Foreign direct investments (FDIs) in Turkish power sector: A discussion on investments, opportunities and risks

Power sector is important for managing the transition towards sustainable and cleaner energy systems, and foreign investments can contribute to overcome the problems encountered in the process. Despite the vast literature on foreign direct investments (FDI) in other sectors, studies on the power sector have been limited to either developed economies or major developing economies such as China or India. Therefore, this study aims to discuss Turkish case by using panel data analysis for 2002-2012 period. Results have shown that the major drivers of FDI inflows in Turkish power sector were privatization and low real effective exchange rate during the period. In addition, Turkey has the potential and opportunities to attract more investments with the recent reforms and increasing incentives for renewable energy technologies; however, business environment and the quality of institutions may create obstacles for realizing its potential. Moreover, fiscal incentives and macroeconomic stability are important to sustain investments, and economic and institutional reforms, notably the EU integration process, are important for FDI inflows.