Evaluation of the reform in the Turkish electricity sector: a CGE analysis

Turkey’s electricity market has undergone extensive reform since 2001 through market liberalization, unbundling, privatization, the establishment of organized power markets, retail market opening, and the establishment of an independent energy regulatory authority. We use a computable general equilibrium model to test the impact of power sector reform on the economy. We construct Turkey’s social accounting matrix for 2010 by disaggregating it into energy accounts. Major findings suggest that the reform has, for a major part, been beneficial to the economy. We find that GDP increases by 0.35% from the baseline when monopolistic rent is reduced simultaneously at all state-run power companies, suggesting that the economy would be better off with these firms behaving as competitive agents in the market, rather than using their dominant position to intervene in the market. One alternative is wider participation of state-run utilities in the day-ahead market, which leads to a 0.25% increase in GDP. Our findings also suggest that the introduction of the day-ahead market and privatization of state-run utilities are positively related to economic growth.