Top Tier Turkish Law Firm Specializing in Energy Law
What waits the renewable generators following the elapse of the 10 year period for feed-in-tariffs?
The establishment of incentivized prices for those generating electricity from renewable energy pioneered the use of renewable energy in Turkey (solar power, a great potential in Turkish territories, in particular) both for major investors who competed with each other with excessive contribution fee offers in tenders and for smaller investors preferring to establish unlicensed power plants.
According to the current regulation, the renewable energy investors, licensed or unlicensed, will only benefit from the incentives for a period of 10 years. Even though the present incentives are attractive for the moment, the bestowal of the incentives for only such a short term and the ambiguity that awaits them after the expiry of this period create a great obstacle before the investors, keeping them from feeling secure and stepping out to the plate right away.
Even though the unlicensed and licensed investors are on the same boat with respect to the term that an investor can benefit from these incentives and the non-regulation of how the generated electricity will be treated after the end of such term; as the licensed investors are also allowed to sell electricity to third parties (as opposed to unlicensed investors and unless they opt-into the feed in tariff system), the options that licensed and unlicensed investors may choose as per the current legislation vary.
Accordingly, as per the current regulation, after the 10 year period elapsed, a licensed investor may continue to sell its electricity to third parties through bilateral agreements on the negotiated price or in organized electricity markets.
On the other hand, an unlicensed investor will not be able to sell the electricity it generates through the system and only continue to consume it for its own consumption. Obviously, this may be considered as a project killer in the first place for an investor who plans to sell all the electricity from the feed-in tariff and to have no self-consumption. On the other hand, it may choose the following options:
a) Although, no example of such a conversion has been established yet, it may choose to make the necessary infra-structural changes and disconnect from the distribution system, and convert its generation facility to an isolated generation facility. This would enable the generation facility to sell its electricity to third party consumption facilities located near them by transmitting the electricity they produce with a direct line (without providing electricity to the transmission or distribution system).
b) Alternatively, it may transfer its unlicensed facility to another company or a natural person located in the same distribution region and which is in need of generating electricity for its consumption. As it requires a third party in need of electricity and located in the same distribution region, this option can be hardly presented as a solution for the term after the 10 year elapsed.
c) Finally it may convert its facility to a licensed facility by obtaining a license. However, it should be noted that both wind and solar energy generation licenses may only be obtained through the capacity limits provided by the legislation and as a result of competition tenders. Obtaining the license may only be possible subject to the fulfillment of these requirements.
It is also worth stating that, although there is no draft legislation whatsoever implicating it, there is an expectation in the market for the unlicensed generation facilities to be provided with licenses and be included within the scope of the Electricity Market License Regulation’s provisions by the end of the 10 year period; in order to enable them to sell electricity either through bilateral agreements or in organized electricity wholesale markets. However, this possibility would only mean that they would be able to sell electricity on a price they would negotiate and not on the feed-in tariff they benefit from for the first 10 years.
In order to provide a clearer view for the investors on their path, sustain the interest in clean renewable energy, and provide stabilization in the market, it is crucial that this ambiguity be eliminated as soon as possible, hopefully in a way to protect the interest of investors and further encourage the establishment of renewable generation facilities.
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