TBY talks to Hasan Köktaş, President of the Energy Market Regulatory Authority (EMRA), on Turkey's energy needs, nuclear energy, and the privatization process.

Hasan Köktaş
Hasan Köktaş was born in 1963 and graduated from the Middle East Technical University with a degree in Public Administration. He began his career in the banking sector, working for a number of top banks in various executive positions. He was appointed Vice-President of the Privatization Administration in 2003, and continued until 2008. He was appointed President of the Energy Market Regulatory Authority in 2008.

Turkey currently imports 75% of its energy, which is equivalent to 99 million tons of oil annually, and it is expected to need 218 million tons of oil by 2020. How do you see current geopolitical situations affecting Turkey's energy needs?

Our understanding of the future of our domestic market is based on a stable, predictable, vivid market with well-defined rules open to all investors. Therefore, our neighbors as well as overseas investors are welcome. When we draft our regulations, we don't discriminate against investors according to their nationalities, but we are witnessing mutually beneficial energy relations with the countries close to us. While Turkish energy firms are investing in Iraq and Georgia, European energy investors are increasingly participating in the Turkish energy market. We believe that this trend will continue evenly at an increasing pace because every regulation we have put in place is creating a more stable, predictable, open, and transparent market. The increasing number of foreign firms operating in the Turkish energy market is a clear indicator of this fact. The Ministry of Energy and Natural Resources has the primary responsibility of determining energy policies and dealing with the geopolitical environment. In this respect, the Energy Market Regulatory Authority (EMRA) doesn't have any direct responsibility regarding geopolitical situations. However, the purpose of the law is to ensure the delivery of sufficient, high-quality, low-cost, and environmentally friendly electricity. Hence, the aim of EMRA is to ensure a sound legal framework for the development of the energy market and form a more liberal trading environment in which every market participant bears its own costs. Under these conditions, market participants will display the necessary elasticity to find the most appropriate supply resources for themselves. As we saw during the last natural gas bottleneck, in a competitive market environment the market responded to rising electricity market prices, and more capacity became more readily available. However, we can work closely with the Ministry to prepare the relevant policies and seek the implementation of these policies in the market environment.

What necessary steps need to be taken to prevent electricity shortages?

We have to make sure that we have a thorough understanding of why electricity shortages occur. Is it because of capacity, infrastructure, or an unpredictable balancing issue? Each reason has different solutions. I believe efficiency is extremely important. Turkey has published a new Energy Efficiency Strategy Paper, not because of shortages but because we want to make sure that every lira consumers spend on energy results in maximum utility. In addition to that, Demand Side Management (DSM) in the EU or Demand Response (DR) in the US are also important. As a short-term solution, smart grids can provide a solution as “grid-friendly" household appliances switch their electricity needs automatically with price signals. The lack of capacity is also another major reason for electricity shortages. As the regulatory authority, we are implementing some significant regulations. Licensing procedures are being simplified. It is expected that through the encouragement of private sector investment, the necessary capacity will be utilized.

What are the prospects for nuclear energy in the country?

Nuclear energy needs very detailed regulation and the Turkish Atomic Energy Agency (TAEK) handles these regulations. As stated by International Energy Agency (IEA) Chief Economist Fatih Birol, “Turkey has to commission multiple nuclear power plants." Our government is also decisive on this issue. I personally believe there are very good prospects for nuclear energy in Turkey. However, security is the primary concern.

How will the continuing privatization of the electricity generation sector impact Turkey's current account deficit?

Imports related to the energy sector are one of the most important lines in the current account balance. Turkey is dependent on imports, especially in its primary energy needs such as oil and natural gas. Gas is predominantly used in power generation. I do believe that the privatized electricity generation industry in Turkey will be able to receive the right price signals so that new investments will be in close harmony with the strategic objectives of the government. In addition to that, we expect plants will be operated more efficiently. The existing capacity will then be used more efficiently and the investment requirement will be decreased. In a more liberal investment environment, investors will have trust and they will be able to invest in technologies with higher capital expenditure such as hydro and coal, which will reduce the deficit.