Turkish Renewable Energy Sector – IV

REGULATORY AND FINANCIAL INCENTIVES FOR  DISTRIBUTED  RENEWABLE ENERGY

-What is the legal and regulatory framework applicable to distributed renewable energy?

Under the Turkish energy market, renewable energy projects are divided as (i) licensed, and (ii) unlicensed facilities.

Pursuant to the Law No. 6446, it is mandatory that the legal entities which will operate in the energy market must be incorporated either as a joint stock company or a limited liability company.  Furthermore, in order to conduct market activities legal entities are obliged to obtain the relevant licence.

However, renewable energy generation facilities with installed capacity of up to 5 MW and installed mainly for self-consumption purposes are exempt both from obtaining a licence and forming a company.  Along with the main aforementioned electricity legislation, Unlicensed Electricity Generation Regulation shall apply to distributed (unlicensed) renewable energy projects.

-Are there financial or regulatory incentives available to promote investment in distributed renewable energy facilities?

In 2019, fundamental amendments were made to the Unlicensed Electricity Generation Regulation and a monthly settlement mechanism was introduced for distributed renewable energy.

As the core of the unlicensed projects are the self-consumption principle, only the surplus energy is incentivised.

Furthermore, the Unlicensed Electricity Generation Regulation explicitly prohibits merchandising of such electric power to be generated.  Accordingly, any surplus electric power shall be purchased by the appointed supplier company that is to be handled within Renewable Energy Sources Support Mechanism determined under the Law No. 5346.

-What are the main sources of financing for the development of distributed renewable energy facilities?

Distributed energy facilities are generally financed through leasing of the facility components by the investor.  As mentioned, it is explicitly determined that the power generated under the Unlicensed Electricity Generation Regulation cannot be merchandised.  Furthermore, since the generation and the consumption facilities must be connected by the same connection point, the facilities cannot be owned by different persons and the investor has to bear the costs of such facility installation.

-What is the legal and regulatory framework that applies for clean energy certificates/environmental attributes from renewable energy projects?

Parallel to the developments in international markets, the Regulation on Renewable Energy Resource Guarantee Certificate in Electricity Market, issued by EMRA on the same subject, was published in the Official Gazette, dated 14th November 2020.  The Regulation entered into force on 1st June 2021.  It has been stated by EMRA that the guarantee of origin structure was taken as a model in order to facilitate compliance with the system used in the European Union while structuring Turkish renewable energy certificate system, YEK – G.

Currently, power consumers in Turkish market preferring to obtain green energy opt to follow the origin of the energy they bought with International Renewable Energy Certificate – I-REC.

-Are there financial or regulatory incentives or mechanisms in place to promote the purchase of renewable energy by the private sector?

There are no financial or regulatory incentives to promote the purchase of renewable energy by the private sector.  The purchase of green energy is mostly preferred by multinational companies.  Furthermore, the possibility that the EU will apply a carbon border tax leads companies to explore possibilities to procure renewable energy.

 

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WE ARE HIRING!

Looking for a legal intern for our growing team.

Qualifications:

-Law degree from law schools in Turkey
-Excellent command of English (IELTS, TOEFL score is an asset), German is a plus
-Being interested in Energy, Administration, Commercial and Corporate Law
-Desire to work with clients from different jurisdictions
-Excellent research skills
-Have a solid follow-up, organizing, time management skills

Who should apply?

-Senior students
-Legal interns at the beginning of their internship

Roles

-Gain practical experience many areas of Turkish Law. This may include energy law, administration law, corporate law, company law, corporate finance, mergers and acquisitions, intellectual property, data protection & IT law and foreigners law.
-Assisting to draft agreements, reviewing customer contracts, undertaking due diligence, performing legal research tasks, assessing legal problems and advising clients on the law and legal issues.
-Research on different matters on both Turkish and English Law
-Attend client meetings when needed
-Drafting client information notes in regards to legal updates.
-Initiation and follow-up of enforcement proceedings when needed.
-Litigation

Send your resume to
info@ege-law.com

Turkish Renewable Energy Sector – III

SALE OF RENEWABLE ENERGY AND REGULATORY OR FINANCIAL INCENTIVES FOR RENEWABLE ENERGY

-What is the legal and regulatory framework for the sale of utility-scale renewable power?

According to the Law No. 6446, legal entities which have a generation licence or a supply licence are entitled to engage with the sale of the electricity.

The sale of electricity can be realised on OTC markets of which agreements are subject to private law rules or on the power exchange EXIST. EXIST is the only legal entity which has a market operating license and is authorised to operate the organised trading market in accordance with the Law No. 6446.

Details of power trading activities are regulated under the Turkish Electricity Market Balancing and Settlement Regulation. There are also secondary legislations that regulate the relation between consumers and suppliers. EXIST and EMRA can also issue decisions which may impact on the energy trading activities. Thus, in order to have the entire picture about the sale of electricity in the Turkish energy market along with the main legislation, one should also examine the decisions of EXIST, EMRA and CMB.

-Are there financial or regulatory incentives available to promote investment in/sale of utility-scale renewable power?

Law No. 5346 grants a purchasing guarantee for both licensed and unlicensed facilities generating electricity from renewables for a maximum term of 10 years starting from the operation date.
Furthermore, the Law No. 5346 also grants local component support for domestically manufactured equipment used in the relevant licensed generation facility. The current legislation calls for at least 51% local content ratio in order to be granted an incentive for a component of the generation equipment. Incentives for local components are determined for each component separately.

On 30 January 2021, new FITs are determined for licensed electricity generation facilities, holding a renewable energy source certificate, and will be commissioned between 1 July 2021 and 31 December 2025. These facilities are also subject to FIT prices for 10 years and five years for domestic components beginning from commissioning dates. New FIT prices are determined in Turkish Lira subject to an escalation mechanism calculated quarterly. There is also a cap for the new FIT prices. Accordingly, the corresponding value of an updated FIT cannot exceed the relevant cap as determined in the table below:

Furthermore, licensed facilities are granted with incentives such as:

-90% discount on the preliminary licence and licence fees at the application stage.
-An exemption from annual licence fees for the first eight years following the facility completion date.

Unlicensed renewable energy facilities are subject to another incentive mechanism. Renewable energy generation facilities, the installed capacity of which is up to 5 MW, are exempt from obtaining a licence and/or incorporating a company. Additionally, purchasing guarantee is granted for the surplus electric power produced by the residential, commercial and illumination subscribers under certain conditions by the retail price of mono-chronic active energy of its own subscriber groups for a period of 10 years, as of the operation date of the power production plants.

-What are the main sources of financing for the development of utility-scale renewable power projects?

Investors of utility scale renewable projects are financing the projects mainly by equity and debt based on a project finance mechanism. Loans are borrowed from national and international banks. Since such projects are granted with FITs, security packages, along with others, are depending on the assignment of the FIT receivables to the creditor.

However, it is claimed that recently announced FITs do not financially meet project finance requirements. Therefore, the sector’s expectation is to find new business models for financing such projects, i.e. corporate power purchase agreements are highly discussed among market players.

For detailed information: info@ege-law.com

Turkish Renewable Energy Sector-II

-What are the main types of renewable energy deployed in Turkey? What are the trends in terms of technology preference and size of facility? According to the statistics of TEIAS published in January 2021, the main renewable energy sources in Turkey are, respectively, hydro, wind and solar energy. The share of renewables in the gross […]

Turkish Renewable Energy Sector 1

-What is the basis of renewable Energy policy and regulation in Turkey? Is there are definition of “renewable” or “clean” Energy? In Turkey, the main legislation regulating Turkish electricity market is the Electricity Market Law No. 6446 (“Law No. 6446”). Along with the Law No. 6446, Law on Usage of Renewable Energy Sources for Generation […]

A Brief Note on UNESCO’s Report on Artificial Intelligence and Gender Equality

As Ege Attorneys at Law, a law firm led by women partners, we celebrate international women’s day in a novel way by addressing gender bias in AI and automation systems. We therefore prefer to draft an informative note about UNESCO’s report on Artificial Intelligence and Gender Equality (Key Findings of Global Dialogue, August 2020) . We aim at remarking significant subjects proposed by the report and thus, reckon on successful gender responsive development of AI systems hoping for advancement of non-discriminative autonomous applications.

Gender bias is one of the challenges posed by AI applications as it includes risks of having a negative impact on women’s economic empowerment and labour market opportunities caused by biased autonomous job recruiting algorithms. Moreover, unfair outcomes such as automatic vetting out of women whilst loan applications, giving women applicants lower (unfavourable) ratings or if fed by wrong data, algorithm based risk assessment in criminal justice leading to verdicts against women and more.

In its recommendation report, UNESCO opens a dialogue to discuss some key findings on gender discrimination caused by AI through machine learning based on a general overview of the current facts and experts’ contributions along with its proposal of an action plan. The report starts with an introduction with an emphasis on current threats posed by AI in terms of gender equality in particular led by AI powered recruitment systems and equal competition opportunities with men. Nevertheless, UNESCO states that the solution still lies in AI in overcoming such obstacles and has the potential to make positive changes but explicitly indicates that the real progress on gender equality must start in policy, corporate and industry decisions.

Purpose of UNESCO’s report is to identify issues, challenges, and good practices first to (i) overcome the built-in gender biases found in AI devices, data sets and algorithms; and (ii) improve the global representation of women in technical roles and in boardrooms in the technology sector; and finally, (iii) create robust and gender-inclusive AI principles, guidelines and codes of ethics within the industry. The report further provides recommendations on how to address gender equality considerations in AI principles. It also offers guidance to the public and private sectors, as well as to civil society and other stakeholders, regarding how to operationalize gender equality and AI principles.

Proposed recommendations lay some burden to stakeholders including gender advocates, practitioners, governments and academics in order to strengthen gender equality in AI principles. A collaborative work and action are demanded to ensure participation of all aiming at increasing general awareness within society at large, the gender equality community and the AI industry regarding the positive and negative implications of AI for girls, women and gender non-binary people. It is further believed that greater awareness may trigger public and stakeholder participation in AI governance. UNESCO sets other required actions such as to encourage the development of AI applications that do not perpetuate bias or negatively impact girls and women but that rather respond to their needs and experiences; create funding mechanisms for participatory AI, access to AI and AI education for girls and women; promote diversity and equality through hiring, supply chain and related practices; and contribute to the collection of sex-disaggregated data and so.

In the light of the UNESCO’S report and existing facts, if AI and automation are not developed and applied in a gender-responsive way, it seems that they are likely to reproduce and reinforce gender stereotypes and discriminatory social norms. Therefore, it is crucial that stakeholders (i.e. governments, companies, software designers and other actors) take concrete steps to achieve goals and works set by the report but most importantly more women must actively participate in creating AI and automation systems rather being sole beneficiaries.

For more and detailed information please contact hande.aksu@ege-law.com or info@ege-law.com

A First Time Decision by the Turkish Personal Data Protection Board: Allowing Cross-Border Data Transfer by Approving a Letter of Undertaking Application

The Turkish Data Protection Board (the “Board”) stated that the letter of undertaking (taahhütname) application submitted by TEB Arval Fleet Management Company (as the data controller) for cross-border transfer of personal data was accepted on 9 February 2021 as per Article 9/2 of the Turkish Personal Data Protection Law No.6698. Thus, the Board allowed a data controller to transfer the personal data by way of issuing a letter of undertaking. The announcement was published on the official website of the Turkish Personal Data Protection Authority.

The decision matters since for the first time the Board accepts a letter of undertaking application of a company to exercise personal data transfer to another country. As known, according to the Turkish Personal Data Protection Law, a data controller is allowed to transfer personal data to a third country if (i) the data subject gives explicit consent or (ii) the third country assures adequate data protection. Alternatively, both the data exporter and importer (data controllers at both sides) may undertake procurement of adequate protection by issuing a letter of undertaking and seeking for the Board’s approval for this.

Until now, the Board issued no such decision. This way, it starts setting the precedence for allowing personal data transfer to other countries through letter of undertaking.

You may find the link of the announcement below (in Turkish language):

https://www.kvkk.gov.tr/Icerik/6867/TAAHHUTNAME-BASVURUSU-HAKKINDA-DUYURU

The Status of Renewable Energy Resource Documents in Turkey

Today’s energy transformation has led major energy consumers to explore new business models to take part in energy transition and use them for their own needs.  Corporate consumers, who have an important place in accelerating the energy transition, have voluntarily turned to renewable energy supply to achieve the reducing greenhouse gas emission targets expected of them[1].  In response to these needs, energy sector players have promoted renewable energy projects with different methods by developing business models that obtained an acceptance in many countries around the world.

In international energy markets, most preferred business models, in order to procure renewable energy by corporate consumers, are emerging as the systems of (i) self-generation or self-consumption, (ii) unbundled energy certificate attribute[2], (iii) green energy offers[3], and (iv) renewable power purchase agreements (PPA).[4]

In electricity markets where not all of these supply methods have yet developed, one of the most preferred method of purchasing renewable energy of corporate consumers is the purchase of energy attribute certificates.

In this article, we will provide brief information regarding renewable energy attribute certificates in the context of the Turkish energy market.

Certification and Tracking of Energy Resources in the Context of Turkish Law:

One of the methods that institutions use when performing energy transition is the purchase of renewable energy attribute certificates from a renewable energy producer or from brokerage companies trading these attribute certificates in a way unbundled from electricity – without purchasing electricity – or along with electricity.

Companies meet their renewable energy consumption targets by purchasing these products in a way that corresponds to their electricity consumption.

These certificates, which are used to track the resource of the generated energy, contain information about the characteristics specific to the power plant where the electricity is generated, such as the location of the power plant, the resource from which the electricity is generated (technology), and the age of the power plant or whether it receives incentives.

Until the Regulation on Renewable Energy Resource Guarantee Certificate will enter into force, one should review the Regulation on Certification and Support of Renewable Energy Resources for information regarding renewable energy resource certificates.  Article 24 of the Regulation on Certification and Support of Renewable Energy Resources states that the Renewable Energy Resource (the “RES”) certificate will be issued to producers producing electricity under the renewable energy resource license[5] (i) to determine and track the resource type of electricity produced from the power plant and (ii) to benefit from the applications within the scope of RESSUM (the Renewable Energy Resources Support Mechanism).  There is no regulation in the electricity legislation related to the unbundled transfer of the RES documents (without electricity purchase).  However, the fact that the RES document is issued in order to benefit from RESSUM applications may be interpreted as that a power plant that benefits from RESSUM cannot transfer unbundled RES document.  Moreover, the presence of certificates accepted in international markets will cause that the transfer of RES documents is not preferred by foreign institutions or institutions with foreign partners in practice.  In addition, despite these regulations in the legislation, the RES document is not issued in practice.  Therefore, the circulation of the RES document does not occur in practice.

Since 2016, it has been possible to certify Turkish renewable energy plants through the I-REC system and transfer these certificates unbundled.

Novelties in Renewable Energy Resource Guarantee Document System

Parallel to the developments in international markets, the Regulation on Renewable Energy Resource Guarantee Certificate in Electricity Market, issued by the Energy Market Regulatory Authority (the “EMRA”) on the subject, was published in the Official Gazette, numbered 31304 and dated November 14, 2020.  The regulation will enter into force on June 1, 2021.

According to the statement made by the EMRA, the RES – G system introduced by the regulation was created by taking into account the guarantee of origin (“GO”) structure in order to facilitate compliance with the system used in the European Union[6].

The RES – G system introduced by the regulation can be summarized as follows:

  • 1 (one) renewable energy resource guarantee document (“RES – G document”) may be issued for every documentable 1 MWh production.
  • Although RES – G certification is provided only for licensed power plants in the current situation, the EMRA reported that it is working on a structure that will allow unlicensed power plants to enter this system[7].
  • The system is designed as a voluntary market and has stated that only the resource of electricity consumed for consumers who supply electricity through the green tariff can only be made by the authorized supply companies with the redemption of the RES – G document obtained from the RES – G market.
  • The relevant renewable energy power plant can be registered as a user in the RES – G system for each calendar year.
  • In order to prevent double counting, the EMRA regulates that a power plant that registers in a certificate market aiming at providing information on the nature of energy, other than the RES – G system, in a calendar year will not be allowed to register in the RES – G system. Although the Procedures and Principles governing the details of the system have not yet been published, we believe that the tracking of double counting will be made based on the declaration and that the penalties stipulated in the legislation will be applied in case of violation.
  • License holders which have multiple-source electricity generation plants will be able to participate in the RES-G system and the organized RES-G market if only all of the energy sources used in the plant are renewable.
  • In accordance with the Regulation, the EMRA will function as a regulatory and supervisory body, Enerji Piyasaları İşletme A.Ş. (“EPİAŞ”), on the other hand, will perform the basic market functions included in the Regulation and assume the operation of the organized RES – G market by creating the RES – G system.
  • In the RES – G system, the meanings given to the terms export, transfer, redemption, repeal, disclosure, and cancellation provide information on how the system will work. Accordingly, EPİAŞ will issue the RES – G certificate electronically with the request of the legal entity that owns the licensed power plant and is included in the database.  The fact that a certain amount or proportion of electrical energy supplied to consumers is produced from renewable energy sources and documented through the RES-G certificate is disclosed to consumers by suppliers through an invoice and/or other disclosure means with it.  By trading the documents, the transfer of RES – G documents between the system users will occur.  A RES – G certificate is redeemed by the supplier by associating it with a specific renewable energy consumption.  The life of an issued certificate is twelve months. At the end of these twelve months, the relevant document will be canceled.
  • Certificates can be bought and sold between market players by bilateral agreement together with energy or unbundled from energy.

[1] For example, RE100 or Renewable Energy Demand Enhancement (REDE)

[2] The term “unbundled energy attribute certificates” (EACs) is used in America for the term GO, which is adopted in Europe.

[3] In some countries, it is used as utility green procurement.

[4] Corporate Sourcing of Renewables: Markets And Industry Trends, IRENA 2018 and EU WWF Report Global Corporate Renewable Power Procurement Models Lesson from India

[5] The reason why the license emphasis is specifically made here is to state that the Renewable Energy Resource (the “RES”) document will be used for producer license holders and only for the identification and tracking of proof of the resource type.

[6] https://www.shura.org.tr/wp-content/uploads/2020/08/Sunum-Dr-Hakki-Ozata.pdf

[7] https://www.bilkenteprc.com/post/renewable-energy-certificates-in-a-nutshell-turkish-certificate-scheme-part-2-onur-uyanusta