Historical Overview of Turkish Energy Policy

Energy policy of Turkey has been changing very frequently because of the changing condition and political preferences of the ruling parties since the establishment of the republic. In the early years of the Republic, a significant portion of the energy was required only for heating purposes. At the transportation and industry sectors, the energy demand was met by using the coke and wood.

106 At the beginning of the republic period, Turkey’s energy policies were affected from the decisions of İzmir Economy Congress, made in 1923. In this congress, it is recommended that energy needs of the country should be met as much possible as from the domestic resources. When the republic was declared, only three cities, Istanbul, Tarsus and Adapazarı, were lighted with the electricity and nearly 94 % of the population was in dark.

The consumption of the electricity was very low and the lighting needs were generally met by kerosene. The countries’ total established power was only 33 MW and total electricity production was 45 GWh. In this period, with the effect of the world economic crisis and inflation, the price of the electricity raised. Due to the low capital accumulation of the private sector, the state played an important role in the establishment and operation of the energy institutions. Therefore, nearly all of the investments were made by the state in this period (Yılmaz and Uslu, 2007: 259).

In the second period, covered the 1930-1950 periods, the main target was to decrease the foreign dependency in energy demand. To realize this target, some institutions like Mineral Research and Exploration Institute (MREA), Electrical Power Resources Survey Administration, Etibank and Petroleum Agency were established. Because of the Second World War, economic depression was lived and most of the targets could not be succeeded (Yılmaz and Uslu, 2007: 259).

In the multiparty era, important steps were taken in the energy sector. New and important hydroelectric, such as Sarıyar, Seyhan, and thermic plants, such as Tunçbilek and Soma, were established to increase the energy production. To widespread the hydraulic plants, State Hydraulic Works (SHW) was established in 1953. To accelerate the oil and coal exploration, Turkish Petroleum Company and Turkish Coal Enterprises were established.

Energy consumption was increased depending on the industrialization and economic growth in this era (Yılmaz and Uslu, 2007:260).

From the 1960 coup to 1980, the state increased its weight in the energy sector.

Accordingly, the activities of foreign companies were restricted and in 1978 the government adopted a draft law on the nationalization of all private mining enterprises.

While the investment ratio of the public sector rose to 13.8 %, the private sectors’

investment rate remained constant. Although the investment of hydraulic and thermic

107 plants increased significantly, the electricity production could not meet the demand ratio (Hiç, 1994: 374). This situation caused a bottleneck in the energy sector. (Yılmaz and Uslu, 2007). In the fourth planned period, it was targeted that 53 % of the total energy consumption was met by using the coal and hydraulic plants. This target could not be succeeded, because at that period the oil price was very cheap in the world but establishment of the hydroelectric plants was very costly (Hiç, 1994: 375).

Turkey seriously affected from 1973 and 1979 oil crises. Because of these crises, the lignite resources were evaluated intensively and the lignite resources were nationalized.

However, this policy could not be maintained consistently and continuously. Between the 1960-1980 periods, the economy grew 5.5% yearly, primary energy production increased from 9.54 MTEP to 19.86 MTEP and primary energy consumption increased from 11.22 MTEP to 33.47. By the year 1980, nearly 80% of the population could use the electricity in Turkey (Yılmaz and Uslu, 2007).

Between the 1980-2003, with the introduction of liberal economy, significant changes occurred in the field of energy. Although energy was described as a strategic public service in the 1982 Constitution, privatization policy was started and electricity generation and distribution were included to the privatization. The 'build-operate' and 'build-operate-transfer' type investments in the energy sector were also trying to increase the share of the private sector in the fifth period (Yılmaz and Uslu, 2007: 262).

During this period, the composition of the resources used in electricity generation was largely changed. While the share of the lignite in the electricity production was 42% in 1985, the ratio was decreased to 16.8% in 2003. Similarly, the share of the hydroelectric plants was fallen to the 25.1% from 35% (Yılmaz and Uslu, 2007:262). The main reason of this change can be explained with the natural gas import. Since the natural gas is clean and the establishment of the plants is comparatively cheap and fast, the preferences shifted from other resources to natural gas.

At end of this period nearly 60 % of the electricity needs was met by natural gas. While the import of the natural gas was only 0.5 billion m³ in 1987, it reached to the 31.3 m³ by the year 2001. Since almost all of the natural gas need is obtained by import, this high import

108 composition creates high risk and high foreign dependency especially in electricity generation. The private sector investment in this field increased from 17% to 45% in this period (Yılmaz and Uslu, 2007:262).

After 2002 election, new energy policy generally deals with the liberalization of the energy market and harmonization of the Turkish legislation with the EU acquis. The new petroleum law numbered as 5015 was adopted and import restriction on energy was cancelled. With the adoption of the new law, the number of the companies working on distribution of the fuel increased rapidly. Boron institution was established to evaluate the strategic mineral. In this period, the energy efficiency policy gained speed and new legislation was adopted to realize the efficiency targets and to decrease the burden of the energy cost on economy in 2007.

In order to evaluate and develop domestic renewable energy resources the use of Renewable Energy Sources in Electricity Production Act was adopted in 2005. In this period, 2023 strategic plan was adopted and the share of the renewable energy sources in the electricity production target was determined as at least 30 % by the year 2023. With the effect of the incentive, there was a boom in the renewable energy investments, especially in wind and hydro energy.

In addition to renewable energy investments, two nuclear plant agreements were signed with Russia and Japan. In the strategic plan, it was planned that Turkey will produce nearly 10 % of its electricity from nuclear power by the year 2023. Besides, in order to decrease the share of natural gas in the electricity production, the government supported the coal plant, working with domestic lignite. The target of government is to fall the share of natural gas in electricity production to 30 % in 2023 (MENR, 2014).

As it can be seen, Turkey has been trying to find a way to obtain its energy from domestic resources. However, because of the structural reasons, such as long term natural gas agreements and high cost of renewables, it cannot succeed its targets yet. In the strategic plan, it is aimed to increase the share of domestic resources.

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