Turkey: New Restrictions In The Unlicensed Electricity Generation Following The Amendment On The Unlicensed Electricity Generation Regulation

Since the beginning of December 2015, the renewable energy market in Turkey was waiting, in some kind of distress, for the amendment of the Regulation on the Unlicensed Electricity Generation in the Electricity Market dated October 02, 2013 and numbered 28783 ("Regulation") by the Energy Market Regulatory Authority ("EMRA"). Finally, the long-awaited Amendment on the Regulation has been issued and published in the Official Gazette dated March 23, 2016 and numbered 29662 ("Amendment on the Regulation") receiving critics from every player in the renewable energy market.

It is a must-say that the issuance of the Amendment on the Regulation had turned into an endless story. The draft of the Amendment on the Regulation was being circulated everywhere in hands of various players in the energy market from the developers to the investors creating great nuisance and uncertainty.

Following the issuance of the Amendment on the Regulation, it is now time for the investors to determine their current and next moves in accordance with the restrictions.

The Amendment on the Regulation brought restrictions on the total installed capacity of adjacent unlicensed plants controlled by the same real or legal person (corporation/s) as well as share transfer restrictions for those that we explain herein to what extent are brought. It should be noted that these restrictions, leading to limitation of the players in the renewable energy market, were one of the restrictions expected from the early drafts of the Amendment on the Regulation, though there are several more restrictions welcomed bewilderedly.

In accordance with the Amended Article 6/10 of the Regulation, apart from the exceptions in relation to rooftop installations, the Amendment on the Regulation brought a restriction on the total installed capacity of plants held directly or indirectly by the same real or legal person. Accordingly, the total grid allocation to be made to unlicensed energy plants owned by a real person or legal person/s in which such persons have direct or indirect shareholding cannot exceed 1 MW per substation. The Amendment on the Regulation requires the legal person applicants to present information as per their direct and/or indirect shareholding in the course of their system connection application

On the other hand, the Amendment on the Regulation also introduced a maximum limit for the amount of excess energy to be fed into the grid regulated under the Amended Article 6/12 of the Regulation. According to the Amendment on the Regulation, the excess energy to be fed into the grid by wind and solar energy unlicensed energy plants cannot exceed 30 (thirty) times the connection capacity under the connection agreement of the consumption facility associated with the plant in accordance with the application.

Furthermore, EMRA also brought norms and procedures in relation to the distance to the grid connection under the Amended Article 6/8 of the Regulation. Accordingly, the distance from the unlicensed energy plant to the connection point cannot exceed (I) five (5) kilometers for plants with an installed energy capacity below 0.499 MW, and (II) ten (10) kilometers for plants with an installed energy capacity between 0.5 MW and 1 MW. The distance of the plants from the connection point cannot exceed 6 (six) kilometers and 12 (twelve) kilometers.

Share transfers of the legal person that applied for grid connection for an unlicensed electricity generation project are prohibited until the provisional acceptance of such project is granted. It should be noted that the Amendment on the Regulation is silent as per if these restrictions apply to indirect share transfers. Following the provisional acceptance, in order to realize a share transfer, the Amendment on the Regulation requires a notification to be made to the relevant electricity distribution company 1 (one) month prior to the share transfer.

In accordance with the Amended Article 31/21 of the Regulation brought by the Amendment on the Regulation; the following real persons or legal persons cannot engage in the activities of unlicensed electricity generation within the distribution area of the relevant electricity distribution company or its shareholders:

  1. Direct and indirect shareholders of electricity distribution and retail sale companies and their first degree relatives;
  2. Employees of electricity distribution and retail sales companies and their direct and indirect shareholders, as well as the first degree relatives of such employees, and
  3. Legal persons which are under the control of the real or legal persons indicated under a. and b. above.

Surprisingly, the Amendment on the Regulation also brings some restrictions for the unlicensed electricity projects which can be regarded as protection for the pre-license applications for the licensed renewable energy projects. In accordance with the restriction on such matter, no unlicensed electricity application can be made for the same area subject to a pre-license application.

However, there are some exceptions for the scenario when there is a pre-license application made for an area subject to an unlicensed plant application indicated under Amended Article 7/12 of the Regulation;

  • In the event that the pre-license application is made for wind or solar energy, (I) if both unlicensed electricity application and the pre-license application received affirmative decisions from the General Directorate of Renewable Energy as per the technical evaluation, (II) if the unlicensed electricity project application received the calling letter to the interconnection agreement for the grid connection, and (III) if these projects can cohabitate; then both of these pre-license and unlicensed electricity projects will be realized.
  • In the event that the pre-license electricity application is made for a renewable energy source other than wind or solar energy, if the unlicensed electricity application did not receive the calling letter to the interconnection agreement for the grid connection, then the unlicensed electricity project application will be rejected.
  • In the event that the pre-license electricity application is made for a renewable energy source other than wind or solar energy, if the unlicensed electricity project application received the calling letter to the interconnection agreement for the grid connection, the pre-license application will be rejected.

The Amendment on the Regulation concerning many and various players in the renewable energy sector has been in force as of its publication date on the Official Gazette which is March 23, 2016. On the other hand, the provisions of the Amendment on the Regulation regarding restrictions on total installed capacity, maximum excess energy levels, and distance to grid connection do not apply to the projects for which are granted with the calling letter to the interconnection agreement as also published on the website of the relevant electricity distribution company as laid down under the Provisional Article 9 of the Amendment on the Regulation. To sum up, the unlicensed electricity projects being granted with the calling letter to the interconnection agreement will not be affected.

As indicated above, there are various provisions introduced by the Amendment on the Regulation brought vital changes in the unlicensed electricity generation. Especially the amendments in relation to the maximum excess energy levels and maximum installed electricity capacity being owned by the same real or legal persons per substation can be regarded as the end of the unlicensed electricity projects.

It is certain that EMRA is intending to attract the investors' interest to the licensed renewable energy projects while positioning the unlicensed electricity generation projects only for the supplying electricity for the self-consumption projects. However, for our opinion, the critics and requests of the investors willing to invest in the licensed energy projects should have been heard and the associated problems should have been resolved before coming up with this move.

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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