Turkish Renewable Energy Law: a glance into the latest legal framework
Turkey has experienced during the past years an increasing economic growth that has not been translated into an effective alternative to the high dependence on foreign energy imports. Far from pessimism, Turkey counts with large amounts of renewable energy resources capable of making the country a prominent player in its privileged position between Europe and Asia.
In need of an important transformation, Turkish authorities have been persuaded about the opportunities provided by its wind, solar, geothermal, biomass or wave resources to set a sustainable and independent energy policy for the country. This has been revealed even more urgent after the signature of the Kyoto Protocol in 2009. These reasons have driven the recent legislative reforms in the sector that aim to develop a liberalized, transparent and sustainable energy market in Turkey. Having set the objective of relying on renewable resources at a rate of 30% by 2023, and having diminished the legal burdens to enterprising, Turkey arises nowadays as an attractive and profitable scene for green international investing projects.
The Turkish renewable energy Law is regulated in three main pillars.
The Law on the Utilization of Renewable Energy Resources in Electricity Generation (number 5436) that was passed in May 2005 constitutes a clear move towards the promotion of solar, wind or tidal energy in Turkey. Its first article explicitly states its purpose to encourage the better use and diversity of renewable resources as well as the protection of the environment. Legal persons wishing to operate in the sector must hold a Renewable Energy Resource Certificate in order to ensure the identification and supervision of the renewable resource concerned. Such certificate is expedited in turn by the Turkish Energy Market Regulatory Authority (EMRA).
In order to catch up with the pace of the innovations introduced with this law, the Turkish legal panorama has experienced in the past months two main changes in its energy framework. On the one hand, the new Turkish Electricity Market Law (number 6446) was passed in March 2013, substituting the old regulation of 2001 (number 4628). On the other hand, a secondary legislation to further detail its elements, the Electricity Market License Regulation, was approved last November. Beyond carrying out a simplification in the type of licenses needed, these two texts have introduced a new key element nonexistent to date, Preliminary licenses. Under this innovation, legal entities willing to carry out energy generation activities in Turkey are granted a temporary permit during the pre-construction phase while they arrange the required approvals and permissions for the project. This allows an easier beginning in the country for international investors.
This new framework, accompanied by the amendments in 2010 to the Law on the Utilization of Renewable Energy Resources in Electricity Generation introduces many specific advantages to renewable resources energy projects:
1. License exemption: The new law envisages a waiver of license for those generation facilities based on renewable resources. This allows investors to initiate solar or wind energy projects, among others, in Turkey without needing a previous authorisation from the Energy Market Regulatory Authority. In order to benefit from this advantage, it is however required that the installed capacity should not exceed 1MW, which may be eventually further increased by 5MW by the respective authorities. The old legislation established on the contrary a more restrictive limit of 500Kw.
2. Fee-in tariffs: The amendments introduced in 2010 to the Law on the Utilization of Renewable Energy Resources in Electricity Generation rely on the mechanism of fee-in tariffs to incentivise foreign investment in the sector. By granting long-term conditions in the contract to renewable energy producers, Turkey grants a defined and transparent price for this kind of electricity.
3. Fee reduction in licensing: In case companies cannot take advantage of the license exemption, a reduction of 10% in the fees compared to those required for non-renewable energy sources is conceded.
All in all, it seems clear the deliberate intention of Turkey to move towards the investment in renewable resources as a way of escaping from the energy production deficit while preserving at the same time the environment. The recent legal reforms have opened the doors to a dynamic and competitive sector that will turn renewable energies into a key asset.