Turkey continues to take steps toward increasing its own security of supply, as energy use is expected to double by 2023, triggering a requirement for around 100 GW of capacity, although market participants said the current "crisis" in the country's natural gas market is not expected to improve until at least 2019.
Speaking at the CSEE Energy Trading and Emart Turkey conference in Budapest Thursday, key players in the Turkish energy sector discussed the role of natural gas in the country's energy mix and more reliable alternatives to improve its energy future.
Of the 20.08 TWh electricity generated in May, 48.8% was generated from gas, 28.8% from coal, 15.9% by hydro plant, 3.1% from wind, 2.2% from liquid fuels and 1.2% from other renewable energy sources.
Ozkan Baykal, Energy Trading Manager at Akenerji told delegates that he expects the "gas crisis" will continue for the next five years, meaning Turkey must decrease its reliance on natural gas supply to at least 30%.
Turkey currently has a total of 709 new power plants under construction, however, including 396 new hydro plants and 60 new gas-fired plants, more than double the 22 coal plants planned.
"Gas plant is becoming unattractive, we need more investment in coal.
Half of Turkey's power generation is from gas plant, but gas is dominated by BOTAS. This means there is limited transparency in the gas market, so it makes it hard to calculate future prices. There is a significant impact of gas prices on power, which is also subject to movement in oil," Baykal said.
BOTAS DOMINANCE ONGOING ISSUE
State-owned Botas currently operates all of Turkey's gas transmission infrastructure, as well as importing and wholesaling 81% of the country's 52.35 billion cu m/year gas import portfolio.
Turkey's limited import and transportation capacity has repeatedly caused problems during periods of cold weather when demand spikes.
Baykal referred to a scenario this past winter, when a lack of gas supply combined with a dry winter, triggering a crisis.
"Turkey has insufficient gas infrastructure, and when the Iranian compressor stations encountered some issues this year, pipeline pressure diminished, so high-producing gas plants were told to cut back production to 50%. Blackouts are also planned for two hours a day in high consumption areas to avoid price spikes. It is not easy to trade in this market because of the unpredictability," Baykal said.
In mid-December, flows of Iranian natural gas into Turkey were considerably restricted, as compressor units in the east of the country were hit by unplanned outages and capacity reductions, triggering a "gas supply crisis" during a severe cold weather spell.
Baykal said that the Turkish energy market also continues its wait for a gas tariff and, once that happens, market participants will be relieved and liquidity will increase. He also reiterated recent calls for a stamp duty tax exemption in power and gas OTC trade to boost market activity.
GAS TSO DEADLINE TO BE SET
Baris Sanli, Turkey's General Directorate for Energy Affairs, also highlighted a lack of trust in the Turkish natural gas market as a major factor hindering its development, confirming that a deadline will be set to establish a separate transmission system operator for natural gas.
"It is all about geopolitical gains, and country risk causes fear. We need to see more independent power producers involved and no state involvement, other than in pilot projects," Sanli said.
"Gas sources in the Turkish market will not find a place in the market at current prices. We are stuck with BOTAS not separated as a transmission system operator. A deadline will be set to establish a natural gas TSO," he said.
Demand side management should also be part of Turkey's energy portfolio, Sanli said, which is an issue the government is currently in talks over, while highlighting the role of the consumer in supply security, calling for more trade with neighboring countries, despite differing international regulations.
GAS STORAGE CAPACITY NEEDED
Oytun Alici, Energy Expert at the Energy Market Regulatory Authority, said increasing natural gas capacity should not be difficult, but that it wasn't feasible without natural gas storage capacity.
"There is a natural tendency to move away from gas plant to alternate sources, such as hydro, as you have more control. It makes sense that investors want to build less power plants," Alici said.
"We will have 20-year lifetime plants by 2020, and the new owners of the older plants will probably revamp them to make them profitable. Turkey is also expecting to have 10 GW of nuclear generation around that time, which is the right decision considering the country's reliance on unstable natural gas," he said.
"We need to do more on transparency to increase confidence across all markets. This will also increase trading opportunities with other countries," Alici said.
