Turkey: Recent Trends In Turkish Renewable Energy Legislation

Last Updated: 24 February 2010
Article by Guner Law Office

Thanks to its unique location and climate, Turkey enjoys diverse renewable energy resources including hydro, wind, solar, geothermal and biomass. However, despite its enormous potential, the currently-installed renewable capacity of Turkey1 is low.

Below, we set out a summary of incentives under the current legislation and the Draft Renewable Law (the Draft Law) followed by our views on Turkey's approach towards renewable energy.

1 Current renewable energy legislation

1.1 Introduction

The Electricity Market Law No. 4628 sets out the general regulatory framework for electricity in the Turkish energy market. The Electricity Market Licensing Regulation (which focuses on rules and procedures relating to the licensing of these activities by the Electricity Market Regulatory Authority or EMRA) complements this law. With this in mind, the key piece of legislation about renewable energy is the Renewable Energy Law No. 5346.

1.2 Incentives under the Electricity Market Law/ Electricity Market Licensing Regulation

The legislation includes some investment incentives. These include:

  • Legal entities which apply for licences to build electricity facilities using domestic natural resources and renewable energy resources currently only pay one per cent of the total licensing fee. These entities are also currently free from paying annual licence fees for the first eight years following the facility completion date.
  • Renewable energy generators may buy electricity directly from private electricity wholesale companies if they do not exceed the annual average generation amounts mentioned in their licences for that calendar year.
  • The state-owned electricity transmission company, TEIAS, and/or distribution licence-holding legal entities have the duty to give priority to renewable energy generators when connecting them to the grid.
  • Retailer licence holders (Retailers) must give priority to energy produced through renewable energy resources. This rule applies when (i) the purchase price for electricity produced by renewable sources is equal to or lower than the sale price of TETAS (state-owned wholesaler) and (ii) there are no other cheaper supply alternatives.

1.3 Incentives under the Renewable Energy Law

The Renewable Energy Law covers certain investment incentives.2 These include:

  • Fixed minimum price: The Law sets a fixed range between a minimum price of 5.0 Euro cents and a maximum price of 5.5 Euro cents for electricity produced from renewable energy sources.
  • Compulsory purchase by Retailers: Legal entities holding a retail sale licence must purchase a specified amount of electrical energy from RES certified generators (RES Certified Generators) which have not yet reached a total operation period of 10 years.
  • Incentives re: state-owned land: Renewable energy generators enjoy an 85 per cent discount on the rent or costs related to getting a right of access/ use on state-owned land within the first 10 years of their investment and operation.

2 Draft Law

2.1 Introduction

Political discussions on the Draft Law are continuing and as a result the Turkish Parliament has not yet adopted the law (although many investors had hoped the Parliament would impose it earlier this year).

One reason behind the delay in the Draft Law's enforcement is the Turkish Treasury finds the proposed pricing incentives (based on feed-in tariff) too high. This is because state-owned entities such as TETAS and TEDAS make up most of the buyers in the electricity market.

2.2 Pricing incentives under feed-in tariff3

The feed-in tariff offers renewable energy generators favourable fixed minimum electricity sale prices. Therefore, under this system the prices of electricity produced from renewable resources will be pre-determined depending on the installed power generator. The fixed prices range from 7 to 25 Euro cents/kWh.

Solar power (both concentrated and photovoltaic) and biomass generation facilities can enjoy fixed electricity prices for their second 10 years of operation. This is unlike the ones that are using other renewable energy resources which may benefit from fixed prices for only their first 10 years.

Legal entities holding a renewable energy generation licence and wishing to benefit from this system have to pre-apply to EMRA by 31 October of the year before they wish to benefit. Generators included in the system shall remain for one year. However, following this one-year period it appears that they can then opt out and choose to sell electricity in the spot market with spot market prices.

2.3 Incentives through pooling of payments

The Draft Law provides that suppliers of electricity (as Electricity Market Law defines) must pay into a pool which PMUM (the Market Financial Settlement Centre – a division of TEIAS) manages. Renewable energy generators will be able more easily to collect their revenues from this pool.

The pool will perform to provide an effective off-take guarantee for all renewable energy generators that opt into this system since this will guarantee the sale of that renewable energy generator's electricity.

This incentive is broader than the compulsory buying incentive for Retailers under the current Renewable Energy Law (see the second bullet point under paragraph 1.3 above). This is because the term "Suppliers" (which the Draft Law refers to) is much broader than "Retailers" (which the Renewable Energy Law refers to) and includes Retailers, plus wholesalers, and generators (who sell to end-users/free consumers) etc. Therefore, eligible consumers choosing to buy electricity from sources other than Retailers (the Suppliers have a wider scope covering any such sources) will not dilute the effectiveness of the off-take guarantee in the Draft Law.

Finally, as the fixed electricity sale prices are higher than under the current legislation it is much more likely that RES Certified Generators will join in this pooling system. 2.4 Incentives due to use of components made in Turkey Certain mechanical and/or electromechanical items in the generation facilities that are using renewable energy resources are manufactured in Turkey. In that case, the Draft Law provides the relevant generation plant will benefit from further incentives as well as the fixed minimum electricity sale prices in the feed-in tariff system.

The incentives will last for five years from the date of its operation.

2.5 Other incentives

The Draft Law includes certain other incentives.

  • Any legal person that has a licence and produces electricity within the scope of the Draft Law will benefit from a 90 per cent discount on the system usage tariffs for 10 years from the operation of the relevant facility.
  • Certain small-scale renewable energy generation facilities, whose installed capacity is lower than 500 kWh and micro-cogeneration facilities may transfer their surplus energy to the distribution system and enjoys the pricing incentives of the RES Support Mechanism. This is true even if they have not opted in. Besides, depending on the energy transferring to the distribution system, electricity-producing facilities using photovoltaic solar energy will benefit from even more favourable prices for 15 years from the establishment of the relevant facility.

3 Conclusion

Turkey's signing the Kyoto Protocol shows Turkey's commitment to cleaner energy and highlights how important the investments in renewable energy are for Turkey. The Kyoto Protocol also enables emission trading (which is new for the Turkish market), which will strengthen the value of renewable energy investments.

Turkey's historical reliance on non-Turkish energy resources is costly to the Turkish economy and a dependency on them is risky (as political tensions can easily affect their supply). The most efficient and secure way to achieve the goal to diversify and increase internal supply is maximising domestic renewable energy resources.

The High Planning Council produced the Electricity Market and Supply Security Strategy Paper on 18 May 2009. According to this paper, Turkey targets to make the share of electricity produced by renewable resources amount to a minimum of 30 per cent of Turkey's entire electricity production. This is a figure to aim at but of course may change depending on various factors.

Clearly, Turkey cannot realise this target without further private investment. To that end, more investor-friendly laws will play a significant role in encouraging this investment and we believe that when the Turkish Parliament passes the Draft Law this will be a milestone towards that direction.

Footnotes

1 Electricity capacity amounting to approximately 15,000 MW (including large-scale hydro-electricity generators which are not considered as renewable energy resources under the Renewable Energy Law) out of Turkey's currently installed capacity of 44,000

2 Please note that the first two incentives below apply to facilities that start operation before 31 December 2011.

3 Please note that a combination of the incentives in the Draft Law make up what is defined in the Draft Law as the RES Support Mechanism which is (in short) a system (outside of the spot market or realms of bi-lateral agreements) that renewable energy generators can opt into so as to obtain fixed pricing/payment benefits/protections.

Guner Law Office was established in 1996 and has since grown into one of the major corporate, M&A, banking, litigation, energy and TMT practices in Turkey. Guner Law Office is headed by Ece Guner and works with international law firm Denton Wilde Sapte.

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.

Authors
 
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