TSKB Publishes Energy Outlook 2023 Report
The TSKB Energy Working Group has published its annual “Energy Outlook” public report for the year 2023. The “Energy Outlook 2023” report, delving into the critical energy sector with profound implications for the economy, global geopolitics, and environmental concerns, conducts a thorough analysis to assess pivotal trends shaping the energy market. The report addresses all facets of the energy sector, providing detailed insights into sub-sectors and highlighting key aspects such as renewable energy, energy efficiency, and climate considerations that align with global green transformation objectives.
The TSKB Energy Working Group has published its eagerly awaited report on the Turkish energy sector. This publication, a regular occurrence for the past five years, introduces a novel approach in its 2023 edition. Centering on recent developments, the report meticulously examines all sub-components within the energy sector, providing a comprehensive analysis.
Kubilay Kavak, PhD, Chair of the TSKB Energy Working Group and CEO of Escarus, offered the following insights regarding the report: “In our 2023 Energy Outlook report, we have robustly presented the key dynamics within each sub-sector. We have scrutinized the energy sector, intricately connected to various domains, emphasizing macroeconomic perspectives, regulatory shifts, policy influences, sector-specific trends, price variations, and technological innovations. We hope that this report, crafted through the meticulous input of our members from diverse disciplines within the TSKB Energy Working Group, will offer decision-makers a well-informed perspective on the sector.”
Highlights from the “TSKB Energy Outlook 2023” report:
Increase in Global Commodity Prices
Türkiye’s reliance on imported fossil fuels, such as oil and natural gas, leaves the country vulnerable to direct impacts from fluctuations and price increases in the global markets for these resources. It is crucial for Türkiye to undergo a low-carbon energy transition to diminish its reliance on foreign energy sources and mitigate vulnerability in its current account deficit.
The Role of Electricity Storage Systems in Low-Carbon Energy Transition
Türkiye’s renewable energy potential serves as a key catalyst for the country’s transition to a low-carbon energy system. The legislative adjustments over the last two years, specifically targeting electricity storage, are anticipated to expedite Türkiye’s transition to low-carbon energy by facilitating the integration of renewable energy sources into the electricity system. Electricity storage systems play a crucial role in enhancing system flexibility and optimizing grid performance. Türkiye National Energy Plan has also set a target for battery storage capacity in the system. Accordingly, the battery storage capacity in the system is projected to reach 7.5 GW by the year 2035.
Development of Electricity Prices
The cost formation in the Turkish electricity market is closely tied to fluctuations in natural gas and imported coal prices. This connection arises from the significant impact of natural gas and imported coal power plants on electricity prices. According to data from Enerji Piyasaları İşletim A.Ş. (EPİAŞ), the monthly average Market Clearing Price (MCP), which stood at TL 1,008.6/MWh in December 2021, concluded 2022 at TL 3,724.4 /MWh. Starting at TL 3,400.0 /MWh in 2023, the monthly average MCP gradually decreased with favorable climatic conditions, reaching TL 1,623.9 /MWh in June. Despite an increase after June, the average for October stayed below TL 2,250.0 /MWh.
Expectation of Gradual Decline in Natural Gas Consumption
Despite the anticipated increase in natural gas consumption in the short to medium term, Türkiye National Energy Plan outlines a decrease in the share of natural gas in primary energy consumption. The expected decline is from 27 per cent in 2020 to 24.2 per cent in 2025, further decreasing to 23.9 per cent in 2030 and 22.5 per cent in 2035.
The Role of Oil in Energy Consumption
The share of oil and oil products in Türkiye’s primary energy consumption is expected to decline gradually over the years. As per Türkiye National Energy Plan, the objective is to reduce the share of oil in primary energy consumption from 28.7 per cent in 2020 to 28.5 per cent in 2025, 27.5 per cent in 2030, and 26.5 per cent in 2035.
Renewable Energy Resources Support Mechanism (YEKDEM)
In May 2023, the escalation model for TL-based prices in renewable energy power plants was revised to favor foreign currency. Additionally, both ceiling and floor prices based on the dollar were introduced. The timelines during which power plants can take advantage of these prices have been altered. Under the new YEKDEM-3, prices for Renewable Energy Source certified generation facilities operational between July 1, 2021, and December 31, 2025, are subject to monthly updates based on resources. These prices are indexed, with 60 per cent tied to foreign currency (euro and dollar) and 40 per cent linked to price developments, including the producer price index and consumer price index.
Energy Efficiency
The 12th Development Plan, released in the Official Gazette No. 32356 (bis) of November 1, 2023, for the period 2024-2028, highlights energy efficiency as a key aspect within categories such as green transformation, initiatives for ensuring energy supply security, and the impact of global developments on Türkiye. Energy efficiency will play a pivotal role in reaching the 2053 Net Zero Emission Target by aiding in the reduction of energy demand and ensuring supply security through effective cost management. The Plan states that investments are anticipated to gain momentum in sectors closely tied to energy efficiency, including the green transformation in industry, sustainable agriculture and transportation, circular economy, and green infrastructure and urban planning.
Climate Developments in Türkiye
Significant steps are being taken in Türkiye towards the formulation of a draft Climate Change Law. Given that carbon pricing has not been implemented in Türkiye yet, studies on the National Emissions Trading System (ETS) are underway to mitigate the potential costs associated with the EU Carbon Border Adjustment Mechanism.
The “Energy Outlook 2023” report, published by TSKB, can be found here.
