TURKEY : A potential hub for Cross- Continental Power ... - ICCI

TURKEY : A potential hub for Cross-Continental Power Trading?Anduvap Servet AkgünICCI 2011, ISTANBUL

AgendaCross-Border Power Trading Concept- History & Development- Current Cross Border Mechanism & OutlookTurkish Power Market- Market Drivers / Fundamentals- Market Design & Policy Recommendations- SWOTInternationalization of Turkish Power Industry- Inter-Connecting Turkey- Projects in the Pipeline- ConclusionSTATKRAFTOVERVIEW

History & Development• Electricity Regulatory Forum1998, (a.k.a. Florence forum)defined use of transmissioncapacity• Three electricity directives byEC:- 96/92/EC - Unbundling- 2003/54/EC – First mentions ofSingle European Market- 2009/72/EC – Sound Cross-Border) MechanismsDeregulationUnbundlingPrivatizationLessBarriers:- Generation- Distribution- TradingLiberalizationCompetitionEfficiencySTATKRAFTOVERVIEW

Current Cross-Border MechanismGolden Rule: «Buy Low, Sell High»Well, it does not work all the time..STATKRAFTOVERVIEW

Flows Across the BordersSTATKRAFTOVERVIEWSource: Inter-connecting Europe, New Perspectives for Trans-European Energy Networks byEuropean Commission, 2008

STATKRAFTOVERVIEWOutlook .. Even Today

Turkish Power MarketDrivers / Fundamentals- Rapid Growth in Demand / Low per capita consumption- High Level of Import Dependency for Power Generation- Lower energy efficiency / relatively high energy intensity- On-going liberalization process- Steep increase in private sector presence- Realization of natural resource potentialSTATKRAFTOVERVIEWSource: Privatization Administration (PA)

Market Design – Does this work?What is the missing element?STATKRAFTOVERVIEW

STATKRAFTOVERVIEWMarket Design – Regulatory Framework

STATKRAFTOVERVIEWMarket Design – Regulatory Framework

good-old SWOT..STRENGTHS• Promising demand growth rates compared to EUcountries.• Legal framework already in place• Precedents established and positive steps taken towardsliberalization and privatization• Growing share of private sector both in generation anddistribution• Excellent geographical location• Stimulus of on going EU Accession talksWEAKNESSES• Non-independent structure of electricity marketregulation, influence of politics etc.• The lack of efficient cooperation among authorities• Ambiguities within the responsibility areas amongrelated bodies• The lack of skilled personnel and sound operationalinfrastructure of the existing wholesale marketmechanism• Lack of transparency with regards to regulatorydecisionsSTATKRAFTOVERVIEWOPPORTUNITIES• Vast potential of Renewable Energy Sources• On going generation and distribution asset privatizations• Rise of regional cooperation opportunities• Set of best practices of EU countries as a road maptowards full liberalisation• Improving general economic conditions of the country• The focus on energy efficiencyTHREATS• The high rate of import dependency on primaryenergy resources• Difficulties with project financing due to globalturmoil• The increase in GHG emissions due to prioritizeddomestic lignite plants• Political instabilities in the region• The volatility of the fuel prices

Internationalization of Turkish Power IndustryInter-Connecting Turkey- ENTSO–E Connection..done!Romania – Turkey Subsea Cable Project..?STATKRAFTOVERVIEW

Inter-Connecting TurkeyBlack Sea Regional Transmission System (BSTP)- Established in 2004 to foster regional cooperation- Two synchronious zones:- West (Romania, Turkey, Bulgaria with ENTSO-E) and East(Ukraine, Russia, Moldova, Georgia, Armenia, Azerbaijan)- Estimated to be complete by 2015STATKRAFTOVERVIEW

Inter-Connecting TurkeyBlack Sea region realistic power exchange directions by 2015 Forecasted Cross Border Capacities by 2015STATKRAFTOVERVIEW

Inter-Connecting TurkeyMEDRING & Eight Countries Interconnection Project- Launched in year 2000, co-financed by the EC and led by Europe andSouthern/Eastern Mediterranean Countries (SEMC)- Once complete, electricity exchange in the region would increase 75 TWhand expected energy not supplied to be reduced by 12 TWh- Five sub projects:- Euro-Maghreb interconnections- the Maghreb interconnection- the Egypt-Tunisia-Libya-Algeria-Morocco (ETLAM) interconnection- the Egypt-Iraq-Jordan-Lebanon-Libya-Syria-Turkey (EIJLLST)interconnection (Palestine joined afterwards)- Turkey- ENTSO-E interconnection- Turkey has a key role in this projectSTATKRAFTOVERVIEW

Fundamental data of MEDRINGcountries and Turkey, 2009 FiguresSTATKRAFTOVERVIEWCountryConsumption*(TWh/yr)Population**(thousands)Cons/Capita***(kWh/yr/cap)GDP/Capita**US$/capita)Slovenia 12.7 2,013 6,302 27,149Croatia 17.9 4,436 4,026 15,628Bosnia-Herz. 11.6 3,993 2,899 4,625Serbia 39 7,382 5,902 6,782Montenegro 4.6FYROM 8.6 2,055 4,206 4,657Bulgaria 34.5 7,582 4,544 6,857Albania 6.3 3,182 1,980 4,074Greece 56.3 11,172 5,040 32,005Sum/Averageof South East Europe191.5 41,815 4,362 12,722Syria 27.519,644 1,400 2,757Lebanon 9.5 3,799 1,158 7,617Israel 50.1 7,400 6,770 28,365Palestine 3.6 4,590 784 N/AJordan 11.5 5,852 7,965 3,421Sum/Averageof East Mediterranean Countries Area102.2 41285 3,615 10,540Egypt 106.6 76,000 1,403 2,161Libya 16.8 5,521 3,054 16,115Tunisia 11.8 10,379 1,137 3,907Algeria 32.6 34,800 937 4,588Morocco 21.7 31,170 696 2,748Sum/Averageof South Mediterranean Countries Area189.5 157870 1,445 5,904TURKEY 198.1 69,659 2,842 10,472

Conclusion & Policy RecommendationsTurkey, with its vast potential of natural resources, granted superb location andattractive power market, has the chance to lead the regional power marketIn order to achieve this:- Turkish power market has to ensure the power supply balance by encouragingthe on going/upcoming investments and well aligned policies between thegoverning bodies- Turkey has to set the cross-border policies as a part of national electricitystrategies in combination with sound capacity allocation designs- in line withEU directives – private sector might be encouraged to invest in interconnectors- market design should be revised so as to create healthy reference prices.Market players should be able to trade/hedge the uncertainties via wellfunctioning OTC markets and independent futures/derivatives exchanges.- the regulatory framework has to be improved in a reasonable time period inorder to accelerate the positive developments- congestion management tools to be preferred and to be publicized to eliminatethe uncertainties, e.g. Re-dispatching, market splitting, market couplingSTATKRAFTOVERVIEW

STATKRAFTOVERVIEWThank you very much for your time..