Legal Briefing on New Provisions in the Electricity Market
Pursuant to various regulations recently published in the Official Gazette, incentives and exemptions were introduced for generation facilities with storage in the electricity market and comprehensive amendments were made in the secondary legislation for such purpose.
On 1 July 2022, various amendments were made to the Electricity Market Law numbered 6446 (“Law”) regarding electricity storage facilities. One of these amendments provides certain advantages to legal entities that undertake to establish electricity storage facilities.
As expected, on 19 November 2022, the secondary legislation, particularly the Electricity Market Licensing Regulation (“Licensing Regulation”), was amended to take into account the amendments made to the Law.
The Energy Market Regulatory Authority (“EMRA”) regulated that investors establishing electricity generation facilities with storage facilities can benefit from various incentives.
- Generation Facilities with Storage Facilities
Under the Licensing Regulation, facilities that (i) establish an electricity storage facility while already generating electricity; or (ii) establish an electricity generation facility after obtaining a licence as an electricity storage facility, will henceforth be classified as 'generation facilities with storage facilities'.
- Collateral and Minimum Share Capital Requirements
Currently, collateral needs to be deposited at rates determined by the Energy Market Regulatory Board (the "Board") to apply for a licence within the scope of the Licensing Regulation. The calculation is based on the installed capacity of the relevant facility in MWm.
The Licensing Regulation determines that the collateral to be provided by generation facilities with storage facilities will be based on the installed capacity of both the generation facility and the storage capacity of the storage facility.
The Licensing Regulation stipulates a transition period for applications for generation facilities with storage facilities. Pursuant to Provisional Article 38, for applications to be made until 30 June 2023, the obligations regarding minimum capital and collateral will not be required, provided that these are completed at a later stage.
- Pre-licence Requirements
Under the Licensing Regulation, certain additional criteria have been introduced for obtaining a pre-licence for generation facilities with storage facilities:
- The ratio of the installed capacity of the generation facility to the installed capacity of the storage facility shall be a maximum of 1;
- Applications based on wind energy shall be for at least 20 MWe installed capacity and applications based on solar energy shall be for at least 10 MWe installed capacity and shall not exceed 250 MWe of installed capacity;
- The ratio of the total electrical energy amount a unit can store to the maximum power a unit can deliver shall be at least 1; and
- The electricity storage unit will need to be located within the borders of the area where the power plant is located.
- Exception to the Licensing Requirement
Pursuant to the additional sentence added to Article 5 of the Licensing Regulation, it will not be necessary to obtain a separate licence or pre-licence for electricity storage units within electricity generation facilities with storage facilities and electricity storage units integrated in generation facilities as these units will be considered as a component of the main resource-based facility.
However, legal entities currently operating as generation facilities will be subject to a licence or pre-licence application if they wish to operate as a generation facility with storage facilities, and must comply with the additional criteria listed above.
- Feed-in Tariff
As of 28 February 2019, if a legal entity holding an electricity generation licence increased its installed capacity, the increased amount would be excluded from the scope of the feed-in tariff and other YEKDEM related incentives under the Regulation on Certification and Support of Renewable Energy Resources (the “YEKDEM Regulation”). However, the amendment to the YEKDEM Regulation stipulates that if a capacity increase occurs by establishing an electricity storage facility, such limitation will not be applied and the capacity increase in question will be included within the scope of the YEKDEM incentives.
- Unlicensed Activities and Exception for Usage of New Material
Article 4(3) of the Regulation on Storage Activities in the Electricity Market (the “Storage Regulation”) regulates that electricity storage facilities can be established in unlicensed electricity generation facilities that receive an invitation letter and in case monthly offsetting is made for surplus energy.
In addition, materials to be used in such electricity storage facilities are excluded from the requirement of being produced within the last five years which was the rule for unlicensed generation facilities.
- Energy Investment by way of Compulsory Enforcement
A new way of obtaining a licence in the electricity market has taken its place in the legislation with the addition of subparagraph (d) to Article 5(3) of the Licensing Regulation.
The gist of such provision was to allow and regulate step-in rights of lenders upon an event of default by the project company. It is now stipulated that the person that steps into the shoes of the project company and takes over the project can only be a legal entity and will be provided with a new licence which is in fact a continuation of the existing licence.
Therefore, no additional approval from EMRA prior to the exercise of such step-in right will be sought as is the case for other transfers.
Pursuant to the opinion adopted by EMRA, generation facilities should be considered as a whole in terms of enforcement proceedings. In other words, it is not possible to subject the individual parts or materials constituting the generation facility to enforcement proceedings separately from the generation facility.
The rationale behind this view is that the generation, distribution and transmission of electricity is a public service as adopted by the Constitutional Court and the Council of State. Electricity generation, which is a public service aimed at meeting the common needs of the society, should be realised in such a way that it will not be interrupted.
Hence the view that it should not be possible to seize or sell parts of the generation facility, such as solar panels or wind turbines; instead, the entire generation facility must be subject to enforcement.
Generation facilities with storage facilities, which have been included in the legislation, constitute an important step towards Türkiye's goal of gaining a place in the global renewable energy market.
Incentives and exemptions introduced for generation facilities with storage facilities may attract both domestic and foreign investors.
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Such rule is regulated under Article 37(6) the Licensing Regulation.