Turkey’s EnergyMarket Regulatory Authority (“EMRA”) will grant the first ever solar energy licenses after receiving applications between June 10-14 this year, for a maximum total capacity of 600MWin 27 regions previously announced by the Ministry of Energy.
Demand for electricity in Turkey has been growing at an annual rate of almost 8% and Turkey is highly dependent on imports of oil, natural gas and hard coals tomeet this increasing demand. In an attempt to cut down on this high “energy bill,” the government has been promoting renewables, and Turkey’s vast solar energy potential (380 TWh and 2,640 hours of insolation per year) offers an opportunity not to bemissed.
The license application process was launched inMay 2012 sparking significant interest from the global industry. Notwithstanding a one-year solar radiationmeasurement requirement as a condition to the license applications, there are reportedly over 600 interested parties that applied to the Directorate of Meteorology to initiate the solar measurement process. The Directorate of Meteorology is responsible for the control and evaluation ofmeasurement data, and in lateMarch, it shortened the evaluation process from30 days to 10 days which has reportedly enabled some 200 more entities to apply for a license (who would otherwise not be able to complete the one-year measurement requirement).
License applicationsmust pertain to a specific site. Generatorsmust first get an authorization from the Directorate of Meteorology to set up a measurement station on such site and then submit to EMRA measuring data of at least one year, including an on-sitemeasurement conducted for at least sixmonths. Once the on-site data has been secured by the applicant, the data pertaining to the remainder of the oneyear periodmay be obtained frommeteorology stations of the Directorate of Meteorology.
When EMRA announced the deadline for solar power license applications, it also set out some terms and conditions for licensing. For instance, agricultural lands will not bemade available for solar power investments: amaximum of two hectares can be allocated for each 1-MWproject; and the total annual solar radiation cannot be less than 1620 kWh/m2. EMRA did not specify the technology to be used by the generators; therefore the licence holder will choose the appropriate technology (photovoltaic or concentrated). Applicantsmust also fulfill the general licensing preconditions set forth in the relevant regulations.
Solar power generators can benefit fromvarious advantages introduced by the Law No. 5346 on Utilization of Renewable Energy Resources for Electricity Generation (the "Renewable Energy Law"). Earlier in 2011, the Renewable Energy Law was amended to provide for feed-in tariffs for renewable generators that opt into the "renewable energy supportmechanism." The renewable energy supportmechanism encompasses various incentives introduced by the Renewable Energy Law, including the domestic component incentives. Solar power plants (photovoltaic and concentrated) are granted a feed-in tariff of USD 133 perMWh. With the domestic component incentives, the applicable feed-in tariff can go as high as USD 200 perMWh in photovoltaic plants and USD 225 per MWh in concentrated plants. These incremental price incentives apply only to projects that commence operations before December 31, 2015 and opt into the renewable energy supportmechanism. Incentives for using domesticallymanufactured components are available for five years after a project commences operations. Generators that do not opt into the renewable energy supportmechanismwill sell the power to the national grid or through bilateral trading.
The Renewable Energy Law also provides other benefits, such as reduced costs in accessing and using state-owned land and priority in grid connection. Renewable generators are almost fully exempt fromthe license application fee and annual license fees.
Most recently on March 30, 2013, a new law regulating the electricitymarket in Turkey (the “Electricity Market Law”) came into effect. The Electricity Market Law has introduced certain important changes such as a pre-licensing mechanism. Going forward, generators will be issued a preliminary license during the pre-construction stage, which will be replaced by a (permanent) license at the beginning of the construction. During the pre-licensing period, the generator must obtain the required permits, approvals and licenses to start the construction and also secure title to, or right of use of, the relevant land. The pre-licensing period is 24 months, unless there is a forcemajeure event (unavoidable and unforeseeable events beyond the reasonable control of the generator, including acts of God and war) or it is extended by EMRA (under certain circumstances), which cannot exceed an additional 12 months. If the generator fails to secure the required permits, approvals or licenses within the pre-licensing term, no permanent license will be issued. Direct or indirect changes in the shareholding structure of the generator is prohibited during this period and such changes will result in the revocation of the pre-license as will the failure of the generator to fulfill any requirements imposed by EMRA. The upcoming applications for solar power in June will be pre-license applications.
Permanent (generation) licenses are granted for aminimum of 10 years and for a maximum of 49 years. Other than expiry of the term, licenses are terminated upon request by the generator if the generator is declared bankrupt, or no longer fulfills the licensing conditions.
As a general rule, licenses are not transferrable. However, a step-in right is granted to lenders in limited or non-recourse project financing and theymay request EMRA’s approval for the transfer of the license to another legal entity provided that this entity assumes all the obligations of the related license holder.