Turkey: Geothermal Energy Regulations and Incentives Under Turkish Law

Last Updated: 1 September 2010

Introduction

Although the most suitable energy resources should be not only affordable and safe, but also environment-friendly and sustainable, use of unsustainable energy resources are widespread. Since unsustainable energy resources have several disadvantages such as being hazardous to environment and limited usage, renewable energy resources have become very important worldwide in recent decades. Consequently, most of the states have considered regulating the renewable energy field in such a way that will encourage investors for investing in this area and provide financial assistance. Among renewable energy resources, owing to the growing technological developments, geothermal energy has definitely got the potential to make the most significant contribution to such emerging necessity.

Geothermal energy can be briefly defined as literally the heat contained within the earth that generates geological phenomena on a planetary scale. Geothermal resources have three main components, namely (i) heat source, (ii) fluid carrying heat from the earth's crust to the surface, (iii) sufficient rock permeability to circulate thermal water.

What makes geothermal energy more preferable to other types including solar or wind energy is that it does not depend on or is affected by weather conditions or seasonal factors. However, it should be noted that the effectiveness and advantages of geothermal energy may be mitigated, whereby the suitable environment for geothermal energy is situated in a very deep distance from the earth' surface. Therefore, its competitiveness in the market is dependant on its cost level to the extent that it can be generated cheaper than the other resources such as crude oil or natural gas which their prices have raised dramatically.

The first use of geothermal energy resource for heating purpose in Turkey dates back to the central heating system of Gönen Park Otel in 1964., Although the utilization of geothermal energy has increased dramatically in Turkey since then, taking into account of Turkey's potential, the current usage is still far behind from the expected level.

Nevertheless, the government in Turkey has recently regulated the renewable energy including geothermal energy and has provided several incentives to encourage the market.

Legal Framework for Geothermal Energy in Turkey:

In Turkey, geothermal energy is separately regulated by the Act numbered 5686 (Jun 3rd, 2007). Law on Geothermal and Mineral Resources. ('Geothermal Energy Law') along with the Geothermal and Mineral Resources Law Implementation Regulation numbered 26727 ('Regulation').

The Geothermal Energy Law in Turkey regulates geothermal resources along with natural mineral water resources and geothermal-related gases in terms of the procedures of ownership rights, licences and their assignment or transfer.

Ownership:

According to the Article 4 of Geothermal Energy Law, the ownership of above-mentioned resources is deemed to belong to the government rather than to the property-owner where the resources are located. Any activity relating to the resources will be subject to obtaining the necessary licenses set out into the same law. The real persons having Turkish citizenship or legal entities, duly incorporated under the Turkish Law, are entitled to apply for the related licences.

There are two types of licences; namely prospecting licence and operating licence. The former enables its holder to carry out prospecting activities in a specific area based on the project; the latter enables its holder to produce the geothermal related-water, gas and steam and utilize them.

Prospecting Licence:

According to the Article 5 of Geothermal Energy Law and Article 6 and 7 of the Regulation, the applicant may apply to the Provincial Special Administration ('Administration') for the licence with the prospecting project, stating plate name and its coordinates drawn to a scale of 1/25000, provided however that it does not exceed 5000 acres. In case of more than one application for the same location, the first one will normally have priority over others. However, the Administration may give priority to another project with a more suitable proposal, in the event that there is more than one application at the same time.

The duration of prospecting licence is three (3) years, commencing as of the date of the registration of the licence and may be extended up to one (1) year with the consent of the Administration on the condition that the revised project is satisfactory to the Administration. As long as the activities are not hazardous to the environment; the production may be operated with a trial purpose during the licence term.

Operating Licence:

Under the Article 6 of Geothermal Energy Law and Article 9 of the Regulation, the prospecting licence holder may apply with a project to the Administration for an operating licence until the expiration date of prospecting licence. The holder must specify a deadline to initiate the operation. The failure in starting the operation before the specified term will give rise to the cancellation of the licences and the guarantee deposited will be recorded as revenue by the state. The licence holder cannot make any amendment with regard to the project without the consent of the Administration. The licence duration is thirty (30) years, commencing as of the date of the registration of the licence and may be extended up to ten (10) year periods. After receiving the operating licence, the holder should obtain other required permits, including the Environment Assessment Report within three (3) months; otherwise the licence may be cancelled.

As per the Article 10 of the Regulation, the operation must be conducted under the supervision of an engineer from a related field as a technical responsible person. In the absence of such engineer during the operation, the amount deposited as a guarantee will be deemed to be recorded as revenue by the state and the operation must be halted in turn. Moreover, the technical responsible person must prepare operating and prospecting report to be annually submitted to the Administration until the end of March of the following year. In case of failure in submitting the report in due time, the amount deposited as a guarantee will be again deemed to be recorded as revenue by the state, yet the extension for the submission will be granted, provided that the doubled amount as a guarantee must be deposited. Otherwise, the operating licence may be cancelled. Furthermore, all activities regarding to licences are also annually monitored by the Administration. If the licence holder does not meet the criteria under the related law, the licence may be halted or even cancelled.

Assignment, Transfer upon Inheritance, Nationalisation and Easement

It is included in the Article 14 of Regulation that both the operating and prospecting licences can be assigned. In order to track the record relating to the assignment, mortgage, lien and any encumbrance, the Administration is required to have a registry mechanism in place under the Article 10-b of Geothermal Energy Law.

According to the Article 15 of the Regulation, obligations and rights as a whole are transferred to inheritors, and cannot be divided into parts without their consents. In the case of a dispute among inheritors, the issue may be resolved by the court, whereby the licence may be sold via tender.

If the prospecting activity requires the licence holder to access to a private property, the required permission may be obtained from the owner. If the owner withholds his consent, the holder may apply to the Administration for easement or nationalisation, whichever is necessary and such application must be determined within three months.

Incentives:

Article 26 of the Regulation explains the requirements for the entitlement to some specific incentives. If a company distributes or produces geothermal resources, it may be regarded as an industrial enterprise or a waste treatment enterprise and subsequently it may be granted a geothermal resource distribution or production certificate. The mentioned companies with these certificates are able to apply for any incentives including reduced electricity tariffs and rights which are peculiar to industrial or waste treatment enterprises. However, the validity of the certificate is dependant upon the existence of the operating licence, meaning that the cancellation of the latter results in invalidity of the former.

There are also other incentives regulated by the statutes other than Geothermal Energy Law. According to the Article 7 of the Law numbered 5346 regarding the Usage of Renewable Energy Resources for the Purpose of Electricity, any legal entity or real person, which uses geothermal resources in order to meet its specific amount of electricity needs, may be exempted from the service fee of particular plan and projects prepared by the Administration. Furthermore, as per the Article 8, the law indicates that fees of easement, lease and permission to use will be deducted in proportion of 85% within the first ten-year period for any property or land belonging to the use of government , provided however that the transactions which are the subject matter of the deduction must take place before 31st March 2012.

It must be also noted that according to the Article 7 of the law numbered 5346, if there is sufficient geothermal energy resource within the territory of a governorship and municipal borough, the priority in heating of domiciles will be given to the use of geothermal energy..

In conclusion, the usage of geothermal energy will probably become more common in Turkey for different purposes. . It can be used with the aim of generating energy which requires high level energy (more than 120 C in 2-3 km deep) or heating which requires low level temperature (less than 100 C in 4-5 km deep). Areas with volcanic activities are the most suitable places to obtain high temperature with low cost and Turkey is regarded as one of them, in addition to Iceland, Italy and Greece in Europe. However, it should be noted that in order to reach higher temperature, there is a necessity of deep drilling thereby being more expensive and reducing its competitiveness. As a result, considerable investment is needed to reduce the cost of production and to increase the competitiveness, whereby the government can encourage investors with some specific incentives.

www.gsimeridian.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions