Sponsored briefing: The licensing process in the Turkish electricity generation market

Dr Ata Torun of Hansu Attorney Partnership provides an overview of the procedure for gaining a licence to generate electricity in Türkiye

General overview of the Turkish electricity market

The energy sector in Türkiye continues to develop in accordance with decarbonisation objectives driven by national and international dynamics. In this context, the number of generation facilities based on renewable energy sources has increased significantly in recent years. Most recently, Türkiye’s National Energy Plan announced in 2023 aims to increase clean energy and energy efficiency within the scope of sustainability. In addition to the integration of renewable energy resources into the electricity system, investments in the energy sector have gained significant momentum with recent regulations on the storage of generated electricity.

The National Energy Plan and Roadmap of the Ministry of Energy and Natural Resources seeks to increase Türkiye’s installed electricity capacity by 189,700 MW by 2035. In this context, a significant increase in the share of energy generated from renewable energy sources is desired. By 2035, the ministry expects to have increased the installed capacity of solar power by 52,900 MW, wind power by 29,600 MW, hydroelectric power by 35,100 MW, and geothermal and biomass power by 5,100 MW. In the last 20 years, major initiatives and incentives have been launched for private companies to participate in the investment and operation process in the energy sector, aiming to attract private capital and international investors into the system. With the legal arrangements and decisive liberalisation steps taken in this direction, the Turkish electricity market has been transformed into today’s competitive model with multiple actors, attracting the attention of international investors.

The main regulation for the electricity sector in Türkiye is the Electricity Market Law No. 6446 (the Law). The purpose of the Law is to establish a financially strong, stable and transparent electricity market in a competitive environment in order to provide electricity to consumers in a sufficient, high-quality, continuous and environmentally compatible manner. In accordance with these objectives, a limited number of activities in the electricity market are subject to a licence. The conditions to be fulfilled by companies that may obtain a licence are specified in more detail in the Electricity Market License Regulation (the Regulation). In this context, the Energy Market Regulatory Authority (EMRA) is authorised to regulate, supervise and sanction activities in the electricity market in Türkiye. The duties and authorities of the EMRA include, for instance, the issuance and revocation of licences, the preparation and amendment of relevant regulations for the provision of high-quality, uninterrupted and continuous electricity generation services, and the supervision of market players.

The Law requires licences for electricity generation, transmission, distribution, wholesale or retail sale, import and export of electricity, and market operation activities.

Companies aiming to operate in the electricity market must apply for a separate licence for each activity and for each facility, in case such activities are to be carried out in more than one facility, before starting their activities.

In this context, generation licences must be obtained from the EMRA for electricity generation plants based on renewable energy resources with an installed capacity greater than 5 MW.

Accordingly, in order to engage in generation activities in the electricity market, first, an application needs to be submitted for a preliminary licence. If the applicant company fulfils its obligations during the preliminary licence period, it can then submit an application to obtain a generation licence.

Preliminary licence process in the electricity market

Preliminary licence application

Initially, preliminary licences are required for electricity generation activities. Companies applying for a generation licence are primarily granted temporary preliminary licences by the EMRA in order to obtain necessary permits, approvals and similar documents arising from the applicable regulations before starting the construction of the respective generation facility, and to obtain the right of ownership or the right of use of the site where the generation facility is to be established.

In this context, companies that apply for a preliminary licence are obliged to be established as a joint stock company or limited liability company in accordance with the provisions of the Turkish Commercial Code. If it is established as a joint stock company, all of its shares, except for those traded on the stock exchange in accordance with capital markets legislation, must be registered shares.

As part of a preliminary licence application, a bank letter of guarantee for the amount determined by the board for each installed capacity in MW, addressed to the authority, must be presented.

‘With legal arrangements and decisive liberalisation steps, the Turkish electricity market has been transformed into today’s competitive model with multiple actors, attracting the attention of international investors.’
Dr Ata Torun, Hansu Attorney Partnership

In addition, it is obligatory to submit the (amended) articles of association of the company, stating that the minimum capital of the company has been increased to 5% of the total investment amount foreseen by the EMRA for the generation facility.

The company is also required to submit a document showing that a preliminary licence fee has been deposited in the authority’s account. Only 10% of the preliminary licence fee shall be collected from legal entities applying for a licence to establish generation facilities based on domestic natural resources and renewable energy resources.

Furthermore, the applicant company must include certain provisions in its articles of association as follows:

• if the applicant is a joint stock company, a provision stipulating that its shares, other than those traded on the stock exchange according to capital markets legislation, are registered shares; and
• the specific provision stipulated in the Regulation that the shareholding structure of the company cannot be changed during the preliminary licence period.

In terms of resources based on wind or solar energy, if the site where the generation facility is to be established is the property of the applicant, it is requested to submit a certificate of ownership of the site.

The duration of the preliminary licence is determined by the EMRA, depending on the resource type and installed capacity of the generation facility project; this will not exceed 36 months except in cases of force majeure.

As a general rule, until the licence is obtained, the applicant is prohibited to change the shareholding structure of the pre-licensed company directly or indirectly, to transfer its shares or to carry out transactions that will result in the transfer of shares, except for the exceptions specified in the Regulation.

The applicants should submit the required documents specified in the ‘List of Information and Documents Required to be Submitted in the Preliminary License Application’ determined by the EMRA together with the preliminary license application petition. If there is any deficiency in the application, the applicant is given a period of 15 days to rectify.

The EMRA grants preliminary licences to companies that fulfil the conditions stipulated in the legislation. This decision is also published on the EMRA’s website.

Transactions to be completed within the preliminary licence period

Pursuant to Article 17 of the Regulation, the pre-licence holder company is obliged to fulfil the following issues within the pre-licence period in order to start the investment of the generation facility subject to the pre-licence:

• If the pre-licence holder is not the owner of the site where the generation facility is to be established, it is required to obtain the ownership or right of use of the respective site.
• It is mandatory to obtain the approval of the master and implementation zoning plan for the generation facility planned to be established.
• Project or final project approval required for the generation facility must be obtained.
• A connection agreement must be concluded with the Turkish Electricity Transmission Corporation (TEİAŞ) or the relevant distribution company for the generation facility.
• A technical interaction permit must be obtained for generation facilities subject to a preliminary licence based on wind energy.
• For applications based on wind, solar, hydraulic, geothermal, geothermal, biomass or domestic mines, the decision required under the Environmental Impact Assessment Regulation must be obtained.
• A building licence for the production facility is required.

In addition, it has been stipulated that the EMRA shall grant preliminary licences for the establishment of wind and/or solar power generation facilities to companies that undertake to set up electricity storage facilities, for wind/solar power generation up to the installed capacity of the electricity storage facility. In this way, it has become more attractive for investors that aim to invest in a storage facility to realise a wind or solar power generation facility with the same capacity as the storage facility.

Licence applications in the electricity market

Preliminary licence holders must apply for generation licence, provided that they complete their obligations under the relevant preliminary licence.

Having obtained the necessary permits and approvals within the preliminary licence period, the applicants must be granted a generation licence by the EMRA in order to commence the construction of the electricity generation facility. The licence is obtained for a minimum of ten years and a maximum of 49 years, depending on the nature of the activity.

The applicant of a generation licence is required to provide a guarantee in an amount determined by the board, provided that it does not exceed 10% of the total investment amount stipulated by the EMRA according to the nature and size of the generation facility to be established.

The evaluation by the EMRA regarding the licence application is to be completed within 45 days.

As a result of this evaluation, if the obligations stipulated within the scope of the preliminary licence have been successfully completed, preliminary licence holders are granted generation licences by a decision of the EMRA that includes the following issues:

• construction period and facility completion date, which is published on the website of the EMRA; and
• for generation licences based on renewable energy resources, the annual maximum production amount that the facility can produce with its current installed power according to its source is listed as the annual electrical energy production amount.

Conclusion

As a country rich in wind power and with high solar radiation rates, Türkiye will be a leading centre of attraction for investors in renewable energy in the coming years. It is important that international and local investors act meticulously in the process of obtaining electricity generation licences, both in the preparation of the preliminary licence application in accordance with the relevant legislation and in the fulfilment of the obligations stipulated during the preliminary licence period, since, as mentioned in detail, the preliminary licence process plays a significant role in the preparation of the legal infrastructure, planning, financing as well as operation of generation facility projects.