The time-lag effect of natural gas prices on electricity prices in turkiye: an analysis of the post-pandemic market

Abstract

This study investigates the relationship between natural gas and electricity prices in Turkiye, one of the countries affected by sudden increases in natural gas prices after the pandemic and regional conflicts. Turkiye determines electricity and natural gas reference prices through transparent markets operated by Energy Exchange (EXIST). Using data from EXIST's transparency platform and regression methods, the study aims to determine when the rapid increases in natural gas prices affect electricity prices. Previous research has shown that increased natural gas prices do not immediately affect electricity prices; instead, affect them after a certain period, depending on the country's natural gas share in the supply. The study will use a similar methodology to evaluate the time-lag effect of natural gas prices on electricity prices in the post-pandemic Turkish energy market. The accuracy of the findings is tested by Mean Absolute Error, Mean Square Error, Mean Absolute Percent Error, and Mean Percent Error metrics. The findings of this study show that a sixty-day delay is observed in the relationship between natural gas and electricity prices in Turkiye, with an increase in forecasting capability of up to 8.88% error.