The concept of full liberalization in energy markets is often used in a theoretical sense. In practice, however, no major economy fully complies with this model. Nevertheless, some countries have developed structures in which market mechanisms are decisive, prices are largely formed by the supply-demand balance and public intervention remains more limited. In this framework, the United States and some European countries are frequently presented as examples of liberal energy markets. However, when these examples are examined closely, it becomes clear that the degree of liberalization varies from country to country and that the role of the state is not eliminated.
In Türkiye, the most accurate definition of the energy market is controlled liberalization or regulated competition. This model expresses a structure in which the relationship between the market and the state is managed in a dynamic and flexible way, reflecting the fundamental character of Türkiye’s energy policies.
Although the liberalization process of energy markets in Türkiye has created significant structural transformations, particularly in the electricity and natural gas sectors, criticisms from industry actors increasingly suggest that a fully competitive market has not yet been achieved.
The transformation of energy markets in the country began with the Electricity Market Law enacted in 2001 and has progressed within a liberalization program aligned with the European Union acquis. The main objective during this period was to unbundle the vertically integrated public structure, separate generation, transmission and distribution activities, and encourage private sector participation.
In the following years, extensive privatizations were carried out in generation and distribution, private sector investments increased significantly and market player diversity expanded.
Today, a large portion of electricity generation is carried out by the private sector, and distribution activities are entirely operated by private companies.
These developments indicate that Türkiye has made significant progress toward liberalization in its energy market. However, the main factor that makes it difficult to define this structure as a liberal market is the continued decisive role of the state. When pricing mechanisms, support policies and crisis-period interventions are examined, it is clearly seen that the market is not left entirely to its own dynamics.
In particular, subsidies applied in response to rising energy costs in recent years represent one of the most concrete examples of this intervention. The state’s direct financial support to the market in order to stabilize consumer prices and reduce inflationary pressure is inconsistent with classical liberal market principles.
The natural gas market, on the other hand, has a more limited level of liberalization compared to the electricity market. Although the number of private sector players in import and wholesale activities has increased, the main determinant of the market remains the Türkiye's state-owned petroleum company BOTAŞ. Long-term contracts, pipeline dependencies and supply security concerns make it difficult to establish a fully competitive structure in the natural gas market.
First of all, it should be clearly stated that private sector companies in Türkiye can import natural gas, but this capability is effectively limited to a narrow group of players. The main reason for this is the structure of long-term contracts and the portfolio size of the dominant public company in the market. Since long-term and high-volume pipeline gas contracts have historically been undertaken by the public sector, competition for private companies in this area becomes very difficult. This situation effectively keeps entry barriers high.
The liquified natural gas (LNG) segment is theoretically considered a more liberal part of the market.
In Türkiye, the legal framework allows private sector LNG imports, and companies can supply spot LNG cargoes and inject gas into the system. Global pricing is largely based on benchmark hubs such as Henry Hub and the Title Transfer Facility (TTF) Natural Gas Index. However, the key question is not whether companies can do this, but under what scale and operational conditions they can do so.
The most critical constraint on LNG trade in Türkiye is access to infrastructure. LNG imports require access to floating storage and regasification unit (FSRU) infrastructure or onshore terminals. Although such infrastructure exists, continuous and equal access for all market participants is not always possible due to capacity allocation mechanisms, operational congestion, and limited market depth.
In this context, although private sector companies can bring spot LNG cargoes to Türkiye and sell them into the system, their ability to act like a classical international trader by redirecting gas to different markets is significantly limited under the current structure. This makes spot LNG trading legally liberal but practically constrained.
Türkiye’s high import dependency further reinforces this structure. The prioritization of imported gas to meet domestic demand creates a policy framework that limits companies from becoming fully free international trading actors.
Nevertheless, Türkiye’s ambition to become an energy trade hub is not merely rhetorical. In particular, the organized wholesale natural gas market and trading platforms developed under the Energy Markets Operation Company (EPİAŞ, Energy Exchange Istanbul) represent an important starting point for the evolution of price formation toward a more transparent and market-based structure. Although the trading volume and depth of these platforms are not yet comparable to European benchmark gas hubs, the gradual development of institutional infrastructure keeps Türkiye’s long-term market transformation potential alive.
At this point, statements made by BOTAŞ General Manager Abdulvahit Fidan at the Energy Markets Regulation and Competition Summit in Antalya provide a remarkable framework regarding the direction of the market. His emphasis on storage capacity and LNG infrastructure points to a strategic perspective aimed at increasing Türkiye’s physical flexibility.
In this context, the target of increasing natural gas storage capacity to 20 billion cubic meters by 2028 should be evaluated not only in terms of supply security but also as a critical threshold for spot market dynamics. Reaching this level of storage capacity would allow for more effective management of seasonal demand fluctuations and enable gas to be stored during low-price periods and supplied to the market during high-price periods. This theoretically strengthens intertemporal arbitrage capability, which is one of the fundamental tools enabling trader behavior.
Similarly, the target of increasing FSRU regasification capacity to over 200 million cubic meters stands out as another important factor expanding Türkiye’s maneuvering space in the spot LNG market. With higher regasification capacity, more spot cargoes can be integrated into the system during global LNG surplus periods, thereby increasing supply diversification and supporting price competition.
However, the critical point here is whether physical capacity expansion will progress in parallel with commercial liberalization. Indeed, the goal of rising to the top tier globally outlined in Fidan’s statements will largely depend on how well infrastructure investments and market liberalization can be synchronized. Otherwise, strong physical infrastructure combined with limited commercial freedom could position Türkiye more as an advanced transit and balancing system rather than a true trading hub. Therefore, ensuring that increases in storage and LNG capacity are supported by deeper spot markets, transparent access rules and robust market mechanisms will be decisive for Türkiye’s ambition to become a genuine gas trading hub.
