Turkey: Turkey’s Unlicensed Solar Energy, Investment Opportunities And The Application Procedures

By means of its geographical location, Turkey appears to be one of the sunniest countries in Europe, with the calculated solar radiation level quite similar to Portugal and Spain. In order to reduce the natural gas dependency from northern countries, Turkey has taken very big steps for energy market privatization and renewable energy investments. Thus, in last 10 years, energy politics and legalislated incentives aim to direct investors to invest on renewable energy generation with high potential of profits.

2 years ago, Energy Minister Taner Yıldız reportedly announced that the limit for unlicensed solar energy generation has been enhanced from 500 KW to 1MW. The primary idea behind increasing the unlicensed production limit seems to be to charm low-budgeted investors to get into Turkey Energy Market. In past two years after the announcement, 1275 of total number of applications have been made to ''EMRA'' (Energy Market Regulatory Authority) in order to commence unlicensed facility establishment and generation.

Even there is no need to get a generation license for facilities up to 1MWh, investors still obliged to take few steps for obtaining the right to generate and sell energy.

General Principles to Establish an Unlicensed Solar Power Plant

There are two main legal resources setting down the rules for unlicensed solar power plants' procedure. According to Energy Market Regulation and Regulation on the Unlicensed Electricity Generation on the Electricity Marketlegal entities are allowed to build up to 1MW generation power plant with an exemption of license and establishment of a company. Regulation defines investors as:

  • Real and legal persons intend to generate electricity from renewable energy resources in micro cogeneration facilities, or generation stations with a maximum power of 1 MW installation,
  • Real and legal persons who will build a cogeneration facility that exceeds the limit laid down under the Regulation on Increase of Productivity on the Utilization of Energy Resources and Energy, in order to meet their own needs.

Related the law, investors are free to sell all the generated energy to the electric utility. Moreover, they have also have options not to connect to national distribution system in order to fulfill their energy requirements or only to sell the surplus energy from the consumption to the electric utility.

When deciding to consume all of the generated energy, as a principal only one generation facility based on renewable energy sources can be established for one consumption facility. However, with another application to the distribution company, it may be applied for more than one generation facility if there is a consumption rate needing more than one energy generation facility.

The Connection Application to the Distribution System

In order to start up the process to connect to the national distribution system, attendants (renewable energy investors) shall fill out the Unlicensed Generation Connection Application Form, which is attached to Regulation on the Unlicensed Electricity Generation, and also a land registration or a rental contract of the area where the establishment will be made; and a technical connection scheme provided from a consultant company are required.

Application shall be made to the relevant territorial distribution company, authorized by the authority. Applications shall be assessed by the distribution company under the following criteria: ''feasibility of the facility, legally permitted areas (compliance of the physical development planning law codes), eligibility of generation and most importantly transformation capacity of the relevant system connection point.''

Elaborately, every connection point has a capacity to transmit electricity to the national distribution system. If the transmitted energy capacity reaches up to the limit, no more applications shall be confirmed regarding the connection area.

Applications shall be assessed and concluded within the 20 days of the next month when application has been made. In case of a lack of one of documents, authorized distribution company shall give an additional 10 days to fulfill the obligations.

According to Regulation, distribution companies are obliged to accept the application unless there is a primary deficieny of the provided documents by the investor. Denial of an application is only possible if there is void according to Regulation provisions.

Following the acceptance of application, distribution company shall send a ''Connection Invitation Letter'' for the confirmation. In 90 days after the letter received, investor shall provide a generation facility project to the distribution company. After they provided documents, investor and distribution company shall sign a ''Connection Agreement'', following that distribution company Compatibility Report. At this point investor is obliged to start and finish physical building process.Consequently, right after the construction is finished, investor and distribution company sign a ''System Usage Contract'' in order to start electricity commercial.

Sell or Use

As said above, unlicensed generated energy can either be used for investor's own needs or be sold to the energy pool via Energy Distribution Company at the fixed price of 13.3 Dollar Cents/kWh.

Energy Market Regulatory Authority determined the highest purchasing tariff for solar energy. Investors should keep it in mind that generated energy cannot be sold in free energy market without a retail-sale or a wholesale license. However the fixed price of the Authority appears to be quite sufficient to compensate all of the investments in 8-9 years.

Incentives Regarding Solar Energy

Incentives for renewable energy investments are set forth in YEKDEM Regulation. (Regulation on Documentation and Support of Electricity Generation from Renewable Energy Resources, law no 28782)

According to the Regulation, Authorized Distribution Company guarantees the investor to purchase electricity from the highest fixed price for 10 years, which leads this investment highly profitable without bearing any risks.

Moreover, investors bound to YEKDEM, are totally exempted from System Usage Taxes, Transmission Expenses, Retail Service Prices.

Domestic equipment and material usage for a solar energy facility is also appreciated and incent by YEKDEM. In accordance with Regulation Article 6/B, Authority makes an incentive pay in favor of the investor for 5 years by calculating the amount with respect to YEKDEM Tariffs considering sold energy to the national system. YEKDEM is subject of a trade barrier by European Commission and it has been reported that due to the Commission has received several complaints from EU business active in this sector as well as from several member states. The Commission has regularly raised this issue with the Turkish authorities during the different CUCJ meetings. The measure has also been raised with the European Investment Bank in the context of EIB's programmes for renewable energy and energy efficiency.

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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