An evaluation of the transitional Turkish electricity balancing and settlement market: Lessons for the future

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<ul><li><p>Renewable and Sustainable Energy Reviews 15 (2011) 13251334</p><p>Contents lists available at ScienceDirect</p><p>Renewable and Sustainable Energy Reviews</p><p>journa l homepage: www.e lsev ier .co</p><p>An evaluation of the transitional Turkish electriciand settlement market: Lessons for the future</p><p>Ercment Camadan , Ibrahim Etem Erten1</p><p>Energy Market</p><p>a r t i c l</p><p>Article history:Received 4 AuAccepted 14 O</p><p>Keywords:TurkeyElectricity whoBalancing mar</p><p>Contents</p><p>1. Introd2. Turkis</p><p>2.1.2.2.2.3.</p><p>3. Turkis4. Price constitution in temporary balancing and settlement market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1329</p><p>4.1. Distribution of instructions according to their tag values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13294.2. An investigation on arbitrage possibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13304.3. Is there a relationship between reserve margin and system marginal prices? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13324.4. Will the new market design solve the problems? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1332</p><p>5. PolicyRefer</p><p>1. Introdu</p><p>Since thetries all oveand restrucformed bytions for the</p><p> The authoTurkey. The viinstitution the Correspon</p><p>E-mail add(I.E. Erten).</p><p>1 Tel.: +90 3</p><p>1364-0321/$ doi:10.1016/j.recommendations and concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1333ences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1334</p><p>ction</p><p>adoption of a reform process in late 1980s many coun-r the world have embraced liberalization, privatizationturing of electricity industry instead of an industryvertically integrated companies. Although the motiva-restructuring of the industry vary across the countries,</p><p>rs work as energy experts in Energy Market Regulatory Authority ofews and conclusions in this article do not represent the views of anyy are afliated with. They are entirely those of the authors.ding author. Tel.: +90 312 2014223; fax: +90 312 2014200.resses: ecamadan@epdk.org.tr (E. Camadan), ierten@epdk.org.tr</p><p>122014173.</p><p>the fundamental purpose is to improve efciency of the sectorthrough the introduction of competition among players [1]. How-ever, thedriving forcesbehind the reformdiffer betweendevelopedand developing countries. The main aim of the restructuring ofthe electricity industry in developed countries is to improve eco-nomic and nancial performance of technically reliable systems.On the other hand, some factors such as the burden of subsidies,low service quality, high network losses, poor service coverage and,most importantly, macroeconomic problems in the countries arethe reasons for the reform process in developing and transitioncountries [2].</p><p>Within the reform process, the regulations focused on priva-tization of electricity generation facilities, separation of verticallyintegrated monopolies, unbundling, foundation of independentregulatory authorities and allowing consumers to choose their sup-</p><p>see front matter 2010 Elsevier Ltd. All rights reserved.rser.2010.10.010Regulatory Authority, Muhsin Yazcoglu Cad. No: 51/C Yznc Yl, Ankara, Turkey</p><p>e i n f o</p><p>gust 2010ctober 2010</p><p>lesale marketket</p><p>a b s t r a c t</p><p>Balancing and settlementmarket is a crucial part of restructured Turkish electricitymarket. In this frame-work, the main purpose of this study is to examine whether the prices constituted in the transitionalbalancing and settlement market reect the real cost of imbalances. Although it is observed that theprices are not powerful in indicating the real cost of imbalances, Turkey has the opportunity to form awell-functioning market within the context of planned new market structure. Turkey needs to dene aproper roadmap reckoning the points mentioned in this paper to be able to achieve her objectives.</p><p> 2010 Elsevier Ltd. All rights reserved.</p><p>uction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1325h electricity market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1326Market structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1326An overview of the performance of the Turkish electricity market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1327Market opening and concentration level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1328h balancing and settlement market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1328m/locate / rser</p><p>ty balancing</p></li><li><p>1326 E. Camadan, I.E. Erten / Renewable and Sustainable Energy Reviews 15 (2011) 13251334</p><p>pliers. Many of these policies are recommended and defended byInternational Energy Agency (IEA) [3].</p><p>Turkey, one of the fastest growing power markets all over theworld since 1980s, is geographically located in close proximityto 71.8% of worlds proven gas and 72.7% of oil reserves. Thus, itforms an energy corridor between energy source countries andmain energTurkey is arity througBesides, sinsteps to bewith its aimtricity sectoMarket Lawof EML havfor Turkish</p><p>The balatured Turkbalancing oEven if therwhole, therancing andis to put an estudy focusthey reect</p><p>This papintroductiosentation oconstitutedtion 4. Thedrawn in Se</p><p>2. Turkish</p><p>2.1. Market</p><p>In Turke1902. It wabigger pow[5]. Since thliberalizatiosometimesization of eare broadlynot delinea</p><p>Howeveket. EML wdevelopmeket operaticivil law. ARegulatoryindependenof EML,privactivities sua license froeral contracthe imbalan</p><p>In the cuties are conCo. (TEIAS).ities. TEIASconnectionapproval. B</p><p>2 An English</p><p>trol, carries out substitution and capacity expansion activities inthe transmission system, monitors real-time system reliability,purchases and provides ancillary services under the provisions ofancillary services agreements.</p><p>Regionain regions i</p><p>is ur in</p><p>al disenseasisail saale lse elre aron reongeTEDoceszatio06 wormed byion oatizaTran</p><p>. Accoof thtribuve ththatnersits sht toenturketion</p><p>ompae-Ownieshin tlio geed pl</p><p>grontrolzed)re armarcity Wesaleen gionst inmenontry offw coas becurr</p><p>citying aas EUtionplannd TO. TETy consumer markets. In this regard, it is apparent thatsignicant country for Europe in ensuring energy secu-h diversication of supply resources and routes [4].ce October 2005 Turkey has passed many signicanta member of the European Union (EU). In accordanceto be a full member of EU, Turkey has initiated an elec-r reform program. Within this context, the Electricity(EML)2 was enacted in 2001. Even if many foresights</p><p>e not been acquired yet it has been an important stepelectricity market.ncing and settlement market is a vital part of restruc-ish electricity market. It is the spot market wheref the system is realized and spot prices are constituted.e are many studies on Turkish electricity market as ae are limited studies focusing on functioning of the bal-settlement market. Hence, one of the aims of this studynd to the lack of studies on thismarket. In addition, this</p><p>es on the prices in thatmarket and investigateswhetherthe real cost of imbalances.er is organized as follows. Section 2 presents a briefn of Turkish electricitymarket. Section 3 provides a pre-f Turkish balancing and settlement market. The pricesinbalancingandsettlementmarket areanalyzed inSec-policy recommendations and concluding remarks arection 5.</p><p>electricity market</p><p>structure</p><p>y, the rst electric generator was installed in Tarsus ins a 2kW dynamo connected to the water mill. The rster plant was installed in Silahtaraga, Istanbul in 1913en, there have been some trends sometimes promotingn and encouraging participation of private sector andincreasing the weight of the government and national-ntities. These trends and developments of the industrydiscussed in [59]. Hence, the history of the market isted in this paper.r, 2001 is an important year for Turkish electricity mar-as enacted in this year. This law aims to ensure thent of anancially soundand transparent electricitymar-ng in a competitive environment under provisions ofn independent regulatory authority (Energy MarketAuthority EMRA) was established whose board ist in its decisions relating themarket.With the adoptionate sectorhas acquired the right toparticipate inmarketch as generation and wholesale activities by obtainingm EMRA. The main purpose of EML is to design a bilat-ting market complemented by a balancing market forces emerged in real time.rrent market structure, electricity transmission activi-ducted by state-owned Turkish Electricity TransmissionTEIAS is the sole company for the transmission activ-also prepares, revises and inspects the transmission,and use of system tariffs that are subject to the Boardesides, it performs load dispatch and frequency con-</p><p>version of EML can be found at the EMRAwebsite (www.epdk.org.tr).</p><p>sumersupplieregionsale licretail bany retretail spurcha</p><p>Thetributifor a lpart oftion prprivatiJuly 20tor Refacceptvatizat</p><p>Privusing amodelsharesthe disnot haitemsThe owthoughthe rigagreem</p><p>In TGenerathe cOperatcompa</p><p>Witportfogas rthese 6the coprivati</p><p>ThetricityElectria wholbetweobligatelemengovernthese ccosts bwith loprice h</p><p>TheElectribalancwheregenerapowerBOO aTETASl distribution companies perform distribution activitiesndicated in their licenses. According to EML, if a con-nable to purchase electricity and/or capacity from athe region served by any distribution company but thetribution company, the latter is obliged to obtain a retailand engage in electricity sales to such a consumer on aand/or provides retail sale services. In fact, there are notle companies except for distribution companies havingicenses. Therefore, the non-eligible consumers have toectricity energy from these distribution companies.e 21 distribution regions in Turkey. Only Kayseri dis-gion has been operated by a partially private companyr time. While 20 of other distribution regions were aAS until 2008, 8 of have been privatized and privatiza-ses of other distribution regions is going on. Whereasn of all these 20 distribution companies/regions by 31as determined as the main target at Electricity Sec-</p><p>and Privatization Strategy Paper (Strategy Paper) [10]High Planning Council in 2004, as mentioned, the pri-f the rst region could be realized in 2008.tion of distribution companies has been implementedsfer of OperationRights (TOOR) backed Share Sale (TSS)rding to thismodel, the investor is the sole owner of thee distribution company which is the unique licensee fortion of the electricity in the designated region but doese ownership of distribution network assets and otherare essential for the operation of distribution assets.hip of these assets remains with TEDAS. The investor,hares in the distribution company, however, is grantedoperate the distribution assets pursuant to a TOOR</p><p>with TEDAS [11].y, electricity is generated by state-owned ElectricityCo. (EUAS), their subsidiaries, afliates, partnerships;nies having Build-Operate-Transfer (BOT), Build-n (BOO) and TOOR contracts; other private generation</p><p>and autoproducers.he framework of Strategy Paper, EUAS was split into 6neration groups which hold hydroelectric, lignite andants. While the aim of Strategy Paper was to privatizeups, none of them have been privatized yet. However,of major hydro plants (which are not expected to bewill be under EUAS.e 54 private wholesale license holders in Turkish elec-ket as of 02 August 2010 [12]. In addition, Turkish</p><p>holesale Co. (TETAS), a state-owned company, ownslicense. Due to existing BOT, BOO and TOOR contracts</p><p>overnment and private parties, the power purchasefrom private generators constitute a stranded cost</p><p>the new systemdenedwith the enactment of EML. Thet, via TETAS, undertakes responsibility for recoveringacts as a type of vesting contracts. Mitigating strandedsetting them via bundling high existing contract pricesst (hydro) generators resulting in an acceptable averageen the preferred method [9].ent structure of the market is demonstrated in Fig. 1.trading is performed by bilateral contracting and innd settlement market. EUAS sells electricity to TETASASs subsidiaries, afliates, partnerships and portfoliogroups sell electricity to distribution companies. Thets generating electricity within the framework of BOT,OR contracts sell all of their electricity generation to</p><p>AS purchasing electricity from these plants and EUAS</p></li><li><p>E. Camadan, I.E. Erten / Renewable and Sustainable Energy Reviews 15 (2011) 13251334 1327</p><p>TEIAS (transmission) </p><p>TETAS </p><p>Othc</p><p>BOT BO TOOR</p><p>Power plants </p><p>Distribution Companies</p><p>Eligible Consumers(TETAS) </p><p>lectri</p><p>provides eleplies electrelectricity bconsumerselectricity f</p><p>Private gwholesale cthe right toelectricity t</p><p>Generatcompaniestricity in thin the balaning BOT, BO</p><p>Althoughenergy direcurrently thpanies andcontracts beeligible conated by privmarket. Thlimited trad</p><p>2.2. An ovemarket</p><p>Total ins2010 [13]. Ain total inweight of sinstalled cais 20.4%. Altthey sell thcontracts, tcompetitiveinstalled cacompetitive</p><p>capacity of electricity (MW) (as 7 April 2010).</p><p>anies MW Share (%)</p><p>20,369 45.2s afliates 3834 8.5lants 650 1.4lants 6102 13.5lants 2439 5.4plants 263 0.6</p><p>e plants 7752 17.2roducers 3641 8.1</p><p>45,050 100</p><p>TEIAS (2010) (teias.gov.tr 07/04/2010).Electricity Generation Co. Inc., their subsidiaries, affiliates, partnershipsand portfolio ge...</p></li></ul>

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