Market framework

Definition of ‘renewable energy’

Is there any legal definition of what constitutes ‘renewable energy’ or ‘clean power’ (or their equivalents) in your jurisdiction?

Turkish regulations contain a number of definitions for renewable energy resources and generation plants based on such resources. In that regard:

  • the Law on the Use of Renewable Energy Resources for Generating Electric Energy No. 5346 defines renewable energy resources as non-fossil energy resources such as hydraulic, wind, solar, geothermal, biomass, gas derived from biomass (including landfill gas), wave, current energy and ebb tide;
  • the Regulation on the Unlicensed Electricity Generation in Electricity Market also defines ‘renewable energy resources’ same as Law No. 5346; and
  • Electricity Market Licence Regulation, on the other hand, defines generation plants based on renewable energy resources as plants based on wind, solar, geothermal, biomass, gas derived from biomass (including landfill gas), wave, current energy and ebb tide as well as channel or river-type hydroelectric plants or those with a reservoir area smaller than 15km² or with pumping storage.
Framework

What is the legal and regulatory framework applicable to developing, financing, operating and selling power and ‘environmental attributes’ from renewable energy projects?

In Turkey, activities related to electric energy involve generation, transmission, distribution, wholesale or retail sale, import, export and market operations of electricity and EML No. 6446 sets forth the rights and obligations of all real and legal persons related to those activities. Pursuant to the relevant law, generation, transmission, distribution, wholesale, retail sale, market operations, import and export of electricity activities may only be pursued if the required licence regarding the relevant activity is obtained.

EMRA is in charge of providing all kinds of permits, approvals and conducting audits for all activities to be undertaken in electricity markets. Distinct licences are required for each activity in electricity market and also for each plant if any activity is performed in more than one plant and the eligibility criteria to obtain licences are provided in the EML and Electric Market Licence Regulation.

Under this law, legal persons shall receive a permit known as a licence in order to operate in the electricity market. In addition to this permit, it is obligatory to secure the necessary environmental impact assessment resolutions rendered by the Ministry of Environment and Urban Affairs in order to perform the above-mentioned operations and receive licences for electricity markets.

Law No. 6446 also provides that legal persons intending to generate electricity shall have to secure a specific permit known as a preliminary licence that is valid for a specific duration so as to receive the approvals, permits, licences and so on, required for initiating the investment for generation plants. Preliminary licences could be defined as a preparatory permit issued for allowing persons to complete the required procedures in the course of the licensing process.

There are a number of exceptions to the licence and preliminary licences to be granted for renewable energy. In that, it is not necessary to receive a preliminary licence and licence for generation plants with an installed power up to 5MW or the cap determined by means of a decree of the President of the Republic and using all the energy generated in the plants based on renewable energy resources without feeding any of the energy to the transmission or distribution system and having the generation and consumption at the same measurement point. According to the article 28 of Regulation on the Unlicensed Electricity Generation in Electricity Market: ‘The energy produced by natural or legal persons at their generation facility established in a distribution place can be consumed in a consumption facility provided that it is owned by the same person and in the same distribution place.’

Licences are issued for a period of minimum 10 years and maximum 49 years with due regard for the attributes of the activity. The term of generation licences granted for renewable energy resources, however, is 30 years.

Apart from preliminary licence and licence, EMRA issues a renewable energy resource certificate (YEK certificate) to the legal person holding a generation licence to allow for determination and follow-up of the resource type during trade of electric energy generated through renewable energy resources in national and international markets. Besides the above-mentioned use of the YEK certificate, it is also used for practices under the renewable energy support mechanism (YEKDEM) for electricity generated through renewable energy resources in generation plants under the licence, and determination and follow up of resource type in the sale of electricity in renewable energy generation plants in markets under the emissions trading scheme.

Apart from YEK certificate, legal persons generating electricity from renewable resources are entitled to receive a Certificate for Generating Electricity from Renewable Resources from the ETKB as per Law No. 6446.

Government incentives

Does the government offer incentives to promote the development of renewable energy projects? In addition, has the government established policies that also promote renewable energy?

Turkey plans to increase the rate of benefit related to renewable energy resources by 30 per cent as per its energy policy. In that respect, a number of regulations are put in force in order to offer an incentive for the use of renewable energy resources.

First of all, plants generating electricity based on renewable energy resources in Turkey enjoy exemption from value added tax and customs duty. Besides, the EML No. 6446 provides that the annual licence fee will not be collected for generation plants using domestic natural resources and renewable energy resources for the first eight years as from the completion of the plants indicated in the relevant licence.

Also, the YEKDEM has been launched based on the Law on the Use of Renewable Energy Resources for Generating Electric Energy No. 5346. YEKDEM aims to offer incentives to persons involved in generating electricity based on renewable energy resources in Turkey and support generation of electricity based on renewable energy resources. This system sets forth distinct prices, terms and payment methods to be utilised by legal entities generating electricity based on renewable energy resources under generation licences themselves or through supply companies for persons generating electricity without generation licences. Generation plants registered in the system are entitled to benefit from YEKDEM for 10 years and sell electricity at the fixed prices as specified in the Law (see table below) until the amendment mentioned above on Law No. 6446.

Schedule No. I (provided in Law No. 6094 dated 29 December 2010)

Applicable prices (US dollar, cent/kWh)

Hydroelectric generation plant

7.3

Wind-based generation plant

7.3

Geothermal-based generation plant

10.5

Biomass-based generation plant (including landfill gas)

13.3

Solar-based generation plant

13.3

Decision dated 10 May 2019 regulates that; provided that the installed capacity of the generation facilities subject to YEKDEM, which is entitled to receive a connection agreement call letter, is limited to the connection agreement contract power of the consumption facility; the retail single-time active energy price of its subscriber group announced by EMRA shall be applied to the surplus electricity generated for a period of 10 years from the date of commissioning of the facility for the following: (i) up to 10 kW (including 10 kW) for residential subscribers, with production and consumption at the same measuring point; (ii) and solar and power generation facilities with roof and facade applications for industrial and commercial and lighting subscribers as well as electricity consumption facilities based on other renewable energy sources.

Thus, investors are protected from market risks for 10 years and they are given due support by elimination of any ambiguity. This also provides an additional security for the funding of the project. YEKDEM is considered to be the most important incentive for renewable energy resources in Turkey. Therefore, the figures provided below that amount to a purchasing guarantee are extremely important for domestic and foreign investors.

The incentives provided for renewable energy investments are not limited to those indicated above. The ratio of domestic parts incorporated into the equipment used for investments is also important. According to the system known as the domestic contribution, the prices available in Schedule No. I are increased in the form of domestic contribution for five years according to the ratio of domestic contribution in the equipment based on the ratios provided in the Law (Schedule No. II provided in Law No. 6094 dated 29 December 2010). In that manner, incentives are offered for research and development activities and localisation that are critical for the development of renewable energy. Currently, hydroelectric power plants have the largest share on the list of plants benefiting from YEKDEM as there are 465 plants. Also 160 wind plants, 98 biomass plants, 45 geothermal plants and nine solar plants are known to benefit from YEKDEM (see www.enerjiportali.com/wp-content/uploads/2018/12/2019-Y%C4%B1l%C4%B1-Nihai-YEK-Listesi.pdf). As of the end of 2016, 21.98 billion Turkish liras was paid for 62,474,456.66MWh electricity generated in plants with installed power of 88,438MW under YEKDEM. Hence, YEKDEM became very attractive for investors in Turkey in recent years.

Another incentive method called the renewable energy resource area (YEKA) has come under the Regulation on Renewable Energy Resource Areas, which came into the force on 9 October 2016. This regulation defines YEKA as an area, on either property belonging to the public or Treasury, or privately owned property, which has a high potential for at least one renewable energy resource. The purpose of this new method is creating large-scale YEKA areas for the efficient use of renewable energy resources. To achieve this goal, this new regulation aims to determine these YEKA areas, to allocate connection capacity for these areas, to determine the conditions of the tender for the participating legal persons and the licence application process for tender winners, and also to determine the procedures regarding the sale of the electricity generated in YEKAs. Under the regulation on YEKAs, the use of both domestic equipment and domestically manufactured equipment for YEKA projects is also ensured. YEKA has already become and will continue to be an important development platform for large-scale big-ticket projects.

Are renewable energy policies and incentives generally established at the national level, or are they established by states or other political subdivisions?

In Turkey, renewable energy policies and incentives are regulated at the national level. In that regard, ETKB prepared a National Renewable Energy Action Plan to increase the share of renewable energy resources in energy generation portfolio.

The National Renewable Energy Action Plan is also an international document available to public opinion that transparently describes the development objectives of Turkey, as well as the measures intended to be taken in line with such objectives as a document issued in compliance with the Directive 2009/28/EC of the European Parliament and of the European Council of 23 April 2009 on offering incentives for the use of energy from renewable resources.

Regional administrations or municipalities do not have any role in any part of energy market policies and incentives that are administered and audited by national state mechanisms (eg, the ETKB, EMRA).

Nevertheless, a number of regional tax rebates and similar incentives are introduced from time to time to eliminate the inequality among the regions in the country under regional investment incentive programmes.

Legislative proposals

Describe any notable pending or anticipated legislative proposals regarding renewable energy in your jurisdiction.

As a party to the Paris Convention, Turkey has provided intended national contribution declarations. Accordingly, Turkey declared that it shall reduce greenhouse gas emissions calculated based on the reference scenario by 21 per cent in 2030. Several planning and strategy documents were prepared in order to realise the contribution declarations made by Turkey under the Paris Convention. Such documents include different action plans on matters such as climate change, industry, energy efficiency, recycling and transportation systems. Although those documents do not have the force of law in legal terms, they could be considered as indicative of the contents of legislative proposals that might be presented in the near future. It is reasonable to anticipate that Turkey shall continue to offer certain incentives in the renewable energy field. There is no public draft or legislative proposal that aims to alter the foregoing status quo (especially with respect to YEKDEM and domestic contribution model).

Disputes framework

Describe the legal framework applicable to disputes between renewable power market participants, related to pricing or otherwise.

Under Turkish law, there is no provision stipulating specific dispute settlement between renewable power market participants and that requires an application to be made to an arbitration or mediation procedure before filing a lawsuit.

However, regarding the settlement of certain disputes, an option to apply to EMRA is provided under the legislation. For example, pursuant to the Electricity Market Licensing Regulation, concerning the resolution of disputes related to connection and system usage agreements, transmission and distribution licence holders may apply to EMRA or EMRA may act as a mediator for disputes arising from concession and application agreements. Nevertheless, litigation is always possible for the parties despite applying to EMRA.

With respect to disputes to be resolved via litigation, the legal status of the renewable power market participants has an important role in the determination of whether administrative or legal jurisdiction will be pursued. In the event that one of the parties to the dispute is an administrative body and an administrative act is established, it shall be applied to administrative jurisdiction. Such disputes arise in the renewable energy sector mainly because of the inability of generation companies to benefit from YEKDEM or from incentives provided within the scope of promotion of domestic components.