. The term of the preliminary licence cannot be more than 24 months, excluding force majeure events. EMRA is entitled to extend this term by up to 12 months, depending on the source type and the installed capacity. The law stipulates that entities failing to obtain the aforementioned documents and approvals shall not be granted a generation licence. In addition, with a few exceptions, the preliminary generation licence will be nullified if the applying entity undergoes any changes in shareholder structure.

To what extent should the feed-in tariff regime be adjusted to make conditions in the renewable sector more attractive to investors?

KÖKTAŞ: The Law on the Utilisation of Renewable Energy Resources for the Purpose of Generating Electrical Energy was amended in January 2011, and covers different feed-in tariffs according to the renewable source. It envisages higher prices for biomass and solar energy. Moreover, power plants that have come into operation since May 18, 2005, or will come into operation before December 31, 2015, will be eligible to receive the set feed-in tariffs for the first 10 years of operation. The cabinet will decide on the incentives to be given to power plants that come into operation after December 31, 2015. Also, if the mechanical or electro-mechanical equipment of the power plant is produced locally, a premium shall be added to the feed-in tariffs during the first five years of operation.

Renewable energy producers now have the option to sell their generation through the feed-in tariffs, or sell their energy in the day-ahead market. Thus far, almost none of the renewable energy producers have opted for the feed-in tariff mechanism, preferring instead to sell their generation to the market.

The renewable capacity commissioned by private entities exceeded 8.3 GW as of February 2013, which is 42.6% of the total commissioned capacity. Almost half of the commissioned renewable capacity has been realised during or after 2011. Another 15 GW of renewable capacity is currently under consideration.

How has the liberalisation of the electricity and natural gas markets affected pubic finances? What is being done to further expedite this process?

KÖKTAŞ: Electricity liberalisation started in 2001 with the enactment of the Electricity Market Law. In 2012 the installed capacity reached around 58 GW. With respect to the supply and demand balance, energy demand grew 9.5% in 2012 and reached 239 TWh. While the Natural Gas Market Law has the same objectives, demand growth in the gas market is in fact currently higher than for electricity. As of 2012, more than 45bn cu metres (bcm) of gas was consumed in Turkey, and almost 48% of this was used for electricity generation. The new market designs for both electricity and gas ultimately require private sector dominance.

Capacity additions for electricity are becoming more private sector oriented. In fact, privatisation tenders for the remaining four electricity distribution companies were recently completed, and all distribution regions are set to be transferred to private companies by the end of 2013. Although liberalisation of the gas market has been slower vis-à-vis electricity, the sale of BaşkentGaz was recently approved. As a result, only the Istanbul Gas Distribution Industry remains in the state portfolio on the distribution side. Regarding BOTAŞ Petroleum Pipeline Corporation, following the first gas release of 4 bcm, the government has decided to renew the 6-bcm contract held by private companies. Overall, public investments in Turkey’s energy investments decreased from 39.2% in 2007 to 18.4% in 2012.