In the early 2000s, the Republic of Turkey has initiated an ambitious reform program in her electricity market, which requires privatization, liberalization as well as a radical restructuring. The most controversial reason behind, or justification for, recent reforms has been the rapid electricity demand growth; that is to say, the whole reform process has been a part of the endeavors to avoid so-called "energy crisis". Using cointegration analysis and ARIMA modeling, the present article focuses on this issue by both providing an electricity demand estimation and forecast, and comparing the results with official projections. The study concludes, first, that consumers' respond to price and income changes is quite limited and therefore there is a need for * Corresponding author. Tel.: +90-312-2872560 E-mail: erkan@erdogdu.net URL: http://erkan.erdogdu.net/english b The author is working as an Energy Expert in Energy Market Regulatory Authority of the Republic of Turkey. The present article is a part of the dissertation submitted by the author in fulfillment of the requirements for the award of the degree "MSc in Energy Economics and Policy". In October 2005, the author is awarded an "MSc with distinction" by the Department of Economics, University of Surrey (UK). The views, findings and conclusions expressed in this article are entirely those of the author and do not represent in any way the views of any institution he is affiliated with. 2 economic regulation in Turkish electricity market; and second, that the current official electricity demand projections highly overestimate the electricity demand, which may endanger the development of both a coherent energy policy in general and a healthy electricity market in particular.
On average, energy demand of Turkey is mounting by 8% annually, one of the highest rates in the world. Among primary energy sources, natural gas is the fastest growing one in Turkey. Gas consumption started at 0.5 bcm 2 natural gas demand in Turkey. The future growth in this demand is also forecasted using an ARIMA modelling and the results are compared with official projections. The paper reveals that natural gas demand elasticities are quite low, meaning that consumers do not respond possible abusive price increases by decreasing their demand or substituting natural gas with other energy sources. Since consumers are prone to monopoly abuse by incumbent, there is a need for market regulation in Turkish natural gas market. Based on forecasts obtained, it is clear that the current official projections do not over/under-estimate natural gas demand although past official projections highly overestimated it.
The last two decades have witnessed widespread power market reforms in both developed and developing countries that have cost billions of dollars. Among the key aims (and assumptions) of these reforms, there has always been realization of improvements in power sector 2 increases efficiency in power sector. Besides, we detect a positive relationship between reform process and the percentage share of network (transmission and distribution) losses in total electricity supplied; meaning that as countries take more reform steps the network losses as a fraction of power generated tend to increase. Moreover, the study puts forward that income level and other country specific features are more important determinants of industry efficiency than the reform process. Overall, contrary to expectations of substantial increases in sector efficiency, the paper concludes that introducing a decentralized market model with competition in the electricity sector has a limited increasing effect on power industry performance.
Keywords: Models with panel data (C33); model construction and estimation (C51); electric utilities (L94); power market reform; electricity industry efficiency
One of the main expectations from power market reform has been a reduction in price-cost margins and cross-subsidy levels between industrial and residential consumers. This paper 2 findings imply that reform steps have different impacts in different countries, which supports the idea that reform prescription for a specific country cannot easily be transferred to another one. So, transferring the formal and economic structure of a successful power market in a developed country to developing countries is not a sufficient condition for good economic performance of the electricity industries in developing countries. Furthermore, the study suggests that power consumption, income level and country specific features constitute other important determinants of electricity price-cost margins and cross-subsidy levels.
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