Turkey: Present And Future Of Renewable Energy Resources Support Mechanism In Turkey: "YEKDEM"

Turkish Energy Market Regulatory Authority ("EMRA") has announced on 1st October 2014 that the electricity manufacturing license holders producing electricity from renewable resources are required to submit their applications for Renewable Energy Resources Support Mechanism ("YEKDEM") for the year 2015 until 31th October 2014, in order to benefit from the facilities regulated by the related legislation.

What is YEKDEM and what are the benefits of investors in renewable energy production?

YEKDEM is a support mechanism for electricity manufacturers from renewable energy resources, which has been regulated in the Regulation on Documentation and Support of Electricity Manufacturing from Renewable Energy Resources ("Regulation") which has entered into force in 2013. Pursuant to the article (4) of the Regulation, the support mechanism consists of feed-in tariffs (valid until 2020) for electricity manufacturing license holders and unlicensed electricity manufacturers producing electricity from renewables and other opportunities for renewable energy. Within the frame of the support mechanism, the retail companies assigned by EMRA are required to purchase the produced electricity from the electricity manufacturers which are subject to this mechanism on the tariffs regulated by the legislation and the electricity manufacturer cannot sell the produced electricity to other companies under the open market conditions. These feed-in tariffs vary on the energy resource, for instance, the tariffs for solar energy are 13,3 USD Cent/kWh whereas these amount to 7,3 USD Cent/kWh for hydroelectricity.

In addition, the electricity manufacturer has the opportunity to benefit from the local equipment support, in where cases local equipment in the power plant is used. These prices are added to the feed-in tariffs and paid to the electricity manufacturer. As in the feed-in tariffs, amount of local equipment support depends on the energy resource. Companies manufacturing electricity from renewable energy resources are required to submit their applications until the end of October of each year. For 2015, this application term will end in one week.

Pros and cons of the YEKDEM

Support mechanism YEKDEM has been regulated in order to encourage the investments in renewable energy. The feed-in tariffs constitute a guarantee especially for electricity manufacturing license holders which have started up recently. Therefore, the risks of instability are minimized due to this mechanism. However, since the feed-in tariffs are determined on the basis of foreign currency, the currency risk might be consider either as a risk or advantage. Moreover, the market prices may amount higher than feed-in tariffs and it is recommended to make a detailled market analyse in order to minimize the possible risks.

Situation of support mechanism after 2020: Future prospects

The support mechanism had been regulated by the Regulation until 2015. These feed-in tariffs and additional payment for local equipments in the power plant have been extended until 2020. The question of the electricity manufacturing companies, how this support mechanism will be regulated after 2020, has come to the fore very frequently. This is not regulated by the legislation and there is not a declaration about this question from an institution yet. According to the experts' opinion, two possibilities exist: Either the support mechanism will be extended with similar incentives and feed-in tariffs for a longer term, since a term of 10 years is regarded as a short term to make profit from an investment, or the tariffs would be changed. In this context, an analyse and a comparison of legislation and practice in other countries and other law systems would be helpful for the decisions and practice in the future. Despite all plus and minus, the existence of a support mechanism for electricity manufacturing from renewable energy resources is essential in order to achieve the target of renewables' share in the electricity manufacturing.

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.

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