Following the licensing-boom in 2015 for wind and solar, the Turkish Renewable Energy Market is once again attracting significant attention from investors for greenfield projects with the enactment of the Regulation on Renewable Energy Source Areas (the "RESA Regulation") and the newly adopted investment incentives.
Before the enactment of the RESA Regulation in October 2016, the Electricity Market Licensing Regulation1 (the "Licensing Regulation") and the Unlicensed Generation of Electricity in the Electricity Market2 were the only two options for investors looking to enter the Turkish renewable energy market. The RESA Regulation introduced a third option, enabling the construction and operation of power plants with high installed capacities on large renewable energy areas. One key commercial difference with the RESA Regulation is that it requires (rather than, as with the Licensing Regulation, incentivises) the use of domestic equipment in the construction and development of power plants.
The Karapınar RESA, with a total solar capacity of 1 GWe, was the first RESA tendered under the RESA Regulation. The Tender Specifications saw several amendments with a view to provide a more flexible investment structure. The tender was conducted in accordance with the Dutch auction method and was finalised on 20 March 2017. According to final results, the electricity to be generated will be sold at USD 6.99 cent/kWh for a period of 15 years. Needless to say, the Karapınar tender has established a baseline for the economics of future tenders but perhaps just as importantly, it has allowed the opportunity for the regulator to smooth out the rough edges of the RESA Regulation.
Although none of the amendments present material policy changes, they are nonetheless important as they aim to allow more flexibility to investors during the tender process. To illustrate, the former version of the RESA Regulation was (perhaps overly) prescriptive on matters such as the duration of RESA generation licences and permitted construction periods. The Amending Regulation3 now defers all of these questions to applicable Tender Specifications, allowing the opportunity to craft more bespoke investment structures for each RESA. The Amending Regulation also widens the sanctions in the event of a default in the use and/or manufacture of domestic products.
Following the publication of the Amending Regulation, a new tender announcement, this time for wind energy, was published by the Ministry of Energy and Natural Resources on 13 April 2017. Similar to the Karapınar RESA, a 1 GWe connection capacity is going to be tendered. The tender will be realised on 27 July 2017 and will be conducted using the Dutch auction method with an initial electricity energy bid price of USD 7.00 cent/kWh. The electricity to be generated will be sold for a period of 15 years as of the signing date of the RESA Right of Usage Agreement.
The Turkish renewable energy market is once again in the spotlight for greenfield opportunities as a result of the RESA Regulation and its recent amendments. The recent amendments to the RESA Regulation offer the promise of increased flexibility in tender terms and to bolster market confidence in terms of the investor friendly approach of the administration. With both market players and the administration looking to capitalise on the experience gained through the first RESA tender, energy investors should mark their calendars for the second RESA tender currently scheduled for 27 July 2017.
1 Published in the Official Gazette dated 2 November 2013 and numbered 28809
2 Published in the Official Gazette dated 2 October 2013 and numbered 28783
3 The Regulation on Making Amendments to the Regulation on Renewable Energy Source Areas, published in the Official Gazette dated 11 April 2017 and numbered 30035
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