A Real Options Evaluation Model for the Diffusion Prospects of New Renewable Power Generation Technologies

This study presents an investment planning model that integrates learning curve information on renewable power generation technologies into a dynamic programming formulation featuring real options analysis. The model recursively evaluates a set of investment alternatives on a year-by-year basis, thereby taking into account that the flexibility to delay an irreversible investment expenditure can profoundly affect the diffusion prospects of renewable power generation technologies. Price volatility is introduced through stochastic processes for the average electricity price and for input fuel prices. Demand for peak-load capacity is assumed to be increasingly price-elastic, as the electricity market deregulation proceeds, and linearly dependent on the extent of market opening. The empirical analysis is based on data for the Turkish electricity supply industry. Apart from general implications for policymaking, it provides some interesting insights about the impact of uncertainty on the diffusion of various emerging renewable energy technologies.Dynamic programming, Investment planning, Renewable energy technology diffusion, Real options, Learning curve, Turkey

Substitution elasticities in an energy-augmented CES production function: An empirical analysis for Turkey

Abstract. This study estimates a production function for Turkey taking capital, labor and energy as input factors. The production function estimated is of the CES form with Hicks-neutral technology and constant returns to scale. A nonlinear least squares regression is employed on a dataset for the entire Turkish economy covering a time period of 27 years. The production function parameters provide insights into the elasticity of substitution of capital, labor and energy in Turkey. In particular, it is found that the elasticity of substitution between the capital-labor bundle and energy is, slightly higher than values found in other studies for various countries. This finding shows the relative ease of substitutability of capital-labor with energy for one another in Turkey and provides new insight on a critical parameter for future energy-economy modeling studies related to Turkey and other similar countries with no elasticity estimate. It is thought that the high substitutability for the case of Turkey may be related to the flexibility of its rapidly growing economy with investment needs that can easily be adapted to market conditions.Keywords. Substitution elasticities, CES, Energy economics.JEL. D22, E23, Q40

Impacts of Regulatory Transformation Processes to the Downstream Oil Market in Turkey

This paper is a review of the regulatory transformation process of the Turkish downstream oil industry with an emphasis of effect regulatory forces to the pace of financial interactions. The regulatory transformation process has been analysed in terms of its effects on large scale financial transactions, in the form of merges and acquisations. The paper reviews a period of 15 years, during which the Turkish Oil Market has gone through a fundamental regulatory restructuring process from a state governed industry to a regulated market. During this period, oil market law, LPG market law and secondary regulations implemented, an Independent Regulatory Authority established, fuel prices were left to the dynamics of market forces, structural reforms have been implemented and the Competition Authority provided guidance to increase the level of competition. This comprehensive restructuring and liberalisation process was essentially a multidimensional transformation process of the Turkish downstream oil industry. During the initial years of this transformation process, there were strong signs of motion towards a fully liberalised downstream market and the players have responded by several, medium to large scale financial transactions in the form of merges and acquisations. As the winds shift toward a regulated market rather than the full libearisation, the level and the period of these financial transactions have slowed down. However, the overall result of this transformation is strong and sustained growth, improved quality and safety implementations, increased investments and financial transactions. The market practically doubled in financial volume, an average of 6.25% growth in automotive fuels for a period of 15 years has been achieved. The last five-six years of this transformation process however, is marked with interventions from both the Regulatory Authority and the Competition Board, which was responded by the market in the form of  substantially reduced investments, lower levels of profits and therefore lower investments in addition to exit decisions of some major international of oil companies. Keywords: Downstream oil industry, Turkish oil market, investments and transactions, growth, regulatory effect, fuels market JEL Classifications: JE31, E61, K2, L11

A model for long-term global air quality prediction and development of efficient control strategies in Turkey

This paper presents an environmental model which differentiates fuel consumption by sectoral use and allows for the reduction of emissions by coupling different emission control technologies to energy conversion and end-use activities. The model can be coupled to any energy model for forecasting air pollutant emissions and developing efficient emission control strategies. An energy-economy module has been integrated into the model and an equilibrium solution for the three-component model is obtained by utility maximization. Effects of emission limits on energy activities and on macroeconomical variables are investigated by restricting total pollutant emissions to the standards of the European Community. Numerical results are presented in the form of long-term forecasts focusing on the pollutants SO2 and NOx. Emission control measures, implied from the model results, are discussed revealing an efficient emission control strategy. (C) 1997 Elsevier Science B.V