1. E P D K 1 Turkish Electricity Market and Recent Developments Cemal Çelik Energy Expert EMRA-TURKEY ccelik@emra.org.tr March 29-30 2007 ANTALYA

2. E P D K 2 Energy Market Regulatory Authority, EMRA was founded on 19 November 2001. - An independent and financely autonomous body - Decision making body is Energy Market Regulatory Board - Board memebers are appointed by the Council of Minister - A chairmen and 8 members - Chairman is the President of the Authority REGULATORY AUTHORITY: EMRA

3. E P D K 3 REGULATORY AUTHORITY: EMRA Objective To establish financially viable, stable, transparent and competitive energy market. Independent regulation and supervision to get adequate, efficient, high quality, low cost and environment friendly energy. Scope A legal framework for generation, transmission, distribution, wholesale and retail activities. A non-discriminatory, reliable, tarnsparent and cost effective base in the electricity market

4. E P D K 4 Preparing and implementing secondary regulation in compliance with EU rules Licensing Approving and publishing tariffs Monitoring and supervising market participant Settling disputes Approving, amending and enforcing performance standards Determining the eligibility threshold

5. E P D K 5 Fuel Type Gr a nted L i c e nses Applications deemed eligible for licensing Review and evaluation NumberInstalled Capacity (MW) NumberInstalled Capacity (MW) Number Installed Capacity (MW) Natural Gas 1665,325112.39250,4 Hydro1885,613,7581,414,02055,377.1 Fuel Oil381,089.5111,04112,7 Wind361,195,224874,51265,171,5 Coal372.438,92332,714,6 Waste527,2----

6. E P D K 6 All market activities are subject to license, obtained from EMRA Seperate market activities are conducted under particular license Seperate accounts are required for all licensed activities Licensing

7. E P D K 7 Licensing Types of Licenses Generation license Autoproducer license Autoproducer group license Transmission license Distribution license Wholesale license Retail license

8. E P D K 8 Licencing Retail services and activities can be performed through a single license No separate license shall be required for import and export activities. The import and export activities could be performed by wholesale licensees. But the retail licensees could perform import activities at the distribution level. More about licensing procedure is available at www.emra.org.tr address. www.emra.org.tr

9. E P D K 9 Main structure of the Market Costs shall include only market related operations Cross subsidies are not allowed. Without deterioration structure of tariffs, direct payment can be applied when necessary Gradual market opening will be applied Eligibility limit is determined on yearly basis by the Board by the end of every January Eligibility limit for the 2007 is 3 million kWh

10. E P D K 10 Electricity Market Law To faster competition Establish fair and cost reflective prices to achieve financial viability of the sector Ensure private sector participation by establishing a transparent and fair legislative investment environment

11. E P D K 11 Electricity Market Law The generation activity is performed by private sector generation companies, Electricity Generation Company (EUAS) and other public sector generation companies. The distribution activities are performed by distribution companies in the regions specified in their licenses.

12. E P D K 12 Privatization Privatization: In order to develop the market envisioned in the Law, the privatization of distribution and generation sectors are designed as supportive factor as well and Privatization Administration is charged with the related privatization. Aiming at liberalization of the sector and privatization the Strategy Paper was issud in 2004. The Paper covers procedures for privatization; Distribution, Generation assets, Transitional measures and security of supply mechanisms. 20 distribution regions were formed by restructuring TEDAS in 2005.

13. E P D K 13 Privatization Turkey is divided into 21 distribution companies, including Kayseri and Surroundings Electricity Company, which is privately owned. TEDAS, as the owner of all distribution assets has transferred the operating rights to the 20 companies. Related licences were granted, The tariffs to be employed by December 2010 were approved by the Board. The privatization of the newly established distribution companies was cancelled.

14. E P D K 14 Electricity Generation for 2006 Generation Fuel TypeMWh% Natural Gas86.900.00046,27 Coal51.600.00027,47 Fuel oil6.900.0003,67 Hydro41.700.00022,20 Wind and Biomass400.0000,21 Others300.0000,16 Total187.800.000100

15. E P D K 15 Incentives for Renewables Projects based on RES; Shall only pay 1% of the total licensing fee. Shall not pay annual license fees for the first 8 years. TEIAS and/or distribution licensees shall assign priority for system connection of generation facilities based on domestic natural resources and renewable resources.

16. E P D K 16 Incentives for Renewables RES based generation facilities are exempt from the liability of being a BM entity but can be registered as a BM entity if requested by the market participant and agreed by NLDC that the generation facility or unit can participate in the Balancing Mechanism. Produced electricity should be bought if the price of electricity generated at generation facilities based on renewable energy resources is equal to or lower than the sales price of TETAŞ and if there is no cheaper alternative, The retail licensees are obliged to purchase electricity with ratio of sold energy in their licensed region,

17. E P D K 17 Cross border trade The principles and procedures regarding the capacity allocation of interconnection lines have been approved by the Board. When there is more than one licensee they will be asked by TEIAS or the related distribution company, to participate in a tender procedure and submit their bids for the congestion management charges.

18. E P D K 18 Cross border trade The license holders use interconnection lines are obliged to make payments according to the principles and procedures set By-Law on Electricity Market Tariffs. When there is one licensee there will be no tender procedure and the capacity of the related line will be allocated to that licensee.

19. E P D K 19 Conclusion In conclusion, the liberalization process in Turkish electricity sector, which started in 2001, is going ahead. In parallel with the implementation of regulations and high increases in the electricity demand, electricity sector has the potential to attract more investment to the sector. In accordance with environmental sensivity there are some more lucrative investment areas intentioanlly for RES as hydro, wind, solar and biomass sources.

20. E P D K 20 Thank you very much for your patience. I will be happy to answer any questions you may have.