Turkey has set solid renewable energy targets for 2023, the nation's 100th anniversary. One of these targets aims to increase the share of electricity generated from renewable sources from 25% to 30%. This is expected to involve increasing installed wind-power capacity to 20,000 MW, as well as installing new power plants with 600 MW of geothermal and 3,000 MW of solar energy.
Under the auspices of the Ministry of Energy and Natural Resources, the Energy Market Regulatory Authority (the "EMRA") is the sector's competent administrative and regulatory authority. The EMRA's powers and duties can be summarized as issuing licenses; setting, amending, enforcing and supervising regulations on performance standards; distributing power and customer services; setting out pricing principles; and maintaining the development and performance of infrastructure to help implement new trading and sales methods for the sector.
The Electricity Market Law1 (the "EML") addresses new issues that have long been anticipated in the renewable energy market, such as the introduction of the 'preliminary license' mechanism for generation license applications. The Law on Utilization of Renewable Energy Resources for Generating Electrical Energy2 (the "RER Law") and its amendment, Law No. 60943, are the primary pieces of legislation governing the use of renewable energy resources in Turkey4. Their enactment also introduced the Renewable Energy Resources Support Mechanism (the "RER Support Mechanism") into the Turkish energy market.
The RER Support Mechanism was introduced in 2011, to create a liberal and competitive energy market and to increase investment opportunities by introducing sector-specific incentives. In order to benefit from the RER Support Mechanism, investors must obtain a renewable energy resource certificate ("RER Certificate"). RER Certificates enable the EMRA to monitor and track power generated from a renewable resource, at the time the energy is traded in domestic and international markets.
Under the RER Support Mechanism, RER Certificate holders may benefit from certain tax incentives. Renewable energy facilities, roads and certain energy transmission lines may benefit from an 85% discount on applicable land allocation fees, rental fees or utilization costs, to the extent they meet the conditions described in the RER Law. This discount is applicable for a period of ten years starting from the relevant facility's construction kick-off date. Renewable energy companies may further benefit from a purchase guarantee incentive, whereby any surplus energy generated is purchased by the state.
The RER Support Mechanism provides additional feed-in tariff and incentives for different types of power generation facilities. Table 1 details the purchase price guarantee incentives determined for each facility type.
These additional incentives are calculated pro rata based on the percentage of domestically manufactured components used in the power generating process. If the mechanical and/or electro-mechanical equipment used in a renewable energy generation facility are manufactured domestically, then the contributions listed below will be paid by the state. This incentive only applies (i) to facilities operational before 31 December 2020 and (ii) for a period of five years starting from the date of operation. After 31 December 2020, guaranteed prices and incentive periods will be re-determined by the Council of Ministers. The purchase price guarantee incentives (Table 1) and the domestic product incentives listed (Table 2) can apply together, if the conditions under the RER Support Mechanism are met.
|Facility Type||Applicable Price (USD cents/kWh)|
|Facility Type||Domestic Productioncents/kWh)||Contribution (USD cents/kWh)|
|Generator and power electronics||1|
|Mechanical equipment in rotor and nacelle groups||1.3|
|Photovoltaic Solar||PV panel integration and solar structural mechanics production||0.8|
|Cells forming the PV module||3.5|
|Material focusing the solar rays onto the PV module||0.5|
|Intensified Solar||Radiation collection tube||2.4|
|Reflective surface plate||0.6|
|Mechanical accessories of the heat energy storage system||1.3|
|Mechanical accessories of the steam production system that collects the sun rays on the tower||2.4|
|Panel integration and solar panel structural mechanics||0.6|
|Facility Type||Installed Capacity (MW)cents/kWh)|
Renewable energy generation facilities with a maximum installed capacity of 1 MW are exempt from the requirements of obtaining a generation license and paying a service fee. However, these facilities must be established to supply the individual energy needs of their owners only.
Under the RER Support Mechanism, the number of applications for obtaining RER Certificates tripled and reached a capacity of approximately 15,000 MW. The details regarding facility-types and installed capacities contained in these applications are stated in the table 3.
Renewable Energy Licences
As of January 2016, the number of generation licenses in force is: (i) two solar5; (ii) 30 geothermal; (iii) 60 biomass; and (iv) 246 wind. Apart from these, there are no wave, stream or tide energy production licenses in force. However, there are many unlicensed, independent renewable energy plants in operation, each with a maximum installed capacity of 1 MW.
Investments in new wind and solar power plants will require investors to obtain permanent power generation licenses from the EMRA. As a precondition to obtaining a permanent license, investors must first procure a preliminary license. This preliminary license is used by investors to obtain the necessary permits, approvals, certificates and ownership or usufruct rights of the geographical area where they will build their power generation facility.
Thanks to new legislation and arguably attractive incentives, the number of energy investments in Turkey has increased over the past two years. Yet, the country is still more than ready to welcome new investments in the renewable energy sector.
- Published in the Official Gazette dated 30 March 2013 numbered 28603
- Published in the Official Gazette dated 18 May 2005 numbered 25819
- Published in the Official Gazette dated 8 January 2011 numbered 27809
- For the purpose of regulating the implementation of the RER Law, the Regulation on Documentation and Support of Renewable Energy was published in the Official Gazette dated 1 October 2013 numbered 28782.
- In addition to the two generation licenses granted to Solentegre Enerji and Halk Enerji, there are four in force preliminary licenses given by the EMRA.