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tew (12.10.18) - Electricity market reform in turkey

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tew (12.10.18) - Electricity market reform in turkey

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tew (12.10.18) - Electricity market reform in turkey

  1. 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. 2 History of Market Reform
  3. 3. 3 Electricity Market Model
  4. 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. 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. 6 Market Figures - II Generation (2017) Installed Capacity (2017)
  7. 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. 8 Privatization of Distribution/Retail Sale Companies
  9. 9. 9 Wholesale Market Development Trade Volumes (2017) Bilateral contracts DAM BPM IDM
  10. 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. 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. 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. 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. 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. 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. 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. 17 FIT Portfolio – II (licensed plants only) Hydro (with reservoir) Hydro (run-of-river) Wind Geothermal Biomass Solar
  18. 18. 18 Cost of Renewable Energy
  19. 19. 19 FIT Scheme (until May 1, 2016)
  20. 20. 20 FIT Scheme (May 1, 2016 - …) (Introducing balance responsibility)
  21. 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. 22. 10/17/2018 22 Thank you! Fatih Kölmek, PhD. Senior Electricity Advisor USAID Energy Markets Development (EMD) Project fatihk@unops.org

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