1. Energy Sector of Turkey “General Overview and Policy Objectives” Sinem ÇAYNAK General Directorate for Energy Affairs IEA Turkey IDR Meeting December 8, 2014

2. –Rapid growth in demand : investment challenges and opportunities the role of competitive markets –High level of import dependency: further role of development of indigenous resources, in particular: renewables, and resource diversification –Relatively high figures for energy intensity : potential for improvement of energy efficiency Energy Sector “Main Characteristics”

3. Energy Strategies “3 Main Principles” Energy Security Economic Growth Environmental Sustainability

4. 2001 -Electricity Market Law (No:4628) -Natural Gas Market Law (No:4646) 2003 -Petroleum Market Law (No:5015) 2004 -Strategy Paper as Road Map for the Market Reform &Transition 2005 -LPG Market Law (No:5307) Major Policy Developments “Legislative Framework”

5. 2005 -Law on Utilization of Renewables in Electricity Generation 2007 -Energy Efficiency Law (No:5627) 2007 -Geothermal Law (5686) 2008 -Significant Amendments to the Electricity Market Law (No:5784) Major Policy Developments “Legislative Framework-II”

6. 2009 -Strategy Paper on Market Reform, Transition, Privatization & Security of Supply 2011 -Amendments to Law on Utilization of Renewable Energy Resources for the Purpose of Electricity Generation (6094) 2012 -Energy Efficiency Strategy Paper 2013 -The New Petroleum Law (6491) Major Policy Developments “Legislative Framework-III”

7. 2013 -The New Electiricity Market Law (6446) 2013 -10th National Development Plan  2014 -Amendment to the Natural Gas Market Law (Draft)  2014 -The New Electricity Market Strategy Paper (Draft) Major Policy Developments “Legislative Framework-IV”

8. “Market operation” will be added to the other electricity activities and electricity market activities are organised as generation, transmission, distribution, wholesale, retail, import and export activities. Issue of the electricity transmission activities carried out by TEIAS (Turkish Electricity Transmission Co) is unchanged. EPİAŞ will organise energy exchange market operations and this will increase reliability of long term price forecasts. New Electricity Market Law (2013) 8 TEİAŞ EPİAŞ System Operator Market operator TEİAŞ System Operator Market operator Law no: 4628 New law:6446

9. The New Electricity Market Law-2 Pre-license mechanism for the permits, approvals, similar certificates required under the legislation to start generation facility investment in 24 months. In order to increase the amount of generation plants based on renewable resources, upper limit for licence exemption increases from 500 kW to 1 MW. The Council of Ministers is authorized to increase this upper limit up to 5 folds. Autoproducer mechanism was repealed and all this type of licensees converted into the generation license.

10. 10th Development Plan (2014-2018) Official Gazette No:28699; in 2013 Includes various provisions for the energy sector. Further diversification of energy supply; development of indigenous resources Further development in competitiveness of electricity and natural gas market Realization of oil and natural gas pipeline projects and development of Ceyhan Terminal Establishment of Energy Exchange (EPİAŞ) in order to deepen trading activities Undertaking a more active role in energy trade within the region

11. 11 Energy Outlook of Turkey Sixth biggest economy in Europe. Fast recovery after the global financial crisis GDP growth: 8,9% in 2010 8,5% in 2011 2,2% in 2012 4,0% in 2013 Mid-term plan: 3,3% in 2014 4,0% in 2015 5.0% in 2016 Sixth biggest electricity market in Europe. Annual demand increase of Turkey : 4,6% since 1990 (Annual demand increase of the EU: 1,6%) Primary energy demand is expected to increase around 4% / annum. Electricity demand to increase annually around 5,5% until 2023 Investment required more than $ 120 billion for the next 10 years

12. Electricity demand progress 1998199920002001200220032004200520062007200820092010 201120122013 Consumption (TWh) 114,0118,5128,3126,9132,6141,2150,0160,8174,6190,0198,1194,1210,4230241,9245,4 Increase (%) 8,13,98,3-1,14,56,56,37,28,68,84,3-2,08,49,05,11,44

13. Target by 2023 Electricity Consumption 13

14. Breakdown of installed capacity of generators 14 Breakdown of electricity generation by generators

15. 15 Strategy Coal Natural Gas Hydraulics Wind Geothermal Solar NuclearOthers Installed Capacity Projection (2023)

16. Share of Imported Resources in Electricity Generation As of October 2014, 62,9% 16

17. 17 –Security of Supply and Market design –Distribution and generation privatisation Distribution  completed (2013) Generation  commencement in 2009 -Utilization of renewable and energy potential in a cost effective manner -Utilization of remaining hydro and indigeneous coal reserves -Electricity generation based on nuclear power by 2023  at least %10 -First NPP agreement with Russian Federation (4.800 MW) -Second NPP agreement with Japanese + French consortium (4.480 MW) Electricity Market & Security of Supply Strategy Paper

18. 18 All economically feasible hydropower potential of Turkey will be provided for generating electrical energy, 20,000 MW capacity of wind power plant will be in operation At least 3000 MW of solar energy capacity will be reached 600 MWe geothermal will be implemented TARGETS FOR 2023

19. 19 Strategy  to privatize significant portion of state owned generation assets Privatization of 9 small power plants (totally 140 MW) & Privatization of 50 small hydro power plants finalized 3 big thermal power plants were privatized: Seyitömer Coal Fired Power Plant - 600 MW Kangal Coal Fired Power Plant - 450 MW Hamitabat Gas Fired Power Plant – 1.120 MW Studies regarding generation privatization will be finalized soon * 45 power plants (18 thermal & 27 hydro) * total capacity 16,359 MW (around %36 of Turkey’s total installed capacity) Privatization of Generation Assets

20. 20 Renewables-Incentive Scheme Feed-in-Tariffs Purchase guarantees Connection priorities Lower license fees License exemptions in exceptional circumstances Various practical conveniences in project preparation and land acquisition.

21. Licensed facilities producing electricity from renewables which will be in operation before 2020 These prices will be given for a maximum term of 10 years from its operation date. In addition, a certain support of 0.4 to 3.5 US cents per kWh is also given to the plants for the utilisation of domestically manufactured technical equipment. 21 Feed-in Tariffs Tariffs in UScents/kWh; Wind and Hydroelectric power plants : 7.3 Geothermal power plants : 10.5 Solar and Biomass power plants: 13.3

22. Energy Sector of Turkey “General Overview and Policy Objectives” Sinem ÇAYNAK General Directorate for Energy Affairs IEA Turkey IDR Meeting December 8, 2014