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The outlook of Turkey Tedas tariff in 2022

As of 1^st April 2022, BOTAS has hiked natural gas prices for electricity production by 44% vs the previous month which will have an inevitable impact on Turkey Tedas tariff. The increase was attributed to a global rise in energy prices and was recently boosted due to Russia’s invasion of Ukraine.

Turkey imports nearly all of its energy, making it sensitive to price fluctuations. Since April last year, the gas price has increased 638% making the highest YoY price swing in history.  Please note that although there was one of the highest gas price increases in Turkey this month, the price is still at a significant discount (40-50%) vs major European gas hubs. Therefore, it would not be a surprise if Botas gas tariff for electricity generators will increase again this year.

This gas price increase has an imminent impact on the electricity generation cost in the market and leaves many business consumers questioning the current and future ways of procuring electricity.

The main debate, however, is going to be around whether to supply electricity under the state-regulated Tedas tariff or procure from an electricity company in the free market. This is not an easy question to answer as a decision on Tedas price is often politically driven, but we will look into some data points in order to draw some preliminary conclusions.

As for Tedas tariff for low voltage business consumers, the government has implemented a new tariff structure since Marh’22. There are currently 2 tariffs for commercial users with a consumption of 30 kWh/day and below and consumption above 30 KWh/day.

The commodity price discount of <30 kWh/day vs >30 KWh/day is 29%. This is a significant reduction aim to support SME businesses in Turkey. It’s unclear how long the government can keep these low prices for SME in 2022, but there could be a big energy cost-saving opportunity for customers with <30 kWh/day consumption by switching to this TEDAS tariff because it’s cheaper than buying power from the spot market today (see the chart below). Apr’22 Tedas LV tariff for SME is 1.332 TL/MWh, excluding electricity distribution/transmission charges, levies, and taxes.

As for industrial and big enterprises, TEDAS tariff is not so attractive vs electricity procurement from the free market. For them, Tedas commodity price ranges from 1800 TL to 2050 TL/MWh. This is about a 20% premium vs today’s spot market electricity procurement. The main risk remains global commodity price trends and the war in Ukraine. If the situation with the supply in the global energy markets continues to deteriorate, this will negatively impact spot market prices and make Tedas, potentially, the only viable option for industrial and business consumers in Turkey in 2022-23.

If you wish to learn more about Turkey’s energy macroeconomics and my prior predictions as to BOTAS gas price in 2022, please check my prior article here. Check out my weekly energy market reports here to stay tuned to the energy market’s latest developments, news and trends.

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