With the Energy Markets Incorporation (EPİAŞ) law that came into existence in 2013, the process of establishing an Energy Exchange was launched and now we have an Energy Exchange. This major project, which is expected to positively impact balances in the Turkish economy, will strengthen Turkey’s global presence through energy-based political and economic policies.
So, what contribution will the Energy Exchange make to the New Economy?
Why is such major significance placed on this project by both political decision makers and the private sector?
First and foremost Turkey will diversify in the field of electricity production, 50 percent of which is currently produced with natural gas. Turkey aims to increase investments in the electricity production sector. Increased investments in this sector, however, are directly proportional to transparency in the electricity market.
What I mean by market transparency is that electricity producers should know at what price they will be able to sell electricity. The ability to make long-term forecasts in this regard is directly related to the existence of an Energy Exchange.
Because as long as a reference price doesn’t exist, firms will be uncertain about the selling price of the electricity they produce. This uncertainty negatively impacts producers, distributors and consumers in the electricity market. Producers will be able to expand their maneuvering space if they are able to make long-term forecasts regarding electricity prices.
On the other hand, as firms diversify their production methods, any fragility that exists regarding market risk will be reduced. Creating just competition in a liberal market where prices are determined on the basis of supply and demand is also significant for consumers. This means that the consumer will have access to cheaper electricity.
Of course it needs to be stressed that the efficient functioning and trustworthiness of the Energy Exchange’s technical, infrastructure and management structures is very important. This is because the Energy Exchange, which will initially comprise the electricity market, is intended to include natural gas, oil and various other energy sources at a later stage.
It is only political stability that can guarantee the efficiency of the Energy Exchange, where no manipulation is carried out and it is made resistant to internal and external shocks.
In any case, it is the existence of political stability that provided the biggest support for an energy-dependent country to be able to target a prime position in the energy market by establishing an Energy Exchange at this stage in the journey of the New Turkey.
It could be said that energy has been the headline topic of global politics and economics in recent times. Europe’s increasing energy dependency, the continuous use of the energy card by energy-rich countries and energy’s role as a dynamo of economic growth has pushed countries to search for alternatives.
The Energy Exchange, which is set to be located in Istanbul, will have a major role to play in Turkey’s becoming an energy hub given this search for alternatives. Turkey’s position on the energy map has been strengthened as a result of the existing TANAP Project, the transiting of oil and natural gas from the Northern Iraqi Kurdish Region through Turkey and the rerouting of Russia’s South Stream Project toward Turkey. The bringing online of the Energy Exchange, alongside these projects, will confirm Turkey’s position as an energy hub.
This is because the Energy Exchange will not only comprise a market for energy producers and distributors in Turkey but also a market where foreign investors are present. The existence of a market that can purchase electricity from neighboring countries and sell it will initially transform the Energy Exchange into a regional energy market.
In the long term, apart from electricity, natural gas, hydrocarbons like oil and other energy resources will also be traded on the Istanbul Energy Exchange, drawing in foreign investors and becoming a global hub.
The existence of an Energy Exchange that provides direction to the energy market is very apt for Turkey’s New Economy.
