An interview with Mr. Alparslan Bayraktar, Chairman of the Energy Regulators Regional Association (ERRA) and Board Member of the Energy Market Regulatory Authority (EMRA) of the Republic of Turkey for the August/September issue of the Bulgarian UTILITIES magazine
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Mr. Bayraktar, you have been recently elected as Chairman of ERRA. What are your priorities for your term in office?

There are 12 regional associations similar to ERRA. The most important factor which distinguishes ERRA from the others is that it brings together countries which possess different characteristics and regulatory backgrounds. For instance, countries which have the problem of dependency on foreign energy sources, such as Turkey, are members of ERRA together with countries who are exporters of energy. At the same time, together with countries which are completely liberal and obliged to adhere to the EU acquis – as they are members of the European Union (EU), there are members who perform old-fashioned regulation and do not have completely liberal markets yet. In other words, ERRA is an association which possesses more variety. I believe that this is not only a challenge but also an advantage because while we are following a route in line with our own market goals, another country can easily benefit from our experiences on this route.

In this regard, ERRA creates a significant added value for its members and my first priority is increasing this value. Therefore my first priority is increasing our members involvement in our processes and activities so that ERRA can offer more to them. We arrange Investment and Regulation Conference, which is our annual flagship event, and numerous training courses covering topics from electricity and gas regulation to tariff setting. Hence, ERRA has a lot to offer not only to its members but also other stakeholders in the energy industry. Historically, ERRA has been focusing on energy but recently water regulation has been added to our agenda as some of the member countries are already undertaking regulations related to water. In other words, ERRA is becoming more like an “Economic Regulators Regional Association”. Actually, ERRA has never limited itself to “energy only” issues and hence interpreted energy issues from a broader perspective. Therefore we have performed meetings, trainings and workshops about renewable energy, climate change, water regulation etc. and have built strong cooperation. In this regard, we plan to increase our international cooperation by new initiatives with IRENA, World Bank and other global organizations. Similarly, I foresee a more close cooperation with EU in terms of aligning our members’ regulatory approach to EU’s market oriented and climate change sensitive mechanisms. Such goals require more efficient regulatory capacity building. At this point, we plan to develop our renowned training programs further and form a body like ERRA Regulation School that will serve for the needs of policy makers and regulators but also industry better.


What are the main regulatory challenges in the ERRA member states?

As I mentioned, ERRA has a very diverse country background in terms of liberal markets and we need to develop our members’ regulatory capacities further in order to address contemporary and future challenge of our markets. For instance, renewable energy penetration has been steadily increasing and this development has becoming more and more challenging in terms of financial burden on consumers and difficulties in system management. Also, most of our members are developing countries, including the ones in Africa, having huge investment requirements for network development and new capacity. In other words, “attracting investment” is always a leading agenda item for ERRA member states. We believe that implementation market based rules and operating liberal markets can help solve our members’ challenges significantly but then another challenge arises: increasing costs and public acceptance due to switching to cost-reflective regimes.

Naturally, at this point independence of the regulators is also challenge. Still we have some members where the regulator is not independent from the government. Therefore, recently we decided to focus on this major issue and run a comprehensive survey to evaluate regulatory independence to see the big picture. Required steps will follow once we have the results.


The growing renewable energy sector is a regulatory challenge in many ERRA member states. What are the best regulatory practices, shared among your organization’s members?

As we all know, utilization of renewable energy is a good opportunity to address increasing energy demand while addressing environmental concerns. Therefore, many countries have provided support schemes (feed-in-tariffs, renewable portfolio standards, purchase obligations, etc.) and acted very generously in terms of tariffs. Then, we observed that increasing costs of support mechanisms resulted in financial burdens on consumers so that some countries decreased their level of support while some others exempted priority segments of industry from renewable support payments.

In this regard, I think Turkey’s balanced approach can be regarded as a very good practice. Turkey provided feed-in-tariffs in a moderate scale (e.g. 7.3 US cents/kWh for hydro and wind and 13.3 US cents/kWh for solar) enough to maintain a secure worst case cash flow together with additional support in case of using domestically manufactured equipment. In other words, we tried to encourage renewable energy producers to stay in the “market mechanism”. As a result, renewable capacity development was very satisfactory and we could avoid big financial support costs on our consumers, which significantly helped in maintaining the public support for renewable projects.


Sometimes regulatory authorities are criticized for the level of independence in their decision-making. What are the main prerequisites for ensuring regulatory independence in general?

There are very important cultural values/principles for regulatory agencies. The list can go on but we can name some of them as communication, transparency, consultation, consistency, predictability, flexibility, independence, effectiveness & efficiency and accountability. These can be regarded as our “musts”. However, I think it is sufficient if we can have 2 of these principles as others automatically fulfilled. First one is definitely independence. Without independence in decision making, budget and appointment, a regulator cannot supervise the market as desired. However if a regulator is “only” independent, this results in a clash between other stakeholders like policy makers, market players or consumers and the regulators.

Therefore, the regulators must also be accountable. Having set the policy, the regulators should be left independent in decision making but their performance should be monitored and they should be accountable upwards to policy makers and downwards to consumers. I believe that these 2 principles are mandatory and provide a balanced independence & responsibility scheme ensuring proper implementation of policies and market rules. In this regard, I think ERRA, with its various platforms and initiatives, can play an important role in filling the gap between regulators and other stakeholders towards having a good communication that is the first and probably the most important requirement for understanding each other and reaching a joint approach to our common problems.


Is there enough cooperation between regulatory authorities from the ERRA member states? What could be done to improve the level of cooperation even further?

Besides annual Investment and Regulation Conference and regular training programs ERRA has 3 important platforms that bring its members together towards discussing common problems and develop regulatory capacity. These platforms are Licensing and Competition Committee, Tariff Committee and Consumer Committee. All of our members have representatives in these committees that meet regularly throughout the year. Hence, we not only keep in contact with our members but also try to address local and regional challenges that are important for our association. As I mentioned, my priorities focus on increasing involvement of members to our events and hence increase the added value of ERRA. Therefore we are seeking new and effective ways of close cooperation between our members.

As a result of these efforts now we are about to start an Expert Exchange program that is expected to increase the interaction between our members. Indeed, beginning from next September, Energy Market Regulatory Authority of Turkey (EMRA) will host interns from Georgian and Ukrainian regulators to study on renewable energy regulation, market mechanisms, cross-border trade, etc. As ERRA, we strongly support such bilateral activities and plan to also provide funding support from our development fund, which is allocated to serve for activities increasing the added value of our association.


Istanbul will be hosting the 6th World Forum on Energy Regulation in May 2015. What are your expectations from this event?

Istanbul is a city that links not only continents but also energy resources and markets. Therefore, we as EMRA proposed to host the event in Istanbul. As expected, the forum will address regulatory challenges from a global perspective in a global context. Together with typical topics like energy security, renewable energy and consumer empowerment, we will also discuss new interesting topics like Smart Regulation that can ensure sustainable market development and encourage innovations, especially in the market services.

Besides, in our proposal we envisaged that the event will address not only the challenges of developed countries and markets but also developing or emerging ones. In other words, we would like to have more participation and diversity more than ever in terms of geographical and economical representation. Indeed, in the final program we ensured that there will be at least one speaker from a developing country and one woman speaker in each session. On the other hand, as Turkey will be chairing G20 in 2015, we also included a special ministerial panel in the forum so that important energy challenges can be discussed at a much higher level and WFER can also form a bridge between policy makers and regulators to discuss. In a nutshell, WFER6 will form a bridge between different markets, concerns and regulatory levels as well as policy priorities.


The Republic of Turkey is one of the growing energy markets in the region. Is this a challenge for the Energy Market Regulatory Authority and how does this affect its activities?

Despite the fact that global economy is still trying to recover from the last crisis, things were the other way around since impact on Turkish economy was quite limited. As a result, we have been experiencing a growing demand and this is very challenging due to the following factors. First of all, we have a liberal energy market and this means market regulations and environment should always be attractive and investor friendly to have required new investment. On the other hand, we are pretty much dependent on energy imports to meet the domestic demand. Indeed, the foreign dependency is over 70% and it is very challenging even not to make this figure worse considering steadily increasing demand.

Considering the achievements of the last 12 years focusing on market liberalization we are very much committed to the liberal market structure. In this regard, we are very sensitive in determining the needs of the market appropriately and taking the interests and concerns of different stakeholders like government, investors and consumers into account while making decisions. Although, we are trying to do our best I should note that private business based energy market operation (especially in electricity and gas sectors) is not in its maturity and players are not deeply experienced. This is a challenging fact but as EMRA we have been performing a gradual transition to liberal market structure. Considering that our installed power capacity was doubled and natural gas became available in almost all of the cities in the last 12 years, I can fairly say that the liberalization process was quite successful. Another big challenge was regulating the state owned enterprises. However, our commitment to the liberal market structure and the timely privatization of electricity distribution companies followed by generation asset privatizations were significantly helpful. Unfortunately, I cannot conclude the same for the natural gas market because we could not unbundle the market activities and decrease the dominance of the state owned natural gas company as desired and this company controls over 70% of the import & supply together with system and market operation.

Having said that, let me stress that after big achievements like opening the markets, having a level playing field and increasing competition in the liberalization era I believe that new era should target consumers and their expectations. Let me put it this way: as a matter of fact, increasing energy demand is the main motivation for operating the markets. Obviously, the increase in demand has to be met but it should be met in a sustainable way. Otherwise, if markets target only meeting the demand, current situation does not improve and we end up with depleting sources followed by higher prices and more seriously significant changes in climate. Considering that market always gives what the consumers want (i.e. it fits to the demand), it is fair to reach the following conclusion: Consumers’ choices are the main determinant for the future of market players. Therefore consumers should be appropriately empowered (i.e. informed, equipped and engaged).
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Commissioner Alparslan Bayraktar is serving on Energy Market Regulation Authority of Turkey since he was nominated by the Cabinet of Turkey and sworn in on February 2, 2010. Mr. Bayraktar worked as a private consultant in Turkey on wide range of areas that include energy from 2007 through 2010. He was the Vice President of Goldenline Inc., New York from 2002-2007. Prior to this he was the Business Developer in the LPG market in Turkey and Project Engineer in the Construction Industry.

Mr. Bayraktar’s ties to ERRA date back to his election for the Presidium (the executive and representative body) in April 2012. He was elected as the Vice Chairman at the General Assembly held in 2013, and used to serve as the Acting Chairman since August 2013.

Mr. Bayraktar’s other international memberships include the Editorial Board of International Confederation of Energy Regulators (ICER) publication “The ICER Chronicle” and International Program Committee & Steering Committee of 6th World Forum on Energy Regulation (6WFER).

Mr. Bayraktar holds bachelor’s degree (BSc) in Mechanical Engineering from Istanbul Technical University and master’s degree (LL.M.) in Law and Economics from Bilkent University. He also studied Strategic Marketing Management at New York University.