We have been regularly summarizing developments in the renewable energy sector. Now, the Government has taken another step to promote renewable energy by radically amending the Law on the Utilization of Renewable Energy Resources in the Generation of Electricity ("Renewable Energy Law"), adjusting the price charged for electricity generated using renewable energy resources.1 We will briefly summarize the amendments to be introduced with the draft law for amendment of the Renewable Energy Law ("Draft Law"), which was submitted to the Industry, Commerce, Energy, Natural Resources, Information and Technology Commission of the Turkish Parliament on 20 November 2008 and is still in the discussion phase. We will also address developments in solar power, in which the Government wants to foster interest similar to that shown by investors in wind power projects.2
Draft Law
In preparing the Draft Law, the Government has considered Turkey's dependence on natural gas and, accordingly, on foreign energy sources to meet the country's demand for electricity and increasing energy needs in general. It has sought to secure Turkey's independence with respect to electricity, provide an uninterrupted and reliable supply of electricity at low cost, diversify energy sources, and secure energy supplies as a whole.
The Draft Law, with the aim of tempting investors, offers price advantages in connection with the sale of electricity based on renewable energy sources, stipulating the price retail license holders are to pay for electricity supplied by generation companies that use renewable energy resources, and which have commenced operations prior to 1 January 2016. The Draft Law designates different purchase prices depending on the type of renewable energy resource used, such prices not being below the average wholesale electricity price the Energy Market Regulatory Authority ("EMRA") has determined for Turkey in the previous year. The minimum electricity purchase prices for each type of renewable energy resource are as follows, provided that the license holders continue to be authorized to sell electricity in the competitive market at a higher price3:
- For wind-powered energy generation facilities, 6 Eurocents/kWh for the first five-year period starting from the facility's operation commencement date and 5 Eurocents/kWh for the second five-year period;
- For biomass-powered energy generation facilities, 14 Eurocents/kWh for the first five-year period starting from the facility's operation commencement date and 10 Eurocents/kWh for the second five-year period;
- For geothermal-powered systems and plants, 7 Eurocents/kWh for the first five-year period starting from the facility's operation commencement date and 6 Eurocents/kWh for the following second five-year period;
- For solar-powered systems and plants, 18 Eurocents/kWh for the first ten-year period starting from the facility's operation commencement date; and
- For hydraulic-powered energy generation facilities, 5 Eurocents/kWh for the first ten-year period starting from the facility's operation commencement date.
Furthermore, the Draft Law further states that (i) the purchase price to be applied after the above-mentioned ten-year period for facilities having started operations prior to 1 January 2016, and (ii) the purchase price to be applied for facilities starting operations after 1 January 2016, should be the average electricity wholesale price of the previous year in Turkey as determined by EMRA. The Council of Ministers will still be authorized to determine the purchase prices, provided that such prices are not below the average electricity wholesale price of the previous year in Turkey as determined by EMRA.
Solar Power
Solar power is still an untouched energy area in Turkey, unlike other renewable energy sources such as wind and hydro. As explained in our spring 2008 Newsletter, EMRA adopted a decision4 to accept new license applications for wind and sun-powered energy generation facilities. Although the number of applications for wind-powered energy generation plants was extraordinarily high, no applications were submitted for sun-powered energy generation plants.
As Turkey is one of the most effective countries in the world in generating electricity from solar power,5 the Ministry decided to promote solar energy in a manner similar to the way it promoted wind power. Accordingly, the Ministry drafted a four-step roadmap specific to electricity generation using solar energy.
(i) Step 1 of the roadmap is the amendment of the Draft Law as explained above.
(ii) Step 2 is to amend Energy Efficiency Law No. 5627 so as to authorize the General Directorate of the Electrical Power Resources Survey and Development Administration (Elektrik İşleri Etüt İdaresi Genel Müdürlüğü) ("EİE") to draft a technical assessment regulation related to the license applications for sun-powered energy generation facilities.
(iii) Step 3 is the enactment of the above-mentioned technical assessment regulation to be drafted by the EİE. The regulation will be drafted by taking into account different technologies such as solar thermal power plants (CSP) and solar power plants (Photovoltaics), and it will set forth the rules applicable in the event of multiple applications for the same area.
(iv) Step 4 of the roadmap is EMRA's determination and announcement of a specific date for accepting license applications for sun-powered energy generation facilities. EMRA will also announce the assessment procedures to be followed in evaluating these license applications.
(v) During the 15th International Energy and Environment Conference,6 one of EMRA's energy experts stated that the technology to be used for generating electricity using solar power and the selection of the land for construction of sun-powered energy generation facilities were two issues crucial to the solar energy sector.
The expert added that EMRA would publicly disclose the date for the license applications in two months. He further explained that if the license applications were accepted by EMRA in 2009, the investors should make their investment plans for 2012, taking into consideration the fact that the license procedures and construction period might take two or three years.
It seems that – after the immense number of wind power license applications submitted to EMRA in one day – the Government and the Ministry will continue to promote renewable energy resources, in particular solar power.
Footnotes
1. Law No. 5346, published in the Official Gazette dated 18 May 2005 and numbered 25819.
2. During the last five years, Turkish and international banks and financial institutions have invested substantially in energy projects and the numbers prove it: it is foreseen that approximately 130 billion dollars will be injected into the Turkish energy sector by 2020. Considering Turkey's rich variety and potential in renewable energy resources, and that the Government has constantly carried out legislative, economic and political reforms to promote use of and investment in renewable energy, the World Bank and the Ministry of Energy and Natural Resources ("Ministry") agreed on a loan package during the negotiations in Ankara on 30 and 31 March 2009. The loan package includes a 500-million dollar loan from the World Bank and a 100-million dollar loan from Climate Investment Funds, and financing private sector construction of renewable energy power plants is also planned.
3. It is reported that the financial incentives foreseen for renewable energy investors will initially increase the financial burden of the end users, but will in the long run serve to benefit the end users as well, on the grounds that renewable energy resources have a lower cost compared to other energy sources, and this will positively affect the unit electricity price in the Turkish market.
4. EMRA's decision dated 4 October 2007 and numbered 1332/15.
5. According to the information published by the Ministry, Turkey's annual capacity for solar power is 380 billion/kWh.
6. The 15th International Energy and Environment Conference took place in Istanbul on May 13, 14 and 15.
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