Deregulation of electricity market in Turkey and the relationship between electricity consumption, foreign direct investment and economic growth

Since the 1980s with the transformation in the electricity market in the world, the electricity market which has a vertically integrated structure, has been subdivided sub-sectors. The sectors that were open to competition with this decomposition were liberalized and natural monopoly sectors which were not open to competition were regulated and restructured. In this process, the neoliberal view that dominated the period in this process was influential in the regulation of electricity markets. Since the 1990s, the liberalization and restructuring process in the electricity market, especially in Chile, England and Norway, has started to be implemented in many countries. The radical changes in the electricity market deregulation and privatization practices in Turkey started in 2001. These applications purpose to establish a competitive electricity market. The main purpose of the study is to determine whether the deregulation and privatization policies has a possible effect in the process of restructuring electricity market. In this context, electricity consumption in econometric model is dependent variable; income, general level prices, foreign direct investments, trading openness and the share of public sector in electricity production were included as independent variables. As a result of the unit root tests applied to determine the stable properties of these variables, it was revealed that the variables were integrated in different degrees. For this reason, ARDL bounds test approach was used to investigate the long-term relationship between the variables. According to the results of the boundary test, except for the share of public sector in electricity generation, all other variables affect the electricity consumption in the long term. Thus, electrical energy policies in Turkey is to promote economic growth and foreign direct investment. Moreover, it is seen that the increase or decrease of the public's share in electricity production does not affect the electricity consumption per capita. Keywords: Deregulation, Electricity Consumption, Foreign Direct Investment Economic Growth, Cointegration, ARDL Bounds Test