22 Sep

The popularity of energy market has been maintaining its importance also this year like in the last decade.  As the result of the open up of the private sector, all energy related industries has been grown up as the legal infrastructure contributed to get it.

According to the unofficial data and analysis, the number of new power plants and as a result of this, the installed capacity has increased within the last 2 years and the share of installed power plants generating electricity from renewable resources has been bigger in comparison to primary resources. Even if energy investments in Turkey rise, it is estimated that the existing installed capacity would not meet the increasing energy demand of Turkey within the coming 10 years.

Legal reforms in market

One of the main factors is legal reforms in energy legislation which has played an essential role in encourage of investments. First of all, the energy policy has been changed, such that the privatizations have been started within the privatization of electricity manufacturing pursuant to the Electricity Market Law No. 4628 in 2001 and distribution, and has continued with the natural gas sector. Now, most of market activities may be operated by private sector companies with the exception of natural gas and electricity transmission.

In addition to this, power generation from renewable resources has been started to promote within the Law on Power Generation from Renewable Resources in 2005, incentives regulated by which have been amended and extended. Most important development regarding these progresses has been the feed-in tariffs, local equipment support and land allocation facilities. Within a Council of Ministers’ Decision in 2013, the feed-in tariff and local equipment support mechanism has been extended.

The New Electricity Market Law has enabled the electricity manufacturing from renewable resources without being obliged to establish a company until a certain limit of installed capacity. Due to the abovementioned incentives and opportunity of unlicensed power generation, it is expected to increase the share of renewable resources in power generation within the next 10 years. In 2014, the number of unlicensed electricity production applicants has exceeded two thousand.

Along with these incentives, the Electricity Market License Regulation enables to the credit institutions an opportunity to assign the production license of the license holder with the permission of EMRA to a third person. Accordingly, a bank or credit institution providing a limited or irrevocable project finance to a license holder may request from EMRA to assign this license to a third person suggested by the bank or credit institution. This may be regarded also as a facility for license holders which look for a guarantee in order to obtain credit for their energy projects.

Still problems in spite of legal reforms?

It is evident that the legal reforms have been a very important factor in development of energy market. However, despite these legal developments, there are some difficulties which investors have or may have during their projects. According to the investors, the abovementioned feed-in tariffs are not sufficient in comparison to other countries, especially in European Union, that offer higher tariffs for a longer term.

In addition to this reality, procedures with more than one institution before and during the energy project have been straining the investors. The investors may have difficulties during the application to different institutions, since the terms for license applications have been determined by the laws and regulations. In this regard, the procurement of coordination between different institutions has been essential to overcome these difficulties.

As is known, land allocation is one of the first stages of an energy investment project. Especially in solar and wind projects the location of the land plays an essential role. The lands may be expropriated if this is regarded as necessary for the license applicant. However, the expropriation of such lands is processed under the conditions stated by the Expropriation Law and there are some difficulties during such processes such as expert’s appointment, holder’s status and also other long processes in relevant institutions. Moreover, these lands’ suitability for solar or wind energy projects shall be confirmed.

Why to increase the power generation from renewable resources?

Turkey has a big potential of renewable resources such as solar, wind and geothermal. If the abovementioned difficulties are removed in cooperation with the market participants, and this energy potential, the incentives such as feed-in tariffs as well as local equipment supports are considered, the targets concerning energy production from renewable resources for the near future will be achieved easier and more quickly.


Herdem Law Firm, Istanbul Turkey

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