Recent developments 

The Energy Market Regulatory Authority ("EMRA") issued an amendment to the Regulation on Unlicensed Energy Generation (the "Regulation") and the Communiqué on Implementation of Unlicensed Energy Generation (the "Communiqué") (together, the "Amendment") on March 23, 2016. The long awaited draft Amendment was first published on EMRA's website in December 2015, and included restrictions on the total installed capacity of adjacent unlicensed plants controlled by the same person or entity as well as share transfer restrictions. The published Amendment, in addition to the restrictions outlined in the draft, introduces a maximum limit for the amount of "excess energy" to be fed into the grid, and includes rules and procedures for situations where there are multiple applications for licensed and unlicensed generation in the same area, as well as other major changes regarding grid connections.

Highlights

Restrictions on Total Installed Capacity

With the exception of rooftop installations, the Amendment introduces a restriction on the total installed capacity of plants held directly or indirectly by the same person(s). Accordingly, the total grid allocation to be made to unlicensed power plants held by a person or entity, and/or entities in which such persons have direct or indirect shareholding, may not exceed 1 MW per transformer center. Applicant entities must submit information regarding their direct and indirect shareholding to the relevant distribution company or TEİAŞ during their system connection application.

Maximum Excess Energy Level 

Prior to the Amendment, the Regulation and Communiqué did not include any threshold or criteria for excess energy which could be fed into a grid. Therefore, unlicensed plants could sell energy on the grid without the energy consumption, causing controversy, as non-consumption was considered to be against the spirit of unlicensed generation under the Energy Market Law.

The Amendment introduces a maximum level of excess energy that unlicensed plants can feed into the grid. Accordingly, the excess energy to be fed into the grid by wind and solar energy unlicensed power plants may not exceed 30 times the connection capacity under the connection agreement of the consumption facility associated with the power plant. The principles and procedures for determining the excess energy will be regulated by EMRA within six months following the issuance of the Amendment.

Distance to Grid Connection

After the Amendment, the distance from the unlicensed plant to the connection point may not exceed:

  • five km (from an aerial view) for plants with an installed capacity below 0.499 MW, and
  • ten km (from an aerial view) for plants with an installed capacity between 0.5 MW and 1 MW.

The distance of the plants, as provided under their projects, from the connection point may not exceed 6 km and 12 km, respectively.

TÜBİTAK Report and General Staff Measures

Unlicensed wind energy generation applicants (that have passed the technical evaluation of the General Directorate of Renewable Energy) are obligated to also apply to TÜBİTAK for a technical interaction report. The technical interaction report is a prerequisite to obtain a license under the Energy Market Licensing Regulation, but was not introduced in the Regulation prior to the Amendment. Additionally, unlicensed wind energy plant owners must implement the measures required by the General Staff for turbines that impact military systems in times of crises or war. This, again, is a reflection of a similar obligation imposed on wind energy license and pre-license holders under the Energy Market Licensing Regulation.

Shareholding Restrictions

There will now be extensive share transfer and shareholding restrictions, which were not regulated under the Regulation or Communiqué.

Share transfers of companies that applied for grid connection for an unlicensed project are prohibited until temporary commissioning for such project is granted. The Amendment, however, remains silent as to whether these restrictions apply to indirect share transfers.

The following persons and entities may not engage in unlicensed energy generation activities above 50 kW, within the distribution area of the relevant distribution company or its shareholders: (i) Direct and indirect shareholders of distribution and retail sale companies and their immediate relatives, (ii) employees of distribution and retail sales companies and their direct and indirect shareholders, as well as the immediate relatives of such employees, and (iii) entities which are under the control of the persons and entities under (i) and (ii). 

Multiple Applications

The Amendment regulates cases where there is a pre-license application in the same area as the unlicensed plant application. Accordingly, an unlicensed application cannot be made for the same area subject to a pre-license application. However, if a pre-license application is made for an area subject to an unlicensed plant application:

  • In cases where the pre-license application is for wind or solar energy, both applications received an affirmative decision from the General Directorate of Renewable Energy for their technical evaluation, the unlicensed plant application received an invitation letter for grid connection, and the two projects can cohabitate, both projects will be realized;  
  • In cases where the pre-license application is for a source other than wind or solar energy, and the unlicensed plant applicant did not receive an invitation letter for grid connection, the unlicensed plant application will be rejected;  
  • In cases where the pre-license application is for a source other than wind or solar energy, and the unlicensed plant applicant received an invitation letter for grid connection, the pre-license application will be rejected.

Effective Date of the Amendment

The effective date of the Amendment is the date of its publication, March 23, 2016. However, the Amendment provides that the articles regarding restrictions on total capacity, maximum excess energy levels, and distance to grid connection do not apply to those projects for which the right to receive the connection agreement invitation was published on the website of the relevant distribution company or TEİAŞ. In other words, if a project was published on the website of the relevant distribution company or TEİAŞ as a project which has received an invitation letter, these restrictions will not apply to that project.

Conclusion

The Amendment introduces significant changes to address issues and controversies in the market regarding unlicensed energy generation. The amendments regarding the maximum excess electricity to be fed into the grid, and the maximum installed capacity owned by the same person or entity for the same transformer center are intended to prevent unlicensed energy generation from becoming a commercial activity and to keep it as a tool for energy generation for self-consumption. Even though these amendments will prevent future applicants from using unlicensed energy generation opportunities as a primary business model, the previous grid connection invitation letters will not be impacted by the changes.