Energy Community representatives to monitor Turkey's energy markets

Author: Aura Sabadus

2015/02/19

Energy Community representatives will start monitoring the liberalisation process in Turkey as concerns about its natural gas market are growing, ICIS has learnt.

Januz Kopac, director of the Energy Community Secretariat, said the organisation which aims to extend the EU energy legislation – acquis – to non-EU member states would send representatives to Turkey to collect pieces of legislation with regards to the opening of the market, its transparency and competition conditions.

Kopac said the Energy Community, an international organisation established between the EU and a number of third countries, typically monitored states that were already members. He pointed out that countries with observer status, such as Turkey, were not subject to compulsory scrutiny. The last time a systematic monitoring of its compliance with the EU legal framework was carried out was in 2008.

He argued that Turkey’s ambitions to become an energy hub could only be achieved by signing up to the legal principles that guided other hubs in Europe and which are being spearheaded by the Energy Community.

These include the unbundling of incumbents, the privatisation of state-owned assets, the establishment of competitive market conditions and transparency.

Turkey has made headway in the electricity sector where the monopoly of the incumbent EUAS has been reduced from 74.3% in 2001 to 37.1% in 2013 and all its distribution zones have been privatised.

However, its gas market lags behind as the state company BOTAS remains in charge of 75% of its imports, and a cross-subsidies system stifles Turkey’s budding private sector. Proposed amendments to the existing gas law have been put back because the country prepares for parliamentary elections in June and any changes likely to affect the electorate are being shunned.

There are also fears that the current stalemate between Russia’s Gazprom, the country’s largest gas supplier, and Turkish shippers over this year’s import price may push private companies into bankruptcy as their purchase price would exceed the subsidised tariff they can sell at.

Kopac said Turkey’s membership of the Energy Community and the embedding of the EU acquis into Turkish law would help to bring competitive gas prices and guarantee security of supply.

“Liberalised gas markets brought lower gas prices wherever they were introduced,” he said. “The Energy Community is about consumers, it’s not about incumbents or governments.

“Turkey has been talking about becoming an energy hub. You cannot be a hub if you don’t have the legislation in place. You are only a transit country.”

He said membership of the Energy Community also guaranteed protection against security of supply risks. He quoted the example of Ukraine, which as a contracting party of the Energy Community benefited from a solidarity clause that helped it to secure a so-called winter package for uninterrupted gas supplies .

“Ukraine, as a party, could formally trigger the mechanism [...] after Russia’s disruption of supply.” he said. “They didn’t, but informally we could hear such suggestions. I believe that the EU, as a Party, knows this mechanism very well and I believe the trilateral negotiations between EU, Russian and Ukraine on the so called winter package for uninterrupted gas supply were a result of the EU’s fear about gas supply disruption, but also of an awareness of a possibility to have a formal obligation to react in case the [...] mechanism would be activated.”


Membership benefits

Kopac said Turkey supported the idea of integrating its markets with those of southeastern Europe, and expressed an interest in becoming a member.

However, he noted that although during negotiations many concerns expressed by Turkey had been solved, Ankara decided not to sign the treaty at the last moment. The main concerns related to the environment, competition and the external energy trade policy in the treaty, he said. This meant that Turkey eventually limited its involvement to observer status.

But Kopac argued that Turkey stood to gain important benefits if it were to reconsider its membership options.

He said Energy Community membership would allow Turkey to participate in European organisations such as ENTSOG and ENTSO-E, [the European Network of Transmission System Operators for Gas and Electricity] on equal terms with EU member states.

Turkey has already synchronised its electricity grid with that of the EU and conducts limited commercial cross-border electricity flows with Bulgaria and Greece. It has also expressed an interest in becoming an ENTSO-E member. For the time being the Turkish TSO TEIAS is only an observer.

According to new ENTSO-E Articles of Association, associated membership, or full membership require an agreement with the EU on the implementation of relevant energy legislation.

Kopac added that for an associated membership Turkey could sign a bilateral agreement with the EU that would demonstrate its commitment to aligning its policies with those of the Union’s internal market.

He noted that Energy Community membership would grant Turkey equal rights with those of other EU energy markets, helping it to secure voting powers and entitling it to propose new acquis. Furthermore, Energy Community membership would be an important lever in Turkey’s accession talks with Brussels, he said.

Finally, Kopac noted that Turkey’s integration in the EU’s energy market could happen via three routes: through Energy Community membership, by opening and embedding the EU’s Energy Chapter into its laws, or through a new path, the Energy Union.

The opening of the EU Energy Chapter which requires the harmonisation with EU energy policies, has proved problematic in the past because Cyprus had blocked it.

The Energy Union, a concept spearheaded by the new energy commissioner Miguel Arias Canete, aims to raise funds for a further market integration of EU member states and establish new energy alliances with strategic states such as Turkey. Aura Sabadus