1 Legal and regulatory framework
1.1 What role does the state play in the renewables industry and which national legislative and regulatory provisions have relevance for the renewables industry in your jurisdiction?
The state plays a critical regulatory role in the renewables energy sector. It not only introduces laws governing activity in the renewables industry, but also supervises whether such laws are duly followed. The state also grants certain permits and licences where the necessary conditions are met by applicants.
Major pieces of primary and secondary legislation include:
- the Electricity Market Law (6446);
- the Utilisation of Renewable Resources in Electricity Law (5346) ('Renewable Electricity Law');
- the Geothermal Resources and Natural Mineral Waters Law (5686);
- the Electricity Market Licensing Regulation;
- the Regulation on Unlicensed Electricity Generation in the Electricity Market;
- the Regulation on Registration and Support of Renewable Sources in Electricity Generation;
- the Regulation on Registration and Support of Renewable Resources in Electricity Generation;
- the Regulation on Renewable Energy Resource Areas; and
- the Balancing and Settlement Regulation.
In addition, the state further regulates incentive schemes concerning the renewable energy sector. Please see question 5.1 for further details.
1.2 Which bilateral or multilateral instruments or treaties with effect in your jurisdiction have relevance for the renewables industry?
Türkiye has signed mutual promotion and protection of investment agreements with 108 countries to date. These agreements address issues such as the following:
- protecting fundamental rights and interests in the countries in which investors invest on the basis of international law;
- securing profit transfers;
- determining the conditions for possible expropriation transactions; and
- resorting to international arbitration in case of any dispute.
The international treaties to which Türkiye is a party include:
- the Multilateral Investment Guarantee Agency;
- the Energy Charter Treaty; and
- the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Türkiye has made two reservations to the New York Convention, declaring that it will apply only to disputes considered commercial under Turkish law and further only on the basis of reciprocity.
In addition, Türkiye has been re-elected as a member of the United Nations Commission on International Trade Law (UNCITRAL) for the 2022-2028 period, which promotes the harmonisation of international commercial law. The multilateral agreements to which Türkiye is also a party include:
- the Washington Convention on the International Centre for Settlement of Investment Disputes;
- the United Nations Framework Convention on Climate Change;
- the Kyoto Protocol; and
- the Paris Agreement under the United Nations Framework Convention on Climate Change.
1.3 Which national regulatory bodies are responsible for enforcing the applicable laws and regulations? What powers do they have and what is their general approach in regulating the renewables industry?
The Energy Market Regulatory Authority was established with the aim of regulating and supervising the energy market. The Ministry of Energy and Natural Resources is responsible for evaluating renewable energy sources and determining policies and strategies for increasing energy efficiency. Türkiye Elektrik İletim AŞ ensures that the electricity produced in power plants in the country is transmitted to consumption centres in a continuous, balanced and reliable manner over high-voltage lines and transformers. It is the duty of Enerji Piyasaları İşletme AŞ to carry out market purchase and sale transactions in a transparent and regulatory manner, and to establish a reference price. Elektrik Üretim AŞ is a public company established in 2001 for the purposes of producing and selling electricity.
1.4 What role do regional or local government or public bodies play in the renewables industry?
Depending on the location of the project, permits must be obtained from local authorities, such as:
- permits required for energy generation and distribution facilities to be built in areas which fall under the scope of the Forestry Law or the National Parks Law; and
- permits required for construction, maintenance, repair and transportation works.
2 Renewables industry
2.1 Which renewable technologies are considered relatively mature in your jurisdiction, and which are emerging as potentially new technologies in the market?
Türkiye's total installed capacity is 104.038 megawatts (MW) and renewables account for 55% of this capacity. A breakdown of renewable energy sources in Türkiye as at January 2023 is as follows:
- 30.3% hydro;
- 11% wind;
- 9.2% solar;
- 1.6% geothermal; and
- 2.5% other resources.
Therefore, the relatively mature technologies in Türkiye are hydro, wind, solar, biomass and geothermal.
2.2 Who are the key players in the renewables industry in your jurisdiction?
In Türkiye, renewable energy market players include public institutions and organisations and private sector suppliers and producers. Renewable energy efforts have improved across the country over the years and the incentives for investors have been increased. Data from Türkiye Elektrik İletim shows that energy from renewable energy sources (biomass, geothermal, hydro, solar and wind) accounted for about 55% of Türkiye's installed capacity in 2022. According to the results of the 2022 Survey of Türkiye's 100 Largest Electricity Producers, the top three companies in electricity generation were:
- Elektrik Üretim (EÜAŞ) (the state-owned generation company);
- Enerjisa; and
- Limak Energy.
The eight hydroelectric power plants made operational by IC İÇTAŞ Enerji Yatırım have a combined installed power of approximately 274 MW. Sanko Energy Group's total installed power in wind energy is more than 300 MW. Borusan Holding, Güriş Holding, Enerjisa Üretim, Alto Holding and Polat Energy are among the most prominent market players in wind energy.
As at the end of May 2022, hydro generation had reached approximately 35.2 billion kilowatt hours (kWh). The Yusufeli dam and hydroelectric power project built by EÜAŞ has a capacity of 558 MW and the Atatürk dam a capacity of 2405 MW. EÜAŞ has an installed capacity of more than 14,000 MW in hydroelectricity, followed by Cengiz Enerji with an installed capacity of 1,000 MW; while Enerjisa Üretim is Türkiye's third-largest hydroelectricity producer with an installed capacity of over 1,000 MW.
2.3 How much do renewables currently contribute to the domestic energy mix? What are the near-term projections for the role they will play?
Renewables account for about 55% of Türkiye's installed capacity and national energy strategies have been determined to secure the future of renewable energy in Türkiye. According to the National Energy Plan for 2019-2023, the aim was to increase the share of intermittent renewable energy sources such as wind and solar in total electricity generation. This plan was realised due to the investment-friendly environment and opportunities that Türkiye presents.
The National Energy Plan for 2020-2035 projects that Türkiye will be producing 29.6 gigawatts (GW) of wind energy (24.6 GW onshore, 5 GW offshore) and 52.9 GW of solar energy by 2030. For other renewable energy sources, installed capacity by 2030 is projected at 35.1 GW for hydro power plants and 5.1 GW for geothermal and biomass power plants.
3 Utility-scale renewables projects
3.1 What utility-scale renewables projects are currently operational or planned in your jurisdiction? What are their key features?
The main renewable energy sources in Türkiye are hydro, wind and solar. According to official data, as at December 2022 there were:
- 751 hydro power plants, 141 of which were dams and 610 river plants;
- 358 wind power plants; and
- 9,353 solar power plants.
Several utility-scale projects (over 10 megawatts (MW)) are currently operational in Türkiye. It would be beyond the scope of this Q&A to provide a full list of these projects; however, to provide greater clarity on the figures, there are:
- more than 360 hydro plants;
- 230 wind farms; and
- 24 solar utility-scale projects.
There is also renewable energy resource area (YEKA) implementation for large-scale renewable projects to be tendered by reverse auction, which specifically requires the use of domestically manufactured high-tech equipment. Some of these tenders have already been conducted, while others are yet to be conducted. A combined list is as follows:
- YEKA GES-1 is a solar power plant with a capacity of 1000 megawatts electric, which commenced full capacity production on 24 December 2022. This facility is expected to generate at least 2 billion kilowatt-hours (kWh) of electricity every year.
- YEKA RES-1 involved the commissioning of six wind power plants with a total installed capacity of 1000 MW. It is envisaged that approximately 3.8 billion kWh of electricity will be generated every year.
- YEKA RES-2 has wind power plants with a total capacity of 1000 MW: 250 MW in four different provinces. This project aims to generate 3.8 billion kWh per year.
- YEKA GES-3 aims to allocate a total of 1000 MW connection capacity comprised of individual plants with respective capacities of 10 MW, 15 MW and 20 MW in 36 provinces.
- YEKA GES-4 plans to install 15 solar power plants with capacities of 50 MW to 100 MW.
YEKA GES-5 will operate in 19 connection regions to allocate a total connection capacity of 1220 MW through 66 solar energy plants comprised of individual plants with respective capacities of 10 MW, 20 MW and 30 MW.
3.2 What authorisations are required for the construction and operation of utility-scale renewables projects in your jurisdiction?
- A generation licence must be obtained from the Energy Market Regulatory Authority (EMRA) for electricity generation plants based on renewable energy sources which will operate in the market and which have an installed power of more than 5 MW. There are no licence or pre-licence requirements for generation plants with an installed capacity of less than 5 MW.
- A pre-licence is also required for electricity generation activities. The investor must obtain permits, approvals, licences and so on under the relevant legislation during the pre-licence period, to be determined according to the source type and installed power.
- Further, a licence is required for transmission, distribution, wholesale and retail sale activities.
- With respect to the construction phase of facilities, a construction permit and a building occupancy permit must also be obtained, except for solar renewable energy systems whose area does not exceed 125 square metres.
- An environment impact assessment (EIA) report must further be obtained; or if the environmental authorities resolve that there is no need to obtain an EIA report for a certain facility, operation or project, an EIA 'report not necessary' opinion will be issued.
As an example, for a river hydro project, the following are some of the major permits/documents required:
- a utilisation of water agreement;
- an expropriation decision (where necessary);
- a workplace opening licence;
- a building utilisation permit;
- a wastewater connection permit;
- a wastewater connection quality control permit; and
- approval of the easement right on a forest (where required).
3.3 Do these authorisations vary in respect of the location of the energy source, the location of the asset or the involvement of a foreign entity?
Under the Foreign Direct Investment Law (4875), there are no specific restrictions on foreign investment in Türkiye. The Energy Market Regulatory Authority grants ownership and usufruct rights to investors regardless of nationality. However, a change in the direct/indirect ownership of shares of a Turkish entity or a change in the parent company level above 10% (5% for listed companies) is subject to EMRA's approval.
Please see question 1.4 with respect to the local permits to be obtained in relation to the location of the facilities.
3.4 What is the procedure for obtaining such authorisations? How long does this typically take? Who is responsible for issuing them?
In order to obtain permits for renewable energy projects, a number of steps must be completed. First, a feasibility study must be conducted to:
- determine the technical and economic viability of the project;
- identify suitable land for the project;
- assess the potential environmental impact;
- obtain approval for connection to the grid and a connection agreement with the relevant utility;
- obtain permits and licences from various institutions, including local authorities; and
- secure financing for the project.
EMRA is responsible for regulating the energy market; while local authorities are involved in the permitting process, particularly for environmental assessments and various permits.
A pre-licence is required for licensed electricity generation to obtain permits (please see question 3.3 for further details).
An EIA must be conducted by the Ministry of Environment and Urbanisation, and the project must be approved to carry out the activities and complete the licensing process (please see question 3.2. for further details).
EMRA also issues a renewable energy resource certificate to determine and track the energy produced from renewable resources in the domestic and foreign markets.
The timing for completion of all authorisations – including the pre-licence, licence and construction permit – may vary depending on the project specifics. In practice, it often takes between 18 and 24 months.
3.5 What are the key features of such authorisations, including any process for renewal and the rights and obligations of the holder?
Licences are issued and can be renewed for a maximum of 49 years at a time, at the request of the licensee. Different procedures apply for specific permit types.
3.6 Can these authorisations be transferred? If so, how and subject to what consents? Do any restrictions apply to the transfer?
As a rule, electricity market licences are not transferable. However, the following rules apply:
- A legal entity holding a licence may transfer its rights and obligations under the licence to another legal entity through merger or partial spin-off. During the pre-licence period, companies cannot:
- make any direct or indirect changes to the shareholding structure;
- transfer their shares; or
- carry out any business or transactions that would result in the transfer of shares.
- The rights and obligations of a legal person that has obtained a generation licence can be transferred to another legal person established with the same partnership structure, provided that it is approved by EMRA.
- A legal person holding a generation licence may transfer the generation facility under the licence to another legal person through a transaction such as sale, transfer or lease, provided that it is approved by EMRA. If limited or non-recourse project financing is provided by banks and/or financial institutions to the legal entity holding the generation licence, a new licence will be granted to the proposed legal entity in continuation of the previous licence, subject to the same rights and obligations, provided that it fulfils the requisite obligations.
3.7 What obligations apply in relation to decommissioning? How is this funded?
If a legal entity holding a licence wishes to terminate its activities within the scope of the licence, an application must be submitted to EMRA at least six months before the expiry of the licence. If the licence holder is a distribution company or an assigned supply company, the application must be submitted at least six months before the expiry of the licence.
Following the evaluation, if the termination request is approved by the EMRA board, the licence will expire on the date to be specified therein. In case of the expiration or cancellation of a licence, the necessary arrangements regarding the actions to be taken for the calculated and defined correction components will be made by EMRA.
Decommissioning is not yet regulated. We believe that, as has happened in other regulated areas, it will be discussed by the authorities once the need arises.
3.8 What are the main barriers to the development of utility-scale renewables projects in your jurisdiction?
The barriers to the development of utility-scale projects include the varying duration of procedures and difficulties in obtaining the relevant permits. In addition, connection to the grid takes time due to a lack of connection points. The frequency of amendments to the secondary legislation also causes ambiguity for investors during the course of projects.
3.9 Environmental issues
- What environmental regulations or requirements must renewables generators in your jurisdiction observe on an ongoing basis (from pre-development to decommissioning)?
- What are the potential consequences of breach of these requirements – both for the renewables generator and for its directors, managers and employees?
- Which national and regional regulatory bodies are responsible for the enforcement of environmental obligations, and what is their general approach in regulating the renewables industry?
(a) What environmental regulations or requirements must renewables generators in your jurisdiction observe on an ongoing basis (from pre-development to decommissioning)?
It is obligatory to obtain a decision of either 'EIA positive' or 'EIA not required' for wind power plants, geothermal power plants, hydroelectric power plants and solar energy plants with a project area of 20 hectares or an installed capacity of more than 10 MW. In addition, legal entities holding licences for biomass-based electricity generation facilities and geothermal power generation facilities with an installed capacity of 5 MW or more must obtain environmental permits and licences. Environmental permits (eg, air emissions, environmental noise) are also requested for some projects.
Decommissioning is not yet regulated. We believe that, as in other regulated areas, it will be discussed by the authorities once the need arises.
(b) What are the potential consequences of breach of these requirements – both for the renewables generator and for its directors, managers and employees?
In the event of a breach of the licence terms or a violation of permits by a renewable generator, administrative fines will be imposed by the competent authorities. Further sanctions may also be imposed in case of a violation of EIA requirements, such as the indefinite suspension of activities.
(c) Which national and regional regulatory bodies are responsible for the enforcement of environmental obligations, and what is their general approach in regulating the renewables industry?
Regulations regarding EIAs and necessary permits and licences are stipulated in various laws and regulations. Although the authorities specified in the relevant laws and regulations are those authorised to implement them, the Ministry of Environment, Urbanisation and Climate Change is the principal authority. Also, the provincial directorates of environment, urbanisation and climate change and other provincial directorates are responsible for enforcing environmental issues.
3.10 Health and safety issues
- What key health and safety requirements apply to renewables projects in your jurisdiction and are there best practices in relation to health and safety that should be adopted?
- What are the potential consequences of breach of these requirements – both for the renewables generator and for its directors, managers and employees?
(a) What key health and safety requirements apply to renewables projects in your jurisdiction and are there best practices in relation to health and safety that should be adopted?
Although occupational health and safety measures are not specifically regulated in Türkiye, there are many occupational health and safety measures regarding the construction process and the operational phase of the project. Especially during the construction phase, it is necessary to:
- use warning strips, barricades and safety signs; and
- issue an emergency action and response plan.
It is also necessary to ensure that:
- personal protective equipment (eg, safety glasses, hard hats, protective work clothes) is used and training is given to personnel working in the field; and
- maintenance and repairs of equipment in the field are done frequently.
(b) What are the potential consequences of breach of these requirements – both for the renewables generator and for its directors, managers and employees?
The employer has legal, criminal and administrative responsibility where occupational accidents occur. The criterion in determining whether the employer has legal and criminal liability is whether it is at fault in relation to the occurrence of the work accident. In investigating the fault of the employer, occupational safety experts will consider:
- what measures should be taken according to the occupational safety legislation;
- whether those measures were taken by the employer; and
- whether the workers complied with those measures.
The employer is responsible for financial compensation and the managers are not directly responsible. Also, the criminal liability of members of the board of directors and/or the employer's representative will arise.
4 Distributed generation projects
4.1 What are the key differences in relation to small-scale distributed generation projects compared to utility-scale projects in your jurisdiction with regard to the regime discussed in question 3?
Renewable energy facilities with a capacity below 5 megawatts are not obliged to obtain a licence and are considered as small-scale projects. Their activities are governed by the Regulation on Unlicensed Electricity Generation in the Electricity Market. Under the regulation:
- consumers can meet their electricity needs from their own generation facilities closest to the consumption point; and
- losses in transmission/distribution costs in the electricity grid can be reduced through the distributed generation method.
Natural or legal persons that establish an unlicensed generation facility must have at least one electricity subscription (consumption facility). Unlicensed generation facilities must be connected to the distribution system, save for the exceptions under the regulation. If the energy produced by natural or legal persons generating unlicensed electricity above their needs is given to the system, it will be evaluated within the scope of the Turkish Renewable Energy Resources Support Mechanism through the relevant assigned suppliers.
4.2 What are the main networks that apply to small-scale distributed generation projects in your jurisdiction?
Distributed generation projects (unlicensed projects) are connected to the distribution network just like any other renewable project. However, distributed generation projects are not limited – even rooftop solar systems should be included in this definition. Such systems will require microgrids in order to maintain the balance in the distribution network. Under the legislation, the development and improvement of distribution networks is one of the obligations of distribution companies. Thus, microgrid projects are currently in the research and development phase in Türkiye, and there is no specific legislation or incentive regime regulating microgrids.
5 Taxes and incentives
5.1 What national, regional and/or local incentives are available as subsidies or support to facilitate the deployment of renewables projects in your jurisdiction?
The investment incentive system comprises several measures. One of the most important incentives is the feed-in-tariff guarantee. For renewable projects, within the framework of the Turkish Renewable Energy Resources Support Mechanism (YEKDEM), the purchase guarantee is given for 10 years (hydro, wind, biomass, solar, wind and solar power generation facilities and integrated electricity storage facilities; wave and current facilities) and 15 years (geothermal and pumped storage hydroelectric facilities) from the date of commissioning of the facility.
According to Presidential Decree 7189/2023, the prices in the table below will be applied for electricity generation facilities based on renewable energy resources with YEK certificates, which have entered or will enter into operation between 1 July 2021 and 31 December 2030.
|Type||YEKDEM price (Turkish kurus/kWh)||YEKDEM minimum price (US cents/kWh)||YEKDEM maximum price (US cents/kWh)||Domestic content premium (Turkish kurus/kWh)|
|Wind and solar power generation facility and integrated electricity storage facility||125||5.85||7.15||38.45|
|Pumped storage hydroelectric||202||9.45||11.55||38.45|
|Wave and current||135||6.3||7.7||38.45|
A domestic content premium is applied for five years (hydro, wind, biomass, geothermal, solar) or 10 years (solar power generation and integrated electricity storage facilities; wave and current facilities; pumped storage hydroelectric facilities) from the date of commissioning of the facility.
Compared to the previous YEKDEM regulation, there have been significant increases in the implementation prices. Unlike in the previous YEKDEM regulation, YEKDEM base prices have also been set in US cents per kWh based on facility type.
Offshore wind facilities, generation facilities based on wind or solar energy, integrated electricity storage facilities, pumped storage hydroelectric facilities and generation facilities based on wave or current energy have also been priced separately for the first time under YEKDEM and the domestic content premium.
Regional incentive schemes address six different regions of the country separately based on their level of development. They include benefits such as:
- value added tax (VAT) exemptions;
- customs duty exemptions;
- tax reductions;
- support of employer's national insurance contributions;
- insurance premium support;
- interest support; and
- VAT refunds.
For generation facilities based on domestic and renewable energy resources, no annual licence fee is charged for the first eight years from the date of partial or total acceptance of the generation facility. To support the use of domestic components in power generation facilities based on renewable resources, there are also price incentives to be applied to the components used in the facilities.
An 85% discount is applied to the permit, rent, easement right and usage permit fees for 10 years from the date of issue of the licence for generation facilities based on renewable energy resources and energy transmission lines that will commence operations before 31 December 2025.
TEIAŞ provides grid connection priority to renewable energy facilities.
5.2 Are any tax reliefs available for investment in renewables projects?
Plants generating electricity based on renewable resources are exempt from VAT and customs duty.
5.3 Have there been any interventions affecting renewables projects in terms of their ability to be constructed or operated, or their ability to earn revenue, in your jurisdiction?
No. To the best of our knowledge, there have been no interventions in that regard.
5.4 What other incentives are available to promote the development of the renewables industry in your jurisdiction?
Another incentive method is the renewable energy resource area known as YEKA. YEKA aims to:
- create large-scale renewable energy resource areas (YEKAs) in public and treasury immovable and private immovable property subject to private property;
- to promote the effective use of renewable energy resources and the rapid allocation of these areas to investors; and
- to ensure that components containing advanced technology are produced in Türkiye or are obtained from Türkiye.
Although not for renewable projects specifically, for energy generation facilities, the Energy Market Regulatory Authority has the right to expropriate privately owned land on behalf of investors and allocate such lands to the generation facilities.
6 Financing structures
6.1 Is debt financing typically used and are there any particular structures that are common for renewables projects in your jurisdiction?
Debt financing is primarily governed by the Regulation on Registration and Support of Renewable Sources in Electricity Generation. There are two main types of financing practice in renewable energy projects: corporate (balance-sheet) finance and project finance.
Although these are two separate practices, our experience confirms that project finance is preferred by borrowers. Therefore, most investors establish special purpose vehicles (SPVs) allocated to a specific project, to keep the liabilities of such financing limited to that SPV. This is also often a common request among lenders. Lenders almost always require parent guarantees for the construction period. Therefore, in Türkiye, most funding is limited-recourse financing.
Apart from the parent guarantees during the construction period, lenders typically require the following securities from the SPV during a project financing:
- the assignment of receivables of the project company's project revenue;
- the assignment of insurance proceeds of the project company;
- the assignment of receivables of insurance companies under reinsurance policies;
- a share pledge on the shares of shareholders of the project company;
- an account pledge on the project accounts of the project company;
- a commercial enterprise pledge on the movables of the project company; and
- a mortgage on immovables of the project company.
6.2 What are the advantages and disadvantages of these different types of structures?
Since it does not involve all the various procedures of project financing, corporate (balance-sheet) finance is faster to utilise where the balance sheet of the borrower is strong and costs are relatively lower. However, it increases the liability of the company and thus affects its borrowing capacity for other activities. More crucially, the company's assets and other business activities become vulnerable to the liabilities and risks of the financing; and if the company defaults on one project, all of its assets and activities will be subject to the consequences of such default.
Project finance takes longer, as it involves multiple parties; and the costs are higher than those of corporate finance. As stated in question 6.1, it requires a separate SPV to be established. Limiting the liabilities to an SPV provides flexibility to shareholders' main entities and other activities, as such liability will be limited to the SPV and the project in question – except during the construction period.
6.3 What other considerations and concerns should parties bear in mind when deciding on a financing structure for a renewables project?
Despite the general implementation in the market, every financing is unique, as each project has its own variables. Therefore, although it is possible to say that project finance in Türkiye has common general principles, both financing and corporate structures will vary depending on the nature of the project and the specific requirements. In the case of a tender set forth by the relevant authorities, for example, the structure should be in line with the tender requirements.
Refinancing options are also available after the construction is completed and the project becomes operational through initial public offerings or through capital market instruments such as bonds. Therefore, before starting a project, the potential investors should establish a strong/realistic financial model, taking into account the following:
- the financing options in the market;
- construction risks;
- operational risks;
- political risks;
- market risks;
- social and environmental risks; and
- legal/fiscal risks.
The structure should be based on these criteria.
6.4 What main financing institutions are active in your jurisdiction?
Apart from international financing institutions, such as the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD), and international export credit agencies, local public and private banks also provide loans for renewable projects. Also, some development banks and leasing institutions have recently become strong alternatives for unlicensed solar energy projects; while participation banks, which have access to alternative funding sources, are also playing a greater role.
6.5 Which financing markets are usually turned to for sources of debt in your jurisdiction, (eg, local, London, New York)?
International finance institutions such as the IFC and the EBRD have played a significant role in the financing of renewable projects in Türkiye. This funding is followed by country loans provided by international export credit agencies, which cooperate with technology providers in their respective countries. Local financing institutions – especially development banks and public and private commercial banks – have obtained funds from international financial markets through syndicated loans.
The hybrid engineering, procurement, construction (EPC) + financing model has also become popular in Türkiye, as some reputable EPC companies (mostly Chinese and German) are engaging with Turkish investors/project owners and bringing in financing for the projects on which they are the EPC contractors. This is preferred by the project owners, as it significantly reduces the financing and construction risks. One negative effect is that usually the financing and EPC costs may be slightly higher than in conventional project financing.
7 Transmission, distribution and export
7.1 What are the applicable processes for connecting renewables projects with transmission, distribution and export networks in your jurisdiction? Do these processes differ between different types of renewable technologies and between renewables and non-renewable projects?
In the renewable energy sector in Türkiye, transmission is carried out solely by Türkiye Elektrik İletim (TEİAŞ).
Distribution is carried out by private companies licensed by the Energy Market Regulatory Authority (EMRA) on a regional basis. To date, there are 21 distribution companies in Türkiye.
Electricity sales and trading are carried out by private supplier companies (including distribution companies) licensed by EMRA and the state-owned Elektrik Üretim.
Eligible consumers (ie, subscribers consuming up to 1000 kilowatt-hours per annum) may purchase electricity from generation companies, retail or wholesale supply companies and assigned supply companies through bilateral agreements. The provisions of the bilateral agreements other than the price include the minimum requirements determined under the Electricity Market Consumer Services Regulation.
TEİAŞ examines connection applications according to the procedures and principles set out in the Electricity Market Connection and System Utilisation Regulation and the Electricity Market Network Regulation. TEİAŞ will notify its opinion on the connection application to the applicant in writing within 45 days of the date of application, together with its reasons. If there is more than one application to connect to the transmission system from the same connection point, TEİAŞ will grant priority to the application for generation facilities based on renewable energy resources.
7.2 What requirements and restrictions apply to the export of renewable energy onto the network?
The export of renewable energy to other countries may be possible in Türkiye, but this will require the necessary permits and compliance with the relevant regulatory requirements. The specific requirements and restrictions for exporting renewable energy will depend on the destination country and the applicable laws and regulations.
The export of electricity is possible where:
- the national electricity system can be operated in parallel with the electricity system of the countries to which the electricity will be exported;
- one or more units of a generation facility within the borders of the country can be operated in parallel with the electricity system of the country to which the electricity will be exported;
- an asynchronous parallel connection is made; or
- an isolated region created in the country to which electricity will be exported is fed by interconnection lines.
7.3 What other considerations and concerns should be borne in mind in relation to the transmission, distribution and export of renewable energy in your jurisdiction, including participation in ancillary services, wholesale electricity trading markets, network charging arrangements specific to renewables and the ability to construct part of the connection infrastructure? Are there long queues and delays for connection?
The connection process is lengthy and sometimes delays operations, even though renewable projects have priority for connection to the grid.
7.4 Are there any initiatives, reforms or consultations relating to the connection of renewables projects?
Research and development efforts are focusing on smart grids and microgrids which would support electricity projects in general. In the absence of any specific legislation, Başkent Electricity Distribution Company has carried out the first microgrid project in Ankara in cooperation with EMRA and the Turkish Scientific and Technical Research Association.
8.1 What processes and rules apply to parties wishing to construct and operate a storage (eg, battery, hydrogen, hydro) project in your jurisdiction?
Türkiye is seeking to develop its energy storage capacity. This process is regulated by the Energy Market Regulatory Authority through the Electricity Market Law and secondary legislation. The Regulation on Acceptance of Electricity Generation and Electricity Storage Facilities, which entered into force in April 2020, aims to ensure that the acceptance procedures of electricity generation and electricity storage facilities are carried out in accordance with the relevant legislation and standards, while the relevant facilities are connected to transmission and distribution networks.
The Regulation on Storage Activities in the Electricity Market, which entered into force in May 2021, regulates:
- the establishment of electricity storage units and facilities;
- their connection to distribution and transmission systems; and
- their use in market activities.
Pumped storage hydroelectric power plants and uninterruptible power supplies installed for use during power outages are outside the scope of the regulation.
The design, installation, connection to the system, acceptance, operation and, where necessary, testing activities of electricity storage units and facilities within the scope of the regulation are carried out as defined in the relevant technical legislation, relevant standards and technical criteria.
Storage activities under the Electricity Storage Regulation include:
- storage units integrated with production facilities;
- storage facilities integrated with consumption facilities;
- autonomous storage facilities; and
- storage facilities to be established by network operators.
8.2 Are there any barriers to the development of storage projects in your jurisdiction?
Efforts are being made to develop Türkiye's renewable energy storage capacity: facilities are being established and incentives are being provided to investors. Investors that undertake to build a storage facility enjoy favourable treatment in pre-licensing procedures (see question 8.3); and generation licence holders that operate wind and/or solar energy facilities and undertake to build a storage facility can increase their capacity up to the installed capacity of the proposed storage facility.
8.3 What other considerations and concerns should be borne in mind in relation to the development of storage projects in your jurisdiction?
According to a recent amendment to the Electricity Market Law, investors that undertake to invest in an electricity storage facility under the law will obtain a pre-licence right for wind or solar energy investments established with the same capacity as the storage facility, without any need to compete. Investors that add storage facilities to existing power plants will have the right to additional capacity as much as to the power of the facility. These investments will also benefit from the Wind Power Plant Support Mechanism.
Incentives for investors may be increased to further promote energy storage activities. In 2023, the number of energy storage projects is expected to increase and technological studies are being carried out in this field.
9.1 Are there any dominant players, including dominant purchasers, in the renewables industry in your jurisdiction?
Please see question 2.2 for the dominant/key players in the renewables industry in Türkiye.
As for dominant purchasers specifically, there is no available official data in this regard. For details of electricity consumers in general, please see question 7.1.
9.2 Are there any pro-competition measures that are targeted specifically at renewables generators?
The main pro-competition measures in Türkiye include:
- the unlicensed electricity generation option;
- priority for connection to the grid;
- local component support; and
- incentives for renewable energy generators.
These facilitate significant cost savings and establish a safer environment with respect to the sale of the generated energy. Please see question 5 for further details.
Further, the Renewable Energy Guarantees of Origin System (YEK-G) and the Organised YEK-G Market are designed to monitor all processes involving generated electricity through blockchain technology, using Enerji Piyasaları İşletme's own means. The energy used by end consumers is monitored through YEK-G certificates, which prove that it was generated from renewable energy resources. As YEK-G certificates are open to trading on the YEK-G Market, renewable energy generators can also benefit from such trading.
The amount of electricity generated by a single generation company or by companies controlled by a single individual or legal entity may not exceed 20% of the total amount of electricity generated in Türkiye in the previous year. Similarly, supply licence holders may not purchase electricity in an amount equal to more than 20% of the total electricity consumed in Türkiye in the previous year.
10.1 In your jurisdiction, do disputes typically go to arbitration or litigation, and does this vary for different types of disputes? What sorts of matters tend to come up in disputes?
In Türkiye, large-scale disputes such as those relating to failed payment obligations resulting from contractual commitments are referred to arbitration, if agreed by the parties. All disputes in connection with regulatory issues, such as licences and permits, are resolved before the administrative courts; whereas disputes of a commercial nature and accusations in connection with criminal acts, such as illegal usage of electricity, are handled by the civil courts of law and the criminal courts respectively.
Mediation also plays a role in the settlement of energy disputes. Some commercial disputes must be reviewed by an arbitrator prior to litigation; others can be referred to an arbitrator if the parties mutually agree. However, as an imperative rule, disputes related to licensing, administrative fines and illegal use of electricity are heard exclusively by the competent courts. Applying to the Energy Market Regulatory Authority (EMRA) for dispute resolution is another option:
- Licence holders may refer disputes regarding connection and system usage agreements, transmission and distribution; and
- EMRA, acting as a mediator, may resolve disputes relating to concession and application agreements.
Applying to EMRA in this regard is not a legal prerequisite; nor does it prevent the applicant from taking the matter to a court of law.
Where foreign direct investment is concerned, arbitration before the International Centre for Settlement of Investment Disputes (ICSID) is also a reliable option. In terms of recognition and enforcement, domestic courts are not allowed to review ICSID arbitral awards. Also, the United Nations Commission on International Trade Law is another alternative dispute resolution forum where bilateral investment treaties are involved.
10.2 Have there been any important disputes in the public domain that relate to or may potentially impact on the renewables industry or the deployment of renewables projects?
There are no important disputes in the public domain that relate to or may potentially impact on the renewables industry or the deployment of renewables projects.
11 Trends and predictions
11.1 How would you describe the current renewables landscape and prevailing trends in your jurisdiction?
At present, renewables account for 55% of the installed capacity in Türkiye. The distribution of this ratio as at the end of January 2023 was as follows:
- 30.3% hydro;
- 11% wind;
- 9.2% solar;
- 1.6% geothermal; and
- 2.5% biomass.
Facilitating the financing of renewable projects through the successful implementation of feed-in-tariffs is crucial for such development.
While hydro, wind and solar projects are currently the main trends, it is likely that solar and wind will come to dominate the renewable market in the near future.
A tidal plant is also being developed: construction is expected to start in 2023 and to be completed within 18 months. The planned installed capacity is 77 megawatts (MW).
Studies on the green hydrogen market are still premature. However, a green hydrogen project has been initiated with the cooperation of:
- the South Marmara Development Agency;
- the Turkish Scientific and Technical Research Association;
- Eti Maden;
- the Marmara Scientific Research Centre; and
- Enerjisa Üretim.
11.2 What influence are net zero commitments having on the development of the renewables industry in your jurisdiction?
Türkiye became a contracting state to the Paris Agreement on 22 April 2016 and ratified it on 7 October 2021. Türkiye's intended nationally determined contribution under the agreement is to reduce greenhouse gas emissions by up to 41% from the business as usual level by 2030. To fulfil this commitment, Türkiye aims to:
- increase production of solar electricity to 10 gigawatts (GW) by 2030;
- increase production of wind electricity to 16 GW by 2030;
- tap its full hydroelectric potential;
- commission a nuclear power plant by 2030;
- reduce electricity transmission and distribution losses to 15% by 2030;
- rehabilitate public electricity generation power plants; and
- establish micro-generation systems, co-generation systems and production on site at electricity production facilities.
Given the current installed capacity of wind power (11.6 MW) and solar power (8 MW), it is expected that Türkiye will achieve its goals four years earlier than the 2030 deadline for wind and seven years earlier for solar.
However, Türkiye's net-zero commitment is targeted at 2053. To this end, Türkiye will:
- continue to incentivise renewable projects;
- increase capacity under the system;
- provide incentives on the utilisation of domestic equipment; and
- support the development of new technologies which would help to reduce the costs of electricity generation from renewable projects.
11.3 What new developments are anticipated in the next 12 months, including any proposed legislative reforms?
In line with Türkiye's commitments under the Paris Agreement and energy security and efficiency policies, it is expected that Türkiye will:
- prepare and announce a new energy plan;
- announce its 12th Development Plan prepared in line with its net-zero commitments;
- enact a new Climate Change Law in 2023;
- launch renewable energy resource area tenders for solar and wind projects;
- provide new tools and mechanisms to enhance the carbon credit market;
- introduce a strategy plan setting out the generation, storage and distribution of hydrogen;
- introduce smart grid and microgrid technologies to promote the efficiency, sustainability and reliability of distribution and transmission networks; and
- introduce a green renewable tariff (YETA). Through YETA, consumers using electricity generated from renewable resources only will be billed on an exclusive tariff.
12 Tips and traps
12.1 What are your top tips for renewables generators in your jurisdiction and what potential sticking points would you highlight?
Türkiye is expected to increase its installed renewables capacity by 50% of what it is today. The renewables sector thus presents significant opportunities for investment, especially for wind and solar projects. Green hydrogen and tidal projects may also become highly feasible in the coming years: the Ministry of Energy and Natural Resources has published the Türkiye Hydrogen Technologies Strategy and Roadmap consisting of five titles and 50 actions, and has provided information about its policies and targets in this roadmap.
Given the introduction of new tools on carbon credits, current electricity market prices, the new Turkish Renewable Energy Resources Support Mechanism prices, price forecasts, Türkiye's net-zero commitments and the long-term national strategy, it is clear that the Turkish renewable market presents possibilities not only for greenfield investments, but also for new M&A opportunities.
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.