Energy & Mining

Private Spark

Electricity Privatization

Turkey's electricity market is setting the standard for privatization, with the electricity distribution market becoming fully privatized and earning Turkey $13 billion.

Turkey’s electricity market is among the fastest growing in the world. In 2010 and 2011, the market grew at an average rate of 9% per year. In 2012, electricity consumption reached 235 billion kWh, a 78% increase on the 140 billion kWh consumed in 2003. Owner and operator of the national transmission network, the Turkish Electricity Transmission Company (TEİAÅž), predicts that Turkey will consume 256 billion kWh of electricity in 2014. Turkey entered 2013 with an installed electric capacity of 57 GW, which will increase to 64 GW over 2014. The country hopes to reach 100 GW by 2023.

In January 2014, 13 cities put up electricity power stations, adding 287 MW to the grid and helping the country to reach its projected capacity in 2014. Of this newly installed power, hydroelectric plants contributed 205 MW, wind plants 56 MW, and fossil fuels 26 MW. Currently, the construction and hydro-mechanical works of the approximately 62-MW Doğançay hydro-project in Turkey’s Adana province are underway. It will have a total output of some 170 GWh and a grid connection voltage of 154 kV. Turkish hydropower developer Enerjisa is looking for bids to finish the project.


The energy market is becoming increasingly more liberalized, and the electricity sector is leading the way. Privatization efforts in Turkey first took hold in the 1980s, but real developments only gained momentum over the past decade.

In March 2013, Turkey sold the last four of its electricity grids, raising $3.46 billion and leading to the full privatization of the electricity distribution sector. The highest bid was $1.73 billion and came from Enerjisa for the Toroslar power distribution grid in southern Turkey. Enerjisa also won the Ayedaş power distribution grid with its $1.23-billion bid. Türkerler İnşaat bid $118 million for the Vangölü grid in eastern Turkey and İşkaya Doğu OGG bid $387 million for the Dicle grid in southeast Turkey. At a signing ceremony for the 457-MW Kangal Thermal Power Plant’s privatization, Energy Minister Taner Yıldız told attendees that Turkey has earned some $13 billion on account of the privatization of electricity distribution grids and that the same amount of money will be achieved with the privatization of generation plants. According to Turkey’s Privatization Authority (ÖİB) and the Electricity Generation Corporation (EÜAÅž), Turkey has 25 GW of installed power and hopes for 16 GW of this total to be privatized.


The most recent developments are much owing to new legislation. In March 2013, Turkey enacted the new Electricity Market Law (New EML). The law was created to establish a financially sound, stable, competitive, and transparent electricity energy market with an independent regulatory system, buffering Turkey’s pursuit to boost the private sector’s portion of the electricity market to 75%, up from 38% a mere decade ago and the current 61%. By easing the transition of investors to Turkey’s energy market, Turkey will attract more private sector players and improve its global importance. The New EML installed a “pre-license” term, which helps to overcome bureaucratic challenges. The former EML required the issuance of licenses by the Electricity Market Regulatory Authority (EMRA) prior to making other applications. This led to significant delays. The New EML allows companies that have applied to EMRA for a proper license to be granted a pre-license that allows them to apply for various permits and licenses for up to 24 months, whilst waiting for EMRA to fulfill its issuance.

Some of the biggest perks of the New EML are the criteria surrounding contests. The new law delineates that when there are two or more renewable energy license applications for the same area, the applicant that contributes the highest investment per kWh for a period of 20 years will win the contest, ultimately promoting productive and quality land use. Also attractive is the New EML’s changing of unlicensed power generation provisions. Formerly, power plants with a maximum capacity of 500 kW were permitted to produce electricity without a license. The New EML boosts this threshold to 1 MW and, possibly, 5 MW, if the provision is received popularly by the industry. Another provision grants renewable energy resources added privileges. Power plants that use renewable energy resources and are isolated from the transmission and distribution grid are exempt from acquiring a production license, irrespective of their capacity.


The privatization of the distribution segment has not lowered retail prices from 2008 to 2013. Wholesale tariff rates have dropped by 10% and retail tariffs increased by 6% during this same period. These unbalanced patterns call into question the privatization scheme’s effectiveness. Turkey has been benefiting from privatization and the world is taking notice. Meanwhile, the electricity sector is moving from electricity distribution to generation. In May 2013, it was reported that the ÖİB was planning to launch tenders for some 2 GW of state-owned generation capacity.

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