The Regulation on the Electricity Market Capacity Mechanism ("Regulation") which sets forth the principles and scope of the capacity mechanism operated by the Turkish Electricity Transmission Company ("TEIAS") has been published in the Official Gazette No. 31693 dated 18 December 2021. The Regulation came into force on 1 January 2022. You can read the Regulation here (available in Turkish only).
The capacity mechanism ensures reliable and secure installed power capacity and/or long-term system security in the electricity market. The Regulation defines activities such as the determination of the annual budget that forms a basis for the execution of the capacity mechanism and payments, the fixed cost component, the estimated capacity usage rates, and the priorities given to domestic resources.
In previous years, license owners of electricity generation facilities have faced financial difficulties as natural gas prices or other expenses have increased, while sales prices in the electricity market have remained relatively low. As a result, some of these legal entities went out of business, and others had their licenses revoked.
Consequently, the former Regulation on the Electricity Market Capacity Mechanism came into force on 20 January 2018 to support stakeholders in overcoming these obstacles. With the implementation of the Regulation, the previous regulation has been annulled and new changes have been introduced.
Who can apply?
Legal entities with a generation license who are eligible to benefit from the capacity mechanism for the first time in the next calendar year can apply to TEIAS. It should be noted that applications for entities who intend to be included in the capacity mechanism in 2022 must be made within 15 days of the date of the Regulation's publication. Entities that currently benefit from the mechanism do not need to re-apply. TEIAS will evaluate and publish whether former beneficiaries still meet the necessary conditions.
Power plants that meet at least one of the following conditions are not included in the capacity mechanism:
- Nuclear power plants,
- Power plants that have previously operated or are in operation under the Build Operate Transfer agreement,
- Power plants based on wind and solar energy,
- Power plants for which privatization tenders were made after 20 January 2018,
- Power plants that benefit (or have the right to benefit) from YEKDEM,
- Power plants with an efficiency ratio of less than 50 percent that do not rely on domestic resources,
- Power plants in which the public share exceeds 50 percent, excluding mobile trailer power plants owned by the Electricity Generation Corporation ("EÜAS"),
- Power plants established by winning a privatization tender within the scope of the Electricity Market Law,
- An installed electricity capacity of fewer than 50 MWe for power plants based on domestic resources and below 100 MWe for other power plants.
Participation in the Capacity Mechanism
Application forms for each power plant operated by legal entities holding a generation license that intend to benefit from the capacity mechanism for the first time in the next calendar year and candidate application forms for each power plant accepted until the next calendar year must be submitted to TEIAS by the 15th day of October. TEIAS will evaluate all the applications made for the first time and decide whether power plants previously included in the capacity mechanism meet the necessary conditions within the framework of this Regulation. It will then announce which power plants benefit from the capacity mechanism in the next calendar year on its website by the last day of October and notify the Energy Market Regulatory Authority ("EPDK").
The new Regulation has amended the date for the proposal of annual budgets for capacity payments made in the next year and the billing period of the budget's distribution submitted to the Electricity Market Regulatory Board from October to December. The EPDK's acceptance date has been extended from November to January.
The determination of capacity payments now includes variable cost components and the market exchange price, as well as fixed cost components and the total installed power capacity by source.
In the event that beneficiaries fail to provide the necessary conditions following a capacity payment, the payment will be refunded with interest at a rate determined by the Law on the Collection Procedure of Public Receivables No. 6183.
The Regulation introduces a number of benefits and amnesties in different forms and intends to prevent economic uncertainties caused by changing market conditions as well as providing long-term system security. All electricity market stakeholders are advised to carefully analyze the impact of the new amendments and other laws related to the energy market to be able to take advantage of the incentives and to detect and prevent possible violations.
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.