Why Are Electricity Prices Constantly Rising in Türkiye?

An Economic and Structural Assessment within the 2025 Energy Outlook (Article – April 2025) The consecutive increases in electricity prices in Türkiye are not only straining household budgets but also significantly impacting industrial production and economic stability. These hikes are driven by a range of structural factors, from supply-demand imbalances and foreign currency-based cost increases to import dependency in energy production and taxation policies. As of 2025, the current state of the energy sector offers important insights into the underlying causes of these price hikes. 1. High-Cost Energy Sources: Dependency on Natural Gas Approximately 28% of Türkiye’s total electricity generation comes from combined cycle gas turbine (CCGT) plants. While these plants are known for their efficiency, their reliance on imported natural gas makes them a major contributor to rising energy costs. Since Türkiye primarily imports gas from countries like Russia and Azerbaijan in foreign currency, fluctuations in exchange rates directly inflate electricity production costs. 2. The Declining Role of Coal and Import-Based Generation As of 2025, coal’s share in Türkiye’s electricity generation has dropped to around 20%. Domestic lignite plants are under pressure due to rehabilitation needs and environmental regulations, while imported coal plants are becoming economically unsustainable due to rising exchange rates and looming carbon tax obligations. These factors are driving up production costs and paving the way for further price increases. 3. Insufficient Renewable Energy Investment Although there has been noticeable growth in renewable sources such as wind and solar (installed capacity: ~34 GW), these investments have not yet reached a level that can support baseload demand. Moreover, financial and bureaucratic challenges in YEKA and unlicensed projects continue to hinder the rapid expansion of renewable capacity, forcing reliance on more expensive alternatives to ensure supply security. 4. Exchange Rate Pressure and Energy Trade Policies While a large portion of electricity production costs is denominated in foreign currency, electricity is sold to the domestic market in Turkish Lira. This mismatch drives energy producers to frequently apply to the Energy Market Regulatory Authority (EPDK) for price adjustments, which are then directly reflected in consumer bills. 5. Rising Demand and Peak Hour Consumption With economic recovery, both industrial and residential electricity demand is visibly rising. In particular, summer air conditioning use pushes consumption to peak levels. Meeting this demand often requires activating costly natural gas plants, which further fuels electricity price hikes. 6. Carbon Tax and the EU Green Deal Risk Coal-fired power plants are set to face substantial costs under the European Union’s Carbon Border Adjustment Mechanism (CBAM), which will come into effect in 2026. Türkiye’s lack of preparation for this transition poses an additional internal cost pressure that could trigger further electricity price increases. 7. Reduction of State Subsidies In 2023 and 2024, the government significantly scaled back energy subsidies, shifting the burden directly onto consumers. This move marked a transition to a pricing model more reflective of actual production costs. Not a Temporary Crisis, but a Structural Issue The ongoing electricity price hikes in Türkiye are not merely the result of temporary crises but reflect a deeper, structural transformation. Türkiye’s dependence on imported energy, carbon regulation pressures, currency volatility, and insufficient renewable investment are all contributing to a persistent upward trend in electricity costs. A sustainable solution lies in a long-term energy policy based on domestic, environmentally friendly, and resilient resources. References: • EPDK 2025 Energy Balance Report • Ministry of Energy and Natural Resources 2024 Strategy Document • TMMOB 2024 Energy Outlook • TÜREB 2025 Projections Ankara 4 APRIL 2025