The Turkish energy industry has been steadily growing for nearly 20 years and has become one of the fastest-growing power markets in the world. Although Turkey’s demand for energy is increasing rapidly, its primary domestic energy sources and their production are limited. As a country heavily dependent on imported energy resources, only 30 percent of Turkey’s energy consumption is met by in-country production. However, Turkey plays a crucial role in the world energy market due to its strategic location, and significant progress has been made in ensuring energy security and establishing a transparent market in recent years.
In this article, we will offer a general insight into the regulatory and organizational landscape of the Turkish energy market.
Turkey has gone through major reform in the most important segments of its energy market to meet growing demand and to address its import dependency. In 2001, the country implemented a radical liberalization process and moved from a state-owned to a privatized market. After establishing the Electricity Market Regulatory Authority (“EMRA”) under the Electricity Market Law in 2001, the country has liberalized the energy market and established public institutions such as the Energy Exchange Market (“EXIST”) and the Turkish Electricity Transmission Corporation (“TEİAŞ”) in 2009, and 2015 respectively.
Subsequently, new regulations and laws regarding the electricity, natural gas and petroleum markets have come into effect, and with the participation of public institutions and strategic alliances within the industry, this liberalization process has driven rapid growth in the country’s energy system.
The Ministry of Energy and Natural Resources (“MENR”) holds the sole authority to govern the energy market in Turkey. MENR is responsible for the preparation and implementation of energy policies and the country’s short and long-term energy plans and programs in coordination with its affiliated institutions and other public and private entities.
In addition, the General Directorate of Energy Affairs (“EIGM”), as the main policy-making body, takes measures regarding energy policies and coordinates programs.
EMRA is the main regulatory authority for the electricity, natural gas, oil, and liquefied petroleum gas markets. As a public entity with administrative and financial autonomy, EMRA is entitled to grant and renew licenses that define rights regarding legal persons and to audit the performance of energy companies. It also executes secondary legislation and imposes necessary sanctions.
Apart from these institutions, there are also other industry-based bodies that govern energy policy in Turkey:
- Turkish Electricity Distribution Corporation (TEDAŞ)
- The Petroleum Pipeline Company (BOTAŞ)
- The General Directorate of Mining and Petroleum (MAPEG)
- Turkish Hard Coal Enterprises (TTK)
- The General Directorate of Mineral Research and Exploration (MTA)
- The General Directorate of Nuclear Energy and International Projects
The Regulatory Landscape
The energy industry in Turkey generally consists of four energy resources; electricity, natural gas, petroleum, and liquefied petroleum gas (“LPG”), which are primarily governed by EMRA through several laws and regulations. EMRA regulates market activities such as distribution, transmission, marketing, generation, licensing, import and export transactions, and the relevant principles, procedures, rights and responsibilities of both the companies and authorized bodies. Since the procurement of energy and relevant market activities are deemed to be a “public service” under Turkish law, these activities are strictly regulated and subject to separate licenses. EMRA is authorized to determine the requirements for obtaining a license to conduct energy-related market activities and to evaluate whether companies meet these requirements. They also grant relevant licenses, as well as approving transactions that may result in a change in the qualifications of license-holder companies in meeting these requirements, such as mergers and acquisitions or share transfers.
Through the major reforms in Turkish energy law, new regulations regarding the electricity market were published in 2013. The Electricity Market Law (“Electricity Law”) and the Electricity Market Licensing Regulation (“Electricity Licensing Regulation”) form a legal framework for licensing and the requirements that must be met. The Electricity Law introduced a number of license types such as preliminary licenses, and supply licenses for retail and wholesale transactions. Market activities regarding the generation, transmission, distribution, wholesale, retail sale, marketing and export and import of electricity are subject to a license issued by EMRA. The Electricity Licensing Regulation also defines activities that fall under the import, export, distribution, and transmission of electricity, as well as other electricity services and the rights of individuals in regard to electricity services.
The Natural Gas Market Law numbered 4646 (“Natural Gas Law”) regulates activities in the natural gas market, ranging from production, storage, transmission, and distribution to the wholesale, and import and export of natural gas. The Natural Gas Law also defines the scope of market activities and the rights and obligations of real and legal persons conducting these activities. As mentioned above, these market activities are subject to license. The principles and procedures regarding market activities, licensing, tariffs, and customer services are further detailed in several other regulations.
The Petroleum Market Law No. 5015 (“Petroleum Law”) which came into force on 20 December 2003, established EMRA as the authorized body to regulate, monitor and audit the petroleum market. The Petroleum Law regulates market activities such as the import, export, refining, processing, storage, transmission, free-use, distribution, transportation, dealership, and the bunker fuel delivery of petroleum that are subject to license. The application process, required documentation and license extensions are further detailed under the Petroleum License Regulation. The Petroleum Law also regulates the obligations and penalties for petroleum market activities and petroleum pricing, which is based on free-market conditions. Since ownership and other rights relating to petroleum in Turkey belong to the Turkish government, activities such as research, sounding, drilling and the processing of petroleum are subject to permission that must be obtained from EMRA.
Finally, LPG market activities such as the distribution, transportation, storage, and trade of LPG are mainly regulated under Law No. 5307 on the Liquefied Petroleum Gas Market (“LPG Law”). In addition to this, procedures and principles pertaining to licenses are defined by the Regulation on Liquefied Petroleum Gas Market Licenses (“LPG License Regulation”). Pursuant to the LPG License Regulation, it is obligatory to obtain a license in order to conduct distribution, transportation, Autogas supply, storage, and the manufacture of LPG cylinders.
Turkey enacted its first energy legislation in 2005 to support the use of renewable energy resources to decrease carbon emissions and safeguard the environment. In 2013, the publication of Law No. 5346 on the Utilization of Renewable Energy Resources for the Purpose of Generating Electrical Energy, Renewable Energy Resources Support Mechanism (“YEKDEM”) introduced incentives in the field of renewable energy resources.
With the many progressive changes made by the Turkish Government in last 20 years and Turkey’s available domestic renewable energy sources such as wind, solar, heat and hydro-power, the Turkish energy market has experienced rapid growth that has served to improve the country’s energy system as a whole. Having adapted the National Energy Policy in 2017, strategic innovations have been carried out to improve the use of local and renewable energy sources resulting in Turkey being ranked fifth in Europe and twelfth in the world in terms of installed capacity in renewable energy. Moreover, the proportion of renewable energy in installed power showed a significant increase and reached to 52 percent in 2021. As per to the government’s plans between 2019 and 2023, Turkey intends to boost the share of renewable energy in total installed electricity in Turkey to 30 percent by 2023.
Furthermore, Turkey has already achieved its objective of reaching 38.8 percent renewable energy generation set forth in the Eleventh Development Plan (2019-2023) and intends to continue promoting the growth of renewable energy resources in forthcoming years.
In today’s world, where the energy industry is becoming more crucial, there is no doubt that the Turkish energy industry has undergone a substantial change over the past 20 years. The new regulations have reshaped the regulatory landscape in Turkey resulting in a more rule-based and transparent policy framework. These developments have paved the way for new investment in different areas of the energy market. While these changes have privatized the energy market, the public-service nature of energy procurement is protected, hence the strictly regulated landscape of the industry has intensified the liabilities of all stakeholders. Therefore, we advise legal persons to prioritize the establishment of compliance mechanisms to detect and prevent any violations that may arise from the changes.
 IEA Turkey Energy Policy Review