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Electricity Generation in Turkey Series II: Unlicensed Electricity Generation

Electricity Generation in Turkey Series II: Unlicensed Electricity Generation

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Pursuant to the Regulation on Unlicensed Electricity Production in Electricity Markets [“Regulation”] [available in Turkish only], it is possible to generate electricity without being obliged to obtain a license / pre-license from the Energy Market Regulatory Authority [“EMRA”] or incorporate a company. Accordingly, the consumers can meet their electricity needs from their own generation facilities that are in the vicinity of the consumption points and sell the surplus electricity limited to the previous year's consumption.

These regulations aim to utilize small-scale generation facilities to ensure the security of national economy and supply and thus reduce the amount of loss in the electricity grid by ensuring the efficient use of small-scale generation resources by enabling consumers to meet their electricity needs from their own generation facilities closest to the consumption point.

In particular, the installed power limit of a generation facility, which was initially 1 megawatt, was increased to 5 megawatts in 2019 in order to encourage renewable energy generation. As such, 1.9% of the electricity supply in 2020 was met from unlicensed generation facilities and 92% of such was generated via solar energy.

On the other hand, the Regulation was recently amended in 11.08.2022 through the Regulation Amending the Unlicensed Electricity Production in Electricity Markets [“Amendment Regulation”] [available in Turkish only], and accordingly, the surplus energy generation exceeding the previous year’s consumption will now be transferred to the Renewable Energy Resources Support Mechanism [the “YEKDEM”] free of charge. In this article we will explain the unlicensed electricity generation in Turkey, together with the latest amendments to the Regulation.

How Is Unlicensed Electricity Generation Carried Out?

Unlike licensed electricity generation, a real person or legal entity who wants to generate unlicensed electricity must be an electricity consumer, i.e., must have at least one electricity subscription. This is due to the purpose of unlicensed electricity generation being that consumers are to meet their own electricity needs from their own generation facilities.

Generation facilities that can be established without having to comply with the obligation to obtain a license and incorporate a company are generation facilities based on renewable energy resources with an installed capacity of up to 5 megawatts as per the Presidential Decree published in the Official Gazette dated 10.05.2019 numbered 30770 [available in Turkish only], and other facilities specified in Article 5 of the Regulation.

In order to connect said-generation facilities to the distribution system, a connection application must be submitted to the grid operator with the information and documents required for the connection. The application is then reviewed based on the submitted documents by the commission within the first 20 days of the following month and the results are published on the website of the grid operator the following day. Applications that are complete are examined technical-wise within the first 20 days of the following month. After technical examination, the applications are finalized according to a priority assessment. For applications subject to connection restriction, the facility carrying out generation of renewable energy is a top priority. The results of the technical examination are also published on the website of the grid operator.

For a wind-based generation facility, the application is additionally forwarded to the General Directorate of Renewable Energy [the “GDRE”]. The GDRE completes the technical examination within 30 days.

Upon the application of the relevant person within one month after the technical examination, a call letter to the connection agreement is notified to the applicant. If an application is not made within this period, the applicant's positive examination results automatically become invalid.

A period of 180 days is given to those who are sent a call letter to the connection agreement. Also, an application to the administration must be made within 90 days if the projects require an Environmental Impact Assessment [“EIA”] report. If the applicant submits all relevant documents to the grid operator within 180 days, a connection agreement is signed with the grid operator within 30 days. Applicants who fail to obtain the relevant documents within the 180-day period shall be granted an additional 180-day period by the grid operator if they certify that they have made the necessary applications on time. If no application is made within the period, the applicant loses the right to sign a connection agreement.

Subsequently, the person establishing the generation facility notifies the grid operator that the generation facility to be connected to the grid complies with the conditions in the Regulation and the connection agreement. The grid operator verifies this with a signed report within 15 days and an application for acceptance is carried out by submitting such report to the Ministry of Energy and Natural Resources. The acceptance process must be completed within one year from the date of signature of the connection agreement if the grid operator’s distribution transformer is used.

Accepted generation facilities must sign the system usage contract within one month following the start of commercial operation of the facility. After this stage, the system can be powered on as of the date specified in the system usage contract by the generation facilities.

What Does the Amendment Regulation Bring?

The most important and controversial amendment introduced by the Amending Regulation is that the persons who are entitled to receive a call letter for a connection agreement as a result of the applications made after 12.05.2019 will be able to sell their surplus electricity limited to the total consumption amount of the associated consumption facility. The surplus energy generated above this amount is transferred to YEKDEM as a free contribution. There was no such limitation before, and facilities were able to sell all surplus electricity.

In other words, real persons or legal entities will now be able to sell only the corresponding amount of their surplus electricity to the total electricity consumption of the associated consumption facility in the previous accounting year. In the absence of consumption data for the previous year, the average of the current monthly consumption will be taken as a basis. The amendment will not apply to generation facilities associated with consumption facilities in residential subscriber groups with an installed capacity of 50 kilowatts or less.

The EMRA states that the aim of the latest amendments is for consumers to obtain the energy they consume from solar energy, therefore such an amendment was necessary because the legislation has been abused. The EMRA further argues that all consumers will benefit from this situation, as the fee paid to the distribution company and the fee paid when surplus energy is fed into the grid will now not be paid, and surplus production exceeding the consumption will be taken as a free contribution.

By Yasemin Keskin, Senior Associate, and M.R. Cafer Koc, Legal Intern, Guleryuz & Partners

Guleryuz & Partners at a Glance

Güleryüz & Partners Attorneys at Law is an Istanbul based law firm offering a broad scope of high-quality legal services to domestic and multinational clients across a wide range of regulated and non-regulated industries. The Firm is comprised of energetic young professionals, led by experienced lawyers with a proven track record of working in the most demanding environments possible. Our team has comprehensive experience in serving clients in connection with a full breadth of Turkish law matters including Litigation & Dispute Resolution, M&A, Wealth Management & Family Businesses, General Corporate & Contract Law, Real Estate & Construction, Enforcement and Bankruptcy Proceedings, Labor Law, Administrative Law, and Anti-Corruption & White-Collar Crimes. 

Our core business culture is centered on integrity, dedication to clients’ needs, and excellence of legal advice and services. Therefore, our primary objective is to ensure the most personalized and reliable legal service for our clients. In pursuit of this objective, the international academic backgrounds of our partners at prestigious universities in USA, UK and Germany coupled with more than ten years of past experience at top tier Turkish law firms enhances the visionary practice of the Firm.

We blend our practical expertise with our outstanding grasp of legal theory in order to provide our clients with legal services of unmatched quality. Our clients range from multinational companies where we provide a level of attention normally only expected from in-house counsels in order to timely manage every aspect of the clients’ legal needs, to individuals for whom we make their objectives ours in order to provide comfort and ease of life. While we always put client service above all, we are proud to be on a quest to make reliable legal information available for everyone. Hence, we are constantly authoring articles on a broad scope of legal topics for respectable publications including Bloomberg Businessweek and the monthly magazine TR Monitor.

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