tew (12.10.18) - Electricity market reform in turkey

1. 1
Electricity Market Reform in
Turkey
Fatih Kölmek, PhD.
Senior Electricity Advisor
USAID Energy Markets Development (EMD) Project
Energy TransparencyWeek
Kyiv, October 12, 2018

2. 2
History of Market Reform

3. 3
Electricity Market Model

4. 4
Market Participants
• Market Operators
– DAM & IM
– BPM
• Market Paticipants
– Producer (860)
– TSO (1)
– DSOs (21)
– Supplier (151+21)
Total: 1054 market participants (as of 10/09/2018)

5. 5
Market Figures - I
By 31.12.2017;
▪ Peak Demand: 47,66 GW
▪ Consumption: 292 TWh
(55,5 % by eligible consumers)
▪ Import / Export : 2,73 / 3,30 TWh
Fuel Type
2018 June
Capacity (MW) Share (%)
Naturalgas 26.127,56 31,76
Hydro (dams) 20.308,43 24,68
Hydro (run-of-river) 7.600,57 9,24
Lignite 9.267,12 11,26
Imported coal 8.938,85 10,86
Wind 6.620,53 8,05
Geothermal 1.144,24 1,39
Fuel-oil 718,71 0,87
Hard coal 616,15 0,75
Biomass 499,74 0,61
Asphaltite 405,00 0,49
Solar 22,90 0,03
Naphta 4,74 0,01
LNG 1,95 0,00
Diesel 1,04 0,00
Total 82.277,53 100,00
Fuel Type
2018 June
Capacity (MW) Share (%)
Solar (PV) 4.582,67 94,60
Naturalgas 121,92 2,52
Biomass 79,18 1,63
Wind 50,80 1,05
Hydro 8,69 0,18
Solar (CSP) 1,00 0,02
Total 4.844,26 100,00
Installed Capacity (licensed) Installed Capacity (not licensed)

6. 6
Market Figures - II
Generation (2017) Installed Capacity (2017)

7. 7
Major Challenges in Reform
 Differences between regions and consumer
groups
 High technical & non-technical losses
 Fast increasing demand & high investment
requirement
 Lack of competition in market activities
 Reliance on imported fuels in the fuel-mix
Problem
 Price equalization mechanism for a smooth transition
 Loss targets and incentive-based regulation
 Enhanced trade opportunities for generators, long-
term tariff setting with satisfactory returns for
network operators
 Unbundled market activities, privatization & enabling
supplier switching
 Encouraging diversity via incentives, increasing
utilization of renewables and distributed generation
Remedy

8. 8
Privatization of Distribution/Retail Sale Companies

9. 9
Wholesale Market Development
Trade Volumes (2017)
Bilateral contracts
DAM
BPM IDM

10. 10
Determination of Hourly Market Prices
* Intra-day market transactions are open until 60 minutes to real-time, volume & price matching applied for bids (hourly/block)
Bids
Hourly
Block
Flexible
Bids
15-min

11. 11
Financial Settlement & Market Clearing
• Dual-price applied for ± imbalances (i.e. min/max(DAP, BMP)x(1±0,03))
• Balance Responsible Groups utilized (with additional responsibility for each generator)
• Market Clearing is perfomed byTakasbank (i.e. Central Clearing House responsible for clearing all
commodity markets in Turkey)
• Settlements are secured via a risk management system (including colleterals) operated by the market
operator (EPIAS) in cooperation withTakasbank

12. 12
Market Operation, Settlement & Clearing Roles
MO
(EPIAS)
DAM&IDM
Operations
Colleteral
Calculations &
Risk Management
Settlement
TSO
(TEIAS)
Grid Operation
Dispatching
Ancillary Services
Stock
Excange
(BIST)
Futures
Forwards
Takasbank
Colleteral
management
Clearing
Account
Management

13. 13
Consumers Portal and Fast Supplier Switching
• Central database for commercial metering
– Metering by DSOs andTSO
– Management by Market Operator
• Consumers access their profiles via a special
platform – Consumers Portal (ID verification
and login via e-government integration)
• Fast supplier switching
– Unique consumer ID (in addition, Entso-e code)
– Suppliers JUST choose the consumers and add
to their portfolio for next month, NO
document or approval required
– Penalties for wrongdoing and damaging consumer
trust (supplier provides electricity but cannot
invoice the consumer, regulator bans the supplier
for 3 months and starts an audit procedure)

14. 14
Feed-in-Tariff (FIT) for Renewables
Prices Applicable (USD ¢/kWh)
Plant Type Schedule I * Schedule II ** Total
Hydro 7,3 2,3 9,6
Wind 7,3 3,7 11
Geothermal 10,5 5,8 16,3
Biomass (including landfill gas) 13,3 2,7 16
Solar (PV) 13,3 6,7 20
Solar (CSP) 13,3 9,2 22,5
* 10 years for plants to be commissioned until 31/12/2020
** Incentive for local content- 5 years for plants to be commissioned until 31/12/2020
*** Before Law No: 6094, feed-in tariff was 5 - 5,5 €¢/kWh for all of the renewables (Law No:5346)
**** FITs are differentiated on a source basis. Additional FIT is provided for using local content.

15. 15
• Incentives and market conditions (price signal) led to a high interest
• Auctions could be introduced in 2009
– First, auctions for connection capacity (fee/MW or fee/kWh)
– Second, reverse auctions (reduction from FIT)
• «Negative» prices in reverse auctions (2017), highlighting the credibility of the price
signal (i.e. day-ahead market prices)
• YEKA model was introduced for large projects (2017)
– Reverse auctions
– Includes establishment of factories for manufacturing
– NewYEKA auctions to include storage
• Cost of renewable support calculated on a monthly basis and distributed to suppliers
proportional to their shares in monthly electricity supply (mechanism operated by the
market operator EPIAS)
Renewable Energy Integration

16. 16
New Auction Model for Wind and Solar:YEKA
• Intoroduced in 2017
• Reverse auctions with a FIT guarantee of 15 years for pre-announced zones (YEKA)
• Auctions in 2017 includes obligations for establishing a manufacturing factory
– 6,99 $ cent/kWh for solar (1000 MW)
– 3,48 $ cent/kWh for wind (1000 MW)
• NewYEKA auctions announced in 2018
– local content obligation
– 1200 MW OffshoreWind (Kırklareli-Tekirdağ-Edirne region)
– 1000 MW Wind (Balıkesir, Çanakkale,Aydın and Muğla regions / 250 MW each)
– 1000 MW Solar
• Viransehir (500 MW), Niğde (300 MW), Hatay (200 MW) regions
• 30 MW/90 MWh Battery Storage in Niğde region

17. 17
FIT Portfolio – II (licensed plants only)
Hydro (with reservoir)
Hydro (run-of-river)
Wind
Geothermal
Biomass
Solar

18. 18
Cost of Renewable Energy

19. 19
FIT Scheme (until May 1, 2016)

20. 20
FIT Scheme (May 1, 2016 - …)
(Introducing balance responsibility)

21. 21
• Market liberalization is a long way, change does not happen overnight, gradual transition
required
• Privatization and unbundling paved the way for competition
• Incentive tariff scheme with performance targets for distribution and authorized supply
improved service and cost-effectiveness
• Maintaning reliable price signals is the key for market liberalization and development
• Secure market clearing is vital, clear and reliable mechanisms lead to liquidity
• Easy procedures and consumer empowerment facilitated supplier switching
• Importance of balance responsibility increases with the growth of market and number of
participants
• All renewables became market players and hence subject to imbalance charges for
sustainability of the market
Lessons Learnt

22. 10/17/2018 22
Thank you!
Fatih Kölmek, PhD.
Senior Electricity Advisor
USAID Energy Markets Development (EMD) Project
fatihk@unops.org