Introduction

Turkey's energy strategy for 2015 to 2019 is based on:

  • good governance and shareholder interaction;
  • regional and international effectiveness;
  • technology, research and development and innovation; and
  • improving the investment environment in the energy and natural resources field.

In keeping with this strategy and its goal of improving the energy generation sector's investment environment, the government recently introduced significant legislative amendments.

Legislative amendments

Changes were made in the unlicensed electricity generation sector, the most significant of which were the restrictions introduced on share transfers until a facility has received provisional approval. As with the changes introduced to the licensed electricity generation sector, this reflects government policy and the aim to block the issuance of grid connection agreement invitation letters to facilities without the required capital to realise the proposed generation projects, which then trade the invitation letters at higher market prices. The amendment aimed to encourage investors that:

  • wish to invest in the unlicensed renewable energy sector; and
  • have the capital to finalise the proposed projects.

Conversely, amendments to the Electricity Market Code 6446, among others laws, were recently passed. The amendments that best reflect the government's electricity generation sector strategy are:

  • the privatisation of the Electricity Generation Corporation and its affiliates and assets; and
  • the promotion of the use of local products in generation plants in the renewables sector.

The amendment regarding the privatisation of the Electricity Generation Corporation and its affiliates establishes a simplified privatisation procedure and temporary immunity from environmental legislation requirements. The amendment suggests that:

  • the Electricity Generation Corporation's privatisation is the government's priority; and
  • the government is willing to adopt the measures required to ensure the generation sector's privatisation.

The amendment regarding the use of local products envisages that local products will be used in future renewables sector project. Together with its policy of increasing energy generation from renewable resources, Turkey is taking solid and serious steps to give the renewable energy market a boost.

Renewable energy source regions

The most recent step taken in that regard was the enactment of Regulation on Utilisation of the Renewable Energy Source Regions on October 9 2016.

Aims

The regulation aims to foster the efficient use of renewable energy sources by establishing regions for large scale renewable energy sources (known as YEKAs) on immovable properties owned by public, treasury and private entities and ultimately to:

  • allocate those regions to investors so that their investments can be realised promptly;
  • ensure that high-tech components used in electricity generation facilities are produced in Turkey or purchased from the local market; and
  • support technology transfer.

Scope

The regulation's scope includes:

  • the terms and conditions applicable to determine YEKAs;
  • organising the relevant competition for the allocation of YEKAs to investors;
  • the issuance of connection opinions and the allocation of capacities to investors conditional on the use of local products;
  • establishing the conditions sought from legal entities participating in the competition and terms relating to financial securities; and
  • establishing criteria relating to licensing applications of successful legal entities and the procedures regarding the sale of electricity produced.

It is expected that YEKAs will be developed through studies undertaken by the General Directorate of the Ministry of Energy and Natural Resources and studies conducted after the connection capacity competition has been completed.

Open competition

Competitions relating to the right to use YEKAs will be published on the website of the General Directorate of the Ministry of Energy and Natural Resources. The announcements will detail:

  • the offer's technical and administrative particulars;
  • the YEKA's connection capacity;
  • the required securities;
  • the requirements that the bidders must meet;
  • the maximum purchase price for electricity purchased from investors;
  • the period for purchasing electricity from investors; and
  • other information relevant to the bid.

Auction by underbidding

The competitions will be based on an auction by underbidding, in which the party that makes the lowest offer for each kilowatt hour (to the extent that other conditions are also met) will be invited to sign an agreement to use the relevant YEKA.

Licensing, term and pricing

The awarded company will still be subject to the applicable licensing procedures. Electricity to be produced within YEKAs will be considered within the scope of the renewable energy source support mechanism (YEKDEM) at a price and for a term specifically stated in the agreement entered into by the company awarded the right to use the relevant YEKA. When the terms of the agreement to use the relevant YEKA expire, the company will operate within the general energy market at market prices.

For further information on this topic please contact Ömer Kesikli at Kesikli Law Firm by telephone (+90 216 348 29 24) or email (omer@omerkesikli.av.tr). The Kesikli Law Firm website can be accessed at www.kesikli.com.

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