Turkey: The Long Expected Regulation On Renewable Energy Designated Areas In Turkey

Last Updated: 1 November 2016
Article by Şahin Ardiyok, Tolga Turan and Can Yıldız

Regulation on Renewable Energy Designated Areas (Regulation) came into force following its promulgation in the Official Gazette dated 9 October. The Regulation is expected to pave the way for large-scale renewable energy investments in Turkey.

So far, the renewable support scheme has been governed by the YEKDEM mechanism put into legislation in 2010. Based on this legislation, the incentives for the use of renewables in power generation include Feed-in tariffs; purchase guarantees connection priorities, lower license fees, license exemptions in exceptional circumstances and various practical conveniences in project preparation and land acquisition. Following the capacity available announced by TEİAŞ, EMRA announces the window for license application and only during the window applications are received.

Other than licensed projects, un-licenced projects are also being incentivized. Under the scheme of distributed generation, renewable based power generating units less than 1 MW capacity are exempt from getting licenses. Furthermore, these units are allowed to feed the grid in with their overproduction compared to their consumption and compensated at rates available for licensed projects.  

The objectives of the new Regulation can be regarded as:

  • Forming large-scale renewable energy designated areas (REDAs) on either property belonging to public and treasury or privately owned property in order to make effective and efficient use of renewable energy sources;
  • Rapidly completing investment projects by assigning these areas to investors;
  • Enabling the high-tech equipment used in the generation facilities to be domestically manufactured or supplied and contributing to the transfer of technology;

The REDA Regulation provides the principles and procedures concerning various issues such as:

  • The determination of REDAs;
  • The opinion on connection and capacity allocation regarding REDAs;
  • determination of usage of the allocated capacity on the condition of domestic manufacturing or utilization of domestic goods;
  • The conditions to be met by the legal entities attending to the tender held to make that determination;
  • Holding the tender;
  • Recording the collateral as revenue if the obligations are not fulfilled;
  • The process of licence applications of the tender winners for setting up the generation facilities in REDAs;
  • Selling the electricity generated.

The Regulation states that REDAs are to be developed by two means: As a result of operations conducted by the General Directorate of Renewable Energy; or as a result of the Tender of Connection Capacity Allocation for REDAs and the operations to be conducted afterwards.

The majority of the provisions in the Regulation concern the capacity allocation tender, the agreement to be signed following the tender and finally, the process of licencing.

Tender for connection capacity allocation for REDA

The Notice of Tender for REDA usage, which is to be published both in the Official Gazette and the website of GDRE, would contain information such as allocation, the conditions to be fulfilled by the applicant legal entity, the amount and duration of the letter of credit to be provided, dates of application, price cap and duration of purchase of electricity.

The notice would also include information regarding the technical and administrative specifications concerning REDAs, the connection capacity of each REDA, connection capacities to be allocated on the basis of connection zones, the specifications and production processes the equipment subject to Requirement of Domestic Equipment (RoDE) and/or Requirement of Domestically Manufactured Equipment (RoDME), and if the REDA is considered to be subject to RoDE, the minimum specifications to be met by the manufacturing facility that would be constructed.

The legal entities that fulfil the requirements set out by the Regulation and the Specifications and provide valid application would earn the right to participate in the tender.

The tender process is illustrated in the infographic below.

Following the sign up, the winner will apply to Energy Market Regulatory Authority (EMRA) for pre-license and license for generating electricity. The winner has to apply for the pre-license within 45 days following the signing of the contract. Following the acquirement of the pre-license, if the entity fulfils the conditions set forward by the Regulation and the requirements of the R&D plans, the entity may apply for the generation license.

The duration of the generation licenses obtained for REDAs will be 30 years. Following that period, necessary action will be taken according to the legal framework concerning the public institutions from which the right of tenancy was initially obtained.

Pursuant to the Regulation, the plants shall be commissioned in 36 months.  If the installed capacity determined in the business plan is not fully operational, price cuts will occur from the prices predetermined in the REDA contract; the cuts will last until the foreseen installed capacity is achieved.

The electrical energy generated in REDAs will be regarded within the scope of Renewable Energy Supporting Mechanism (YEKDEM) with the price predetermined in the contract, and prices will not increase for the period foreseen in the Specifications. Following the purchasing period provided by the REDA contract, the entity will continue to be active in the electricity market under the generation license.

Obligation of domestic equipment

Within the scope of the Regulation, the legal entities who fulfill the specifications announced by the Ministry, and who will manufacture the specified equipment in Turkey, and/or commit to use domestically manufactured equipment may apply for the generation of electricity based on the renewable energy sources.

Moreover, the Regulation also contains provisions regarding the use of domestically manufactured equipment during the process of licensing following the tender. Within the scope of the Requirement of Domestic Equipment, it is necessary to use domestically manufactured equipment in the generation facility that was produced in a certain factory, which was asserted under the specifications and the responses to specifications as well.

In addition to this, for the installation of generation facilities within the scope of the REDA Usage Contract, Law on Renewable Energy Resources shall not be applicable separately in terms of the provisions of domestic equipment incentive.[1]

The initiation of REDAs and the legal framework of the investments on these areas have been defined with the Regulation. Now, it is expected that the interest towards renewable energy will be much more than before on account of this development being anticipated by the actors in the sector.

At the end of the day, previous scheme based on license application during the window announced by EMRA is still applicable and EMRA has already announced the applications for wind power projects will be received in 3-7 April 2017.

On the other hand, the details of the first REDA project tender, which will consist of a solar-based designated area in Konya-Karapınar, were announced. The project would include construction of a PV solar module manufacturing factory and relevant R&D center in Turkey, as well as the 1.000 MWe electricity generation facility that would use the modules produced in the factory. The initial bid of the tender is set to 8 USD, and the period of purchasing guarantee will be 15 years. The submission of the first bids will take place no later than 12 December, which would be followed by the auction; the winner of the auction has to complete the installation of the factory and R&D center within 18 months, and the generation facility within 36 months, from signing the contract. The tender is expected to be the first example for the application of the new scheme.

We will wait and see how the available capacity would be split between these two parallel schemes for connecting renewables to the grid, and how—until 2020 and after 2020 these two schemes would proceed hand in hand.    

[1] For certain domestically manufactured equipment used in the construction of the power plants, feed-in tariffs may go up at the level set fort at the Annex II of the legislation. These extra feed in tariffs are applicable for five years from commissioning.

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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Şahin Ardiyok
Tolga Turan
Can Yıldız
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