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Legal Alerts
11/09/2021 https://www.esin.av.tr/wp-content/themes/esin/images/esin.jpg

Changes to Renewable Energy Support Mechanism

Legal Alerts
Energy, Mining & Infrastructure

New Developments

The Law No. 7257 Amending the Electricity Market Law and Certain Other Laws (“Law No. 7257“) was published in the Official Gazette on 2 December 2020 and became effective on the same date. The Law No. 7257 introduced significant changes to the Turkish Renewable Energy Resources Support Mechanism (tr. YEKDEM) through amendments to the Renewable Energy Resources Law No. 5346 (“Law No. 5346“).

What’s New?

1)    Updated YEKDEM

Conditions for Power Plants Based on an Eligible Renewable Resource for YEKDEM under Law No. 5346Feed-in-tariffPurchase Guarantee PeriodAdditional Domestic Production Incentive
Licensed generation – commissioning before 31 December 2020No amendment (Table I of Law No. 5346)No amendment (10 years as of commissioning)No amendment (Table II of Law No. 5346 and applicable for 5 years as of commissioning)
Licensed generation – commissioning between  1 January 2021 –  30 June 2021No amendment (Table I of Law No. 5346)No amendment (until 31 December 2030 after commissioning)No amendment (Table II of Law No. 5346 and applicable for 5 years as of commissioning)
License-exempt generation – receiving the right to receive a call letter by 10 May 2019No amendment (Table I of Law No. 5346)No amendment (10 years as of commissioning)Not applicable
License-exempt generation – receiving the right to receive a call letter after 10 May 2019No amendment (retail one-time active energy price of its subscriber group, announced by the Energy Market Regulatory Authority in Turkish lira (cents/kWh))No amendment (10 years as of commissioning)Not applicable
Licensed or license exempt generation – commissioning after 30 June 2021YEKDEM and the related principles and procedures will be determined by the President of Turkey. Feed-in-tariff and domestic production incentive will be in Turkish lira.

2)    Fee Discount Incentive

The Law No. 7257 extends the commissioning deadline to 31 December 2025 for power plants within the scope of Law No. 5346 to receive the 85% discount for permit, lease, usage right and servitude right fees and exemptions from the Forest Villagers Support Fee and Planting and Erosion Control Fee. The discount and exemption will now be applicable for the first 10 years after the license is issued, instead of the first 10 years after the construction and operation periods start.

3)    License-Exempt Generation – What Will Happen After the First 10 Years?

License-exempt power plants were in a tight corner due to the prohibition of bilateral agreements and the 10 year YEKDEM limit. Addressing the period following the initial 10 years of operation of license-exempt power plants, the Law No. 7257 authorizes the President of Turkey to determine the principles and procedures regarding

(i)      the transformation of license-exempt generation power plants into licensed generation power plants, provided that 15% of the hourly market clearing price during the license period is paid as a YEKDEM contribution payment; and/or
(ii)     the prices to be applied for the surplus generation of license-exempt generation power plants, provided that these prices do not exceed the market clearing price.

4)    YEKDEM Applications

Previously, YEKDEM application deadlines were 31 October of each year to benefit from YEKDEM for the following year. The Law No. 7257 provides that Energy Market Regulatory Authority will determine and announce a new application date.

5)    Confirmations Concerning Auctions

The Law No. 7257 confirms two important issues regarding previous auctions:

(i)      Legal persons allocated a capacity based on a price equal or less than zero before the effective date of the Law No. 7257 (2 December 2020) will not benefit from the domestic product incentive.
(ii)     The contribution payments offered by the winning bidders for the solar preliminary license auctions held between 12 May 2014 and 30 April 2015 and wind power plant license auctions held between 15 February 2011 and 13 September 2011 will be paid even if the commissioning takes place after 31 December 2020.

Conclusion

The Law No. 7257 introduces certain changes and procedures regarding YEKDEM, and the market awaits the President’s announcements of the accompanying regulations providing clearer guidelines regarding the implementation of the new system.