As a country with a rapidly growing economy, Turkey has an increasing energy need. At the moment, the energy need is mostly met by fossil fuels and a large portion of it is imported. Turkey, on the other hand, has a large potential for renewable resources. Within this context, Turkey has enacted important pieces of legislation to encourage the use of different renewable energy resources in order to increase the energy production from domestic energy resources, to decrease the use of fossil fuels and reduce of green house gas emissions in Turkey. Consequently, the share of energy production from renewable energy sources has increased considerably during the recent years. It is also important to underline that Turkey has recently acceded to the Kyoto Protocol. This paper outlines the Turkish legislation concerning renewable energy.
2. General Framework
The main piece of legislation governing the electricity sector in Turkey is the Electricity Market Law numbered 4628 (“Electricity Market Law”) . The Electricity Market Law was enacted in 2001 with the aim to liberalize the electricity market. The Electricity Market Law deals mainly with the following issues:
- the actors of the electricity market, and
- licenses required in order to operate in the sector, and
- the duties of the Energy Market Regulatory Authority (“EMRA”)
The general principles set forth in the Electricity License Market Law are further detailed in the secondary legislation enacted based on this law. The secondary legislation governing the obtaining of the licenses is the Electricity Market Regulation (the “License Regulation”). Energy Market Law and License Regulation set forth general principles related to renewable energy and have been amended various times in order to encourage more investment in the renewable energy projects, particularly the wind energy projects.
In addition to the main piece of legislation outlined above, the Law on the Use of Renewable Resources for the Generation of Electrical Energy (the Renewable Energy Law”) was enacted in 2005. The Renewable Energy Law governs the principles for the conservation of renewable resource areas and introduces further incentives for renewable energy projects. According to the Renewable Energy Law,
Published in the Official Gazette dated 3 March 2001 numbered 24335 as amended by Law No: 5496 published in the Official Gazette dated 24 May 2006 numbered 26177 and Law No: 5784 published in the Official Gazette dated 26 July 2008 numbered 26948
Published in the Official Gazette dated 4 August 2007 and numbered 24836
Published in the Official Gazette dated 18 May 2005 and numbered 25819
the facilities within the scope of this law are required to obtain a Renewable Energy Source Certificate in order to benefit from the incentives provided under the law. The procedures for benefitting from the incentives are detailed in the Regulation on Granting of Renewable Energy Source Certificate (“the Renewable Energy Certificate Regulation”).
The entities have to obtain a license from the EMRA in order to operate in the electricity sector. The types of licenses which may be granted by the EMRA consist of generation license, auto-generation license, auto generation group license, transmission license, distribution license, wholesale license and retail sale license.
The procedure and requirements of license application are detailed in the License Regulation. Accordingly, the entities applying for a license must be established in the form of a joint stock company or limited company under the Turkish Commercial Code. The major application and post approval requirements include the following:
- the payment of the license fees,
- provision of letter of guarantee,
- amendment of the Articles of Association (“AoA”) of the applicant company to adjust to the minimum share capital and other requirements envisaged by the License Regulation
- payment of the annual license fees determined by the EMRA
As a consequence of the policy to encourage private investment in the renewable energy projects, the License Regulation stipulates that the legal entities applying for licenses for the construction of facilities based on domestic natural resources and renewable energy resources shall only pay 1% of the total license acquisition fee and do not pay annual license fee for the first 8 years following completion of the construction of the related facilities. The Turkish Electricity Transmission Company (TEIAS) and distribution companies are required to give priority status for renewable energy facilities’ systems connection.
4. Renewable Energy Law
In addition to the incentives provided by the Electricity Market Law and the License Regulation, the Renewable Energy Law, which came into force on 18 May 2005 was enacted in order to provide more incentives for renewable energy resources. The facilities must obtain a Renewable Energy Source Certificate (“REC”) in order to benefit from the incentives provided under the Renewable Energy Law. According to the Renewable Energy Certificate Regulations, the entities should apply to the EMRA for obtaining REC and such applications should be reviewed by the EMRA within 30 days as of the date of the application. The REC is granted for a term of one year.
The renewable energy resources covered by the Renewable Energy Law are wind, solar, geothermal, biomass, biogas, wave, stream, tidal, river and arc type
Published in the Official Gazette dated 4 October 2005 and numbered 25956
hydroelectric generation facilities and hydroelectric generation facilities with a reservoir area of less than fifteen km².
The incentives provided by the Renewable Energy Law are as follows:
a.Holders of retail licenses are obliged to purchase a percentage of their total uptake from licensed generation companies holding a REC, which are established prior to 31 December 2011 and which have been operating in the sector less than 10 year.
The percentage of the total uptake of retail electricity distribution to be purchased from entities with a REC should be calculated considering the proportion of the energy they have sold within the previous calendar year against the total electrical energy amount which all entities holding retail electricity distribution licenses sold in Turkey in such year.
b. The price of the electricity to be purchased under the Renewable Energy Law should be the country average of the electricity wholesale price of the previous year to be determined by the EMRA. In any case, the price to be determined cannot be less than the Turkish Lira equivalent of 5 Euro Cent/kWh and more than 5,5Euro Cent/kWh. However a generator can sell the electrical energy generated for a higher price in the market if there is possibility.
c. In the event that the forests and the lands under private ownership of the Treasury or under the control or disposal of the State are utilized for the generation of electricity from renewable energy resources, such lands shall be leased to or right of way or usufruct rights thereof shall be granted to the relevant entities. The fees to be paid for using such lands shall be reduced by 85%.
d. There are certain incentives concerning the investment periods of the projects. For example, the service fees will not be collected from the individuals or legal entities willing to construct generation facilities to meet their own energy needs from renewable energy resources for the preparation of final project, planning, master plans, initial examination and initial studies to be performed by the State Hydraulic Affairs General Directorate or the Electricity Affairs General Directorate. In addition, the investments for energy generation facilities, procurement of electro-mechanic systems within the country, research, development and production investments concerning solar energy units, and research and development investments for biomass energy may benefit from the incentives upon a Council of Ministers’ Decree.
e. The need for heat energy in the municipalities where there are sufficient geothermal energy resources will be primarily met by geothermal and solar thermal energy resources.
f. In addition to the above-stated incentives, the Renewable Energy Law also provides that development plans, which might have a negative impact on the use and efficiency of renewable energy resource areas can no longer be created on public land.
A draft Amending Law to the Renewable Energy Law has recently been prepared in order to provide further incentives to the renewable energy sector. According to the draft amending law, different minimum purchase prices varying between 5 Euro Cent/kWh to 18Euro Cent/kWh are stipulated for electricity produced from different type of renewable energy resources. The purchase obligations are provided to be extended to facilities established prior to 1 January 2016.
This Memorandum provides a brief description of some of the important aspects of Turkish Renewable Energy Legislation. The information provided is not intended to serve as a legal advice. Before taking any action or relying on the information given, the addressees of this Memorandum should seek specific advice on the matters which concern them.