Turkish Renewable Energy Sector – III


-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.

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