2nd Renewable Corporate Power Purchase Agreements (“PPA”) Workshop

                                                              EXECUTIVE SUMMARY

Date: 18 June 2020
Venue: Online
Organizers: Solarbaba and TurSEFF
Legislation and Moderation Support: Ege Law

  • Energy Companies: Aksa Energy, Aydem, BayWa, Borusan EnBW, EnerjiSA, Engie, Entek, Foton Energy, Limak, OMV, Pure Energy, RES Anatolia and YBT Energy
  • Financial Institutions: Akbank, AkLease, Garanti BBVA Bank, Garanti BBVA Leasing, Isbank, Is Leasing and TSKB
  • Electricity Consumer Brands: H&M, Inter IKEA Group Textile Category, Lindex and Sisecam

Guest Participants: EPDK, Coorbiz, ELDER and Oculus Insights


Three workshops have been planned by TurSEFF & Solarbaba for 2020 in Turkey with the main theme of “Power Purchase Agreements (PPA) as a model to create new renewable energy installed capacity” and the second workshop was held. The purpose of those workshops is to brainstorm with the participation of different parties and to present the useful ideas emerging from the synergy as reports to the public opinion, thus, to open the subject to discussion for its development. Each workshop is designed to focus on a different key aspect of Renewable Power Purchase Agreements (PPA). 

The first workshop took place with a focus on “electricity generation and trading” on February 22, 2020 at TurSEFF office with the participation of energy companies, who are currently working on the issue. Financial institutions, energy companies and corporate consumers participated in the second workshop with a focus on “finance” on June 18, 2020. The third workshop will be organized focusing on “consumer” aspect with the participation of more corporate electricity consumers from different sectors. 

In the executive summary of the second workshop below, the issue is presented from the perspectives of three parties of Power Purchase Agreements (PPA); (i) energy companies (electricity producer / seller) who are the IPPs (Independent Power Producers) and investors for renewable energy projects, (ii) corporate electricity consumers (buyers) who buy clean energy to be generated from these power plants in the long term and (iii) financial institutions to finance the projects.


From the perspective of textile sector:

Textile industry is among the most important sectors in Turkey in terms of production and trade. According to IHKIB’s (Istanbul Apparel Exporters’ Association) “Developments in the Global Apparel Industry” report dated 2019; Turkey ranked sixth place in the world in 2019 with 17.6 billion US dollars in export value for apparel exports. Moreover, the European Union countries’ apparel imports from Turkey in 2019 was 15.2 billion US dollars in import value and Turkey ranked third with 11.1% share.

Many global textile brands have production coordination offices and common manufacturing supply chains in Turkey. There is also a “Brands Joint Platform” with the participation of more than 20 global textile brands carrying out studies for manufacturers in textile supply chains. Three brands, which are members of that platform – H&M, IKEA Group Textile Category and Lindex contributed on the consumer side by participating in our workshop. 

These brands have goals and roadmaps on sustainability and climate change for 2030, 2040, whose details can be seen in their annual sustainability reports and they need to select their manufacturers in their global supply chains in accordance with the goals to be able to attain them. In this context, brands follow the manufacturers in their supply chains by conducting performance evaluations in the process to assure their compatibility with the goals. These performance evaluations require manufacturers to carry out some works and improvements in the process for the utilization of renewable energy and energy efficiency to reduce their carbon emission in line with the goals of being carbon neutral and then carbon positive of the brands. The brands also organize various trainings and awareness raising activities to contribute to the efforts of the manufacturers in their supply chains.

The textile manufacturers in Turkey are in a variety of size and capacity; along with the large factories, there are smaller manufacturers subcontracting or producing in limited rental spaces unfit for on-site renewable energy applications as well. For this reason, regarding the consumption of electricity from renewable energy, the brands demand from the manufacturers to generate their own electricity within the scope of self-consumption, if applicable, and if not to purchase electricity from renewable energy or renewable energy certificates instead. As per examples in Europe, i.e. Portugal and Italy, there is “Green Tariff” and the brands benefit from it. Having various alternatives in a country make it easier for the manufacturers to attain these goals according to their scope or scale. In this sense, they think that having various options such as Renewable Power Purchase Agreements (PPA) or Renewable Energy Certificates (REC) alternative to installing renewable energy systems in their will facilitate the transition on the consumer side.

Brands’ goals are global, and the same criteria and goals apply to manufacturers in all countries they work with. In this regard, taking the necessary steps to comply with the criteria and to keep their performance evaluation scores high is a subject to be seriously taken into consideration by the manufacturers in Turkey for the sustainability and global competitiveness of their business.

From the perspective of energy companies:

The European Green Deal is a forthcoming subject and brings serious opportunities and risks. There are substantial opportunities particularly in terms of both new renewable energy capacity increase and decarbonization of the industrial infrastructure in Turkey. With the good governance of the process it is possible to transform the possible risks here into opportunities. Therefore, the electricity consumers are expected to focus more on this issue of transformation and the energy companies should support consumers more in this regard.

The most critical heading in the European Green Deal for electricity consumer industrial companies in Turkey is “Border Carbon Adjustment” related to “Carbon Leakage” because Turkey is among the largest suppliers of the European Union and majority of the products of Turkey are exported to the E.U. countries (41.1% according to the Jan – May 2020 data of the Turkish Ministry of Commerce). Within the Green Deal, the European Union aims to price its emissions within the scope of its historical responsibilities. Due to the obligations that will be imposed on its industry, the European industry may lose its competitiveness compared to other countries or there is a risk that the European industry may shift to production outside the E.U. and because of that “Border Carbon Adjustment Mechanism” is considered to be applied for the non-member country suppliers. Once this mechanism will be established, the industrial companies in Turkey wishing to export their products to the European Union will have to bear an additional cost for both emissions from the generated electricity supplied by the grid and from their own processes. It would be wise for all companies to seriously consider these two aspects and start working on them. In this context, Renewable Power Purchase Agreements (PPA) may become a good option for electricity consumers to purchase electricity from renewable energy at a more affordable price. Although Green Tariff is another option for this, it is observed that it brings an additional cost to the consumer in some foreign applications. In addition, establishing a Carbon Emission Trading infrastructure and market it in line with Renewable Power Purchase Agreements (PPA) will be a positive development on the consumer side.

International companies having significant investments and/or supply chains in Turkey currently create substantial demand in the Turkish market for supplying their electricity consumption from renewable energy in accordance with their decarbonization goals. Likewise, many energy companies having international shareholders and active in the Turkish market have been working on Power Purchase Agreements (PPA) to be able to meet the demands of above-mentioned consumers’ international accounts for their operations in Turkey. Some of the global energy companies are waiting for the development of Renewable Energy Power Purchase Agreement (PPA) Mechanisms to enter Turkish market. 

Some of the concerns observed on the consumer side by the energy companies regarding the structure of Renewable Power Purchase Agreements (PPA) are as follows:

  • Electricity purchase is currently not a primary business for corporates, to whom the energy companies’ intent to sell electricity through Renewable Power Purchase Agreements (PPA) and it is far outside their value chain. The relationship between the electricity consumers and producers should be improved to disseminate the knowledge to all level of consumers. While all these developments are taking place, it becomes very crucial to inform and raise the awareness of electricity consumers. At this point, the structures and platforms established by companies are also very important in terms of providing information and experience exchange among themselves.
  • There is a misperception that renewable electricity may be more expensive than normal electricity. One of the most determinant factors in the preference of the Renewable Power Purchase Agreements (PPA) by consumers is the price factor and the fact that the prices of electricity produced from renewable energy have dropped considerably will cause the Renewable PPAs to be preferred more and more by the consumers. Currently, some consumers meet their electricity demands from the grid but purchase additional Renewable Energy Certificates. Even though this operation can be considered as a kind of Renewable PPA, the long-term predictability of the electricity price provided to the customer by a long-term Renewable PPA to create new capacity cannot be achieved in this structure.
  • In addition, the electricity consumers are hesitant when to sign long-term Renewable PPA, today or within few years. “Cannibalization Effect” is one of the main issues of the electricity market due to technological developments. Although the answer to this question requires some market knowledge and projections, the best decision can be made for the company with the help of the project developers or independent consultants.
  • The electricity consumers want to ensure that the energy supplied comes from renewable resources. For this reason, the Renewable Energy Certificates (REC), which will allow the buyer to keep track of the electricity consumed, are expected to gain importance.
  • In the self-consumption model on the unlicensed side, electricity cannot be sold according to the legislation. In this model, consumers can use the electricity they produce by investing in their rooftops themselves. If the sale of electricity generated in unlicensed power plants is allowed and a collateral structure can be established in this regard, energy companies can invest in factory rooftops, install RSPVs (Rooftop Solar PV) and sell the electricity to factory owners. By this way, a more consumer-friendly structure for the electricity consumer can be created with a new business and finance model within the scope of the self-consumption model, and both industrial and energy companies may win.

The financial institutions in Turkey have achieved a significant growth in renewable energy financing. The key element of this growth was the YEKDEM mechanism, a feed-in-tariff scheme introduced by the Turkish Government in 2010. YEKDEM have offered elements that reduce the risk of financial institutions with a fixed price and public electricity purchase guarantee. The fact that the financing provided is mainly in US Dollars enabled financial institutions to eliminate the exchange rate risk.

The financial institutions agree that a new market will be formed after YEKDEM with Renewable Power Purchase Agreement (PPA) models. The fact that financial institutions have not had a prevalent experience so far indicates the needs will be determined more clearly over time. However, all financial institutions participating in the workshop are eager to take part in this new market. The most critical issues are how the legal structure will be formed, what the contracts will cover and how the risks will be minimized.

The PPA model is the financing of a bilateral agreement. The best example of a PPA is Mini-YEKAs (Licensed renewable power plant public tenders with installed capacities 10-20 MWs each). The fact that one of the contracting parties in Mini-YEKAs is the government, makes it a model in which many risks of the investor are eliminated at the initial stage.

In the PPA model, when financing is done based on the contract between the two parties, financial institutions must be able to measure the credibility of both parties and evaluate their guarantees. 

Since rooftops are important area that may be subject to Renewable PPAs, experiences in financing RSPV (Rooftop Solar PV) investments will be guiding. Earning income from the savings in rooftop solar energy investments does not enable the repayment of financing with external cash flow. In that case, where there is no income transfer, leasing financing comes into prominence because the balance sheet evaluation of the investing institution is essential. Eliminating obstacles for renting roofs and enabling roof sharing will be the developments that will pave the way for the financing of Renewable PPAs. 

Requirements for the PPAs to finance them:

For the development of PPA financing, it is important to establish the structure of the contracts. The PPAs should be carefully reviewed and formulated by the lawyers from the very beginning. What the contracts will cover is the most important factor for financing institutions. The involvement of financial institutions in the financing process before the contract, agreeing on pricing, maturity, payment terms and other scope of the contract and adjusting the financing conditions accordingly are among the factors that will increase the accessibility of projects to finance and reduce the risk for all parties. 

The Renewable PPAs are expected to include at least the following clauses: 

  • The maturity of the contract is one of the basic criteria for financing. Payment plan and terms must be compatible. 
  • It is extremely important that the contract is final and irrevocable. If the contract is terminated, the subject of the penal sanctions to be applied should be clearly stated in the contract. The financial institutions expect that the contract can only be terminated under the very limited circumstances. Even if the contract is terminated, the presence of penal clause in the contract that the principal and the reduced amount of interest during the term of the loan to be paid on the day of termination, will be the priority of the financial institutions. 
  • The contract price must be predictable. Forming these contracts at a fixed price will keep the investor, the electricity buyer, and the financier on the safer side of the project returns. However, pricing may be expected to be subject to a certain escalation mechanism. The buyer may want to set the price with a market clearing price (MCP) minus a price, but this situation may make it difficult for the financial institutions to finance and increase the demand for equity due to market risk. Of course, it is obvious that every financial institution will make decisions in line with their own risk perception and risk appetite for the financing of projects subject to such contracts and will implement a policy in this direction. 
  • Contract Currency: If contracts are signed in Turkish Lira, prices may be indexed with a TL reference interest rate (TLREF); as in the MCP mechanism of EPİAŞ. It is a good model that can be used in the example where the maximum and minimum prices are determined based on US dollars, 25% – 25% CPI-PPI (Consumer Price Index – Producer Price Index), 50% exchange weight in foreign currency. However, the primary choice of financial institutions is a contract in US dollars.

Major risks: 

Project risk is one of the major risks that financiers will take, and there is no problem in analyzing the project risks with the experience of financial institutions in this regard. However, the buyer’s ability to pay the amount specified in the contract during the term of the contract is the most important risk for financial institutions. The financial strength of the buyer and the long-term sustainability of its business activity are other important parameters of risk measurement. In a fixed price contract, the price of the buyer party may remain too high over time within the agreed term and therefore the buyer party may want to terminate the agreement. 

Risk management: 

In Turkey, there is no sophisticated balance sheet risk assessment mechanism as in the advanced economies to assess the risk of the buyer side. Long-term O&M (Operation and Maintenance) agreements with the EPCs (Engineering Procurement Construction Companies), performance bonds, construction period insurances will be risk mitigating instruments. Determining how the buyer’s payments will be made, monitoring the payments, and guaranteeing them to the financial institution are other important elements of risk management. For the case of excessive price fluctuations, if both parties put forward their spot market expectations in writing in advance to reshape the contract accordingly, such approach may relieve all parties. 


Since the PPA model seems risky by the financial sector representatives, the financial institutions may request an additional collateral. The letter of guarantee or financial security will complement the process. State-supported credit insurance will also be one of the guarantees that will increase the financing capability. Of course, the insurance period must match the term of the contract. The formation of a state-supported credit insurance that will ensure these commercial risks will pave the way for the system.      

As a result, the PPA model creates a new market potential on the side of financial institutions. Although financial institutions prioritize the potential in the private sector, the PPA model has a huge market potential especially for financing the municipalities. The model, in which the contract risk is eliminated, and payments are secured by the public, will enable commercial finance institutions to evaluate the potential in this area. The financial institutions assume that the electricity suppliers are corporates. As market go into more depth, small players will enter the sector and additional measures may be required to increase these enterprises’ access to finance. 


The suggestions of energy companies participating in the workshop on Renewable PPAs, which are in use as a financing model in the renewable energy sector in many countries of the world, can be summarized as follows.

Legislative status regarding Renewable PPAs:

  • In the self-consumption model on the unlicensed side, electricity cannot be sold according to the legislation. In this model, investors can invest in their own rooftops and consume the electricity they generate. If the sale of electricity generated in unlicensed power plants is allowed and a collateral structure can be established in this regard, energy companies can invest in factory rooftops, install RSPVs (Rooftop Solar PV) and sell the electricity to factory owners. This will pave the way for Energy Service Company (ESCO) model or the Built-Operate-Transfer (BOT) in the sector. This model does not contradict the self-consumption model, and it is a financing model within the self-consumption model. In this way, the self-consumption RSPV projects and as well as WPP (Wind Power Plant) projects as the upper limit for self-consumption system investments is 5 MW, can be implemented faster. Both industrial and energy companies can win.
  • On the licensed side, there is a YEKDEM model coming to an end and a new mini-YEKA model. Licensed companies have been already selling electricity from different types of resources. While YEKDEM has an electricity purchase guarantee (feed-in-tariff), PPA is not an attractive commercial model, but it is predicted that it will be attractive for renewable power plants to exit YEKDEM after completing their 10-year period starting from 2021. In the current situation, although there is an energy company that will make the investment, the consumer to buy the electricity and the financial institution that will provide financing, it is very difficult to create licensed renewable capacity due to grid connection capacity limits. For the case that the electricity producer, consumer, and financier sign a Renewable PPA, it will be useful to define the methodology of the grid connection capacity allocation to develop the PPA structure. As a proposal, one of the cities announced in the Mini-YEKA package may be declared as a pilot city and proceed as a tender with the corporate renewable PPA model. Energy companies who want to implement this business model may compete for grid capacity allocation based on fixed electricity purchase prices in the PPAs by bringing the agreement they have made with corporate electricity consumers, without demanding an electricity purchase guarantee from the state. 
  • An alternative point of view that came to the agenda in the workshop is the creation of a single regulation specific to the PPA that can cover renewable energy investments of all sizes, without making any distinction such as unlicensed or licensed. For example, an industrialist may install 2 MW on his rooftop or buy 2 MW equivalent electricity from 20 MW power plant or may become shareholder for 2 MW of a 20 MW power plant and receive the energy. However, it is very important to include unlicensed energy generation facilities in the market regulated by EPİAŞ. 
  • Workshop participants predominantly interpret the Renewable PPAs as long-term corporate bilateral electricity trade agreements with the purpose of creating new renewable capacity, which we call “additionality”, and the three items mentioned above are related to this.
  • Moreover, some of the workshop participants have negative priced wind project portfolios in hand and this is an overall market portfolio of 2500 MW. If these portfolios are given the Renewable PPA alternative, it will be possible to realize these investments that currently occupy the grid capacity, thus it is an option for the creation of new renewable capacity “additionality” that has been brought to the agenda. 
  • In addition, participating energy companies are currently working on the Renewable PPAs for the wind power plants (a total capacity of 3500 MW in the perspective of 2020-2024) that are out of or will exit YEKDEM after 10 years. Although these power plants are discussed in our workshop, they are not the priority topic of our workshop, as they are completing return of investment periods, have the ability to sell electricity at affordable prices, can easily sell them with shorter-term agreements, and there is no chance of creating “additionality” – new capacity. 
  • Again, a view that came to the agenda in the workshop is that there is no legislative obstacle against all what mentioned and can be solved with business models. Although there are a small number of companies that have already accomplished this model or are close to do so, it will be beneficial to enable or support the Renewable PPA issue for capacity increase in renewable energy with some legislative changes, especially for more players of different sizes to reach and enter the market. 

Inclusion of unlicensed generation into the system with the logic of a virtual power plant:

On the unlicensed generation side, opening the way for the management of these projects in the power market (EPİAŞ) by combining these projects in a virtual power plant structure by an aggregator, will create a positive effect for the Renewable PPAs to become more prevalent. Thus, these projects may have a more predictable and objective structure both on the financing side and for the market risk to be taken and may be subject to PPAs. With the ability to trade the energy generated from those facilities and enabling them to perform market access transactions, those small distributed facilities can be managed with the logic of portfolio management and combined with demand side, new added value areas may be created. 

Implementation of Renewable Energy Certificates and pricing carbon:

It is critical to ensure that the resource is from renewable energy and monitoring it so that the new structures and business models such as Renewable PPA based on renewable energy can develop in the market. In this context, creation of Renewable Energy Certificates (REC) related mechanisms along with the legislation is crucial. With the YEK-G regulation, which was published as a draft in early July after our workshop, a step was taken towards this. 

As explained in detail on the consumer side, along with the E.U. Green Deal and expected Carbon Border Adjustment, Turkey may also begin pricing carbon. This is one of the most important issues for Renewable PPAs to become commercially attractive. 

Competition law and contracts over 5 years:

Energy companies stated that supply contracts having a maturity more than 5 years cannot be signed due to competition law restrictions. This issue is also discussed in Europe. The general assumption is that supply contracts longer than 5 years disrupt the competitive market, but there are some exceptions to this acceptance. If the relevant supply contracts contribute to technological development, the consumer benefits from this and can obtain a price guarantee, the relevant contracts will be exempt from this 5-year limitation. There are evaluations that the electricity sales contract signed for the sale of electricity produced in a nuclear power plant in Europe should not be subject to this limitation for the reason stated above. 

YEKDEM costs may be removed for Renewable PPAs:

In case of signing a Renewable PPA, energy companies recommend not to charge YEKDEM costs from projects within the scope of this model since electricity trade is realized between the parties without burdening the state. In this way, the Renewable PPA, renewable energy and new renewable capacity may be supported indirectly. 

Expectations from financial institutions:

With the decrease in renewable energy project costs and return on investment periods, especially in solar energy projects, the state-supported purchase-guaranteed structures in the world are leaving their places to free market mechanism business models. Likewise in Turkey, as YEKDEM will stop at the end of 2020, it is possible to observe that starting this year EMRA have taken some steps to pave the way for free market mechanism business models with various draft regulations such as YEK-G.

Until today, financial institutions have been financing renewable energy projects in a much different structure within the framework of the YEKDEM mechanism. It is important that financial institutions closely follow these changes and start working to adapt themselves to new business models with free market mechanisms. There are highly experienced financial institutions in Turkey and based on experience we can observe that these institutions have capabilities to rapidly adapt to changes in the legislation. 

At this point, the expectation of energy companies from financial institutions is that they are willing to leave a little more their comfort areas to finance new structures and business models such as Renewable PPA for the market to develop and to start developing the necessary financial structures and models to finance those models in a way that will bring the least burden to all parties. 

Recommendations for renewable PPA financial risk elimination:

  • In the case that the YEKDEM model is no longer on the agenda, the electricity market may create a mechanism and/or fund in order to minimize or eliminate the buyer risk in the Renewable PPAs emphasized by the financial institutions.
  • Additional collaterals may be developed to facilitate the work of financial institutions. An amount of EUR 50-100 million may be used to finance projects to be made under the Renewable PPAs model, in cooperation with a green fund or a development bank. Local financial institutions in Turkey may be included as well. This fund may manage all these risks on a market basis.
  • Insurance companies may develop different products to minimize or eliminate the buyer risk in Renewable PPAs.
  • Secondary market / derivative products may be introduced. For example, there are products traded on international platforms to ensure weather derivatives; if the wind does not blow or if the solar radiation is not at the desired level. 
  • The guarantees like the ones provided in long-term commodity trading, may also be applied in energy trading, and instruments such as Coface and KGF may be used.
  • Again, on the buyer side, a more developed mechanism may be established for the balance sheet risk assessment side as in Europe.
  • Financing mechanisms may be developed to apply the project finance approach. For that, financial institutions may issue Green Bonds.
  • With all these alternative proposals, it is an important aspect to include the financial institutions in the subject from the stage when the Renewable PPAs are started to be discussed.

Feasibility and cost reduction due to technological advances:

From the point of view of energy companies, the attraction of the Renewable PPA for all parties is primarily related to the feasibility of the projects and the return on investment. Investments have become very attractive now, when we approach from the technology and costs perspective and follow the decline in renewable energy costs in recent years. However, it is expected that the efficiency will increase, and the costs will decrease with new PV panel technologies, especially in solar energy. The decrease in the return period of investments will both increase the interest of investors and facilitate the work of financial institutions with shorter-term Renewable PPAs. In addition, the development of storage technologies and the decrease in costs will enable new, more flexible business models in the market.

Global companies may transfer global knowledge and experience to Turkey:

International companies having operations or/and Turkish business partners in Turkey having experience on Renewable PPAs, may transfer these global know-how and experience to Turkey and thus serve the local market to develop and the sector to raise its competitiveness rank globally and to attract foreign investor to invest more in Turkey.


Question: In your opinion, is leading the Renewable PPAs up more important in licensed applications or unlicensed applications?

Result: 35% Licensed, 65% Unlicensed


Question: In your opinion, is leading the Renewable PPAs up more important in solar power or wind power?

Result: 80% Solar Power, 20% Wind Power


  1. Renewable Power Purchase Agreements (PPA) online workshop organized by TurSEFF and Solarbaba on June 18, 2020 has been an important step especially in terms of involving financial institutions and the consumer side of all PPA parties in the studies.

With this workshop, financial institutions had the opportunity to hear the knowledge and experience of energy companies conducting global activities on an alternative business model such as Renewable PPA. In addition, energy companies had the opportunity to listen and understand the approaches of different financial institutions on the Renewable PPA model.

Moreover, the consumer perspective was also included in the workshop and it was decided to organize the third workshop with a “consumer” focus with the participation of more consumers from different sectors in the participants list.