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Public consultation on changes to Turkish energy legislation

February 2021 – The Turkish Energy Market Regulatory Authority (“EMRA”) has initiated a public consultation process in relation to significant proposed changes to Turkish energy legislation, mainly in the area of energy storage. Other substantial amendments have been proposed to the Electricity Market License Regulation (“License Regulation”), the Regulation on Support and Certification of Renewable Energy Resources (“Regulation on Renewables”), and the Regulation on Unlicensed Electricity Generation (“Unlicensed Electricity Regulation”). Below we provide an overview of the main changes being proposed.

1. Draft Regulation on Storage Activities and other storage-related amendments

EMRA initially opened public consultations on draft storage regulations in 2019 and has now provided an updated draft of the Electricity Market Storage Activities Regulation (“Draft Regulation on Storage Activities”) following comments from market players. Market players have been waiting for detailed secondary legislation regulating electricity storage facilities since the 2018 amendments to the Electricity Market Law (No. 6446) first acknowledged its need for regulation.

The main provisions in the Draft Regulation on Storage Activities, and the main draft amendments to existing regulations related to storage activities, are as follows:

Types of storage facilities: The Draft Regulation on Storage Activities defines four types of storage facilities: (i) storage facilities integrated with a licensed generation facility; (ii) storage facilities integrated with a consumption facility; (ii) independent storage facilities; and (iv) storage facilities owned by network operators. The aim of the Draft Regulation on Storage Activities, as well as related draft amendments to other regulations, is to regulate how storage facilities may be owned, operated and connect to network systems, and the main principles according to which storage facility owners may participate in market activities.

(i)  Storage facilities integrated with a generation facility: Both licensed and unlicensed renewable energy generators will be allowed to build storage facilities. However, the electricity provided by storage facilities will not form part of the calculation under any power-purchase guarantees or incentives (such as feed-in tariffs) provided for generation facilities.

The capacity of these storage facilities must not exceed the installed capacities of the generation facilities to which they are integrated. The electricity to be provided to the network by generation facilities with an integrated storage facility must not exceed the installed capacity of the generation facility within a settlement term, and storage facilities may not commence their operation and participate in market activities until the relevant generation facility has commenced its operations.

(ii) Storage facilities integrated with a consumption facility: Such storage facilities are to be constructed to cater solely to the consumption facilities’ needs and may only be constructed and owned by (i) consumption facilities; and (ii) unlicensed generation facilities that are connected to the grid from the same connection point as the associated consumption facility and were granted the right to connect to the grid system after 12 May 2019. The installed capacities of such storage facilities must not be in excess of the capacity stipulated in the connection agreement for the relevant connection facility.

(iii) Independent storage facilities: Supply companies will be allowed to construct and own storage facilities with an installed capacity of 5 MW or higher with the approval of the relevant network operator. These facilities will be allowed to participate in ancillary services and the balancing market.

(iv) Storage facilities owned by network operators: Distribution companies will be allowed to own storage facilities subject to obtaining EMRA’s approval, and by demonstrating that having such facilities is less costly compared to distribution network expansion, and fulfilling other requirements sought the relevant legislation. These storage facilities will not be allowed to participate in the balancing market or wholesale or retail market activities. TEIAS, the transmission network operator, will also be entitled to own storage facilities.

Hydroelectric facilities with pumped storage and battery backup units made available for usage during power cuts are outside the scope of these regulations.

  • Licensing of storage facilities: Under the draft amendments to the License Regulation, storage facilities will not be subject to a separate license but will rather be recorded in the main license of the relevant licensee. Additional documents, such as an environmental impact assessment decision regarding the storage facilities, are to be submitted to EMRA during the license application process or to amend an existing license to integrate a storage facility. In order to integrate a storage facility by amending an existing pre-license or generation license, the amendment application will be accepted if (i) the area that the storage facility will be built on does not exceed the licensed area; (ii) network operator’s approval is obtained; and (iii) the connection point, voltage level and connection type of the generation facility will not need to change.
  • Grid requirements, system connection and usage of storage facilities: Approval of the network operator will be required for independent storage facilities and storage facilities integrated with generation and consumption facilities for connection to and usage of the relevant network.

2.  Significant amendments to other legislation

Below are the most significant proposed amendments to other legislation:

License Regulation

  • Provisions related to biomass power plants: Biomass power plant projects using pyrolytic oil or gas (obtained through processing waste tires) will not be allowed to use another biomass energy source, and pre-license applications will be rejected on this basis.
  • Installed capacity limitation for auxiliary power generation facilities: In electricity-generation facilities using an auxiliary energy source in addition to a main energy source for energy generation (including renewables-based plants), the total installed capacity of electricity from auxiliary resources may not exceed the installed capacity of the portion of the electricity generation facility using the main source for generation.
  • Generation license owner rights to acquire land: Generation license owners will be allowed to apply to EMRA with a request for expropriation of land relevant to a generation facility. This may be envisaged as a means to enable plant owners to expand through hybrid facilities.

Renewables Regulation:

  • Clarification of the feed-in tariff term for certain generation facilities: A ten-year feed-in tariff term was available for renewable energy facilities commencing operation before 31 December 2020; this was extended to 30 June 2021 due to Covid-19. However, it was unclear whether facilities commencing their operation after 1 January 2021 but before 30 June 2021 would benefit from the feed-in tariffs for a whole ten-year period or would lose a valuable six-month incentive term. The draft amendment to the Regulation on Renewables proposes that this feed-in tariff period will end on 31 December 2030. It is worth noting that, for facilities commencing their operation partially during the first six months of 2021, there is a lack of clarity as to whether they will benefit from the current feed-in tariff prices for their full capacity once the remaining portion of the facility commences operations.
  • Exclusion of excess electricity from the RER Support Mechanism: Under proposed changes to the Renewables Regulations, if a renewable energy facility generates higher than the maximum hourly generation that is allowed based on its installed capacity, no payment will be made for the excess generation within the relevant settlement period, and this excess amount will be considered a free contribution to the RER Support Mechanism. Similarly, the portion of electricity that does not comply with the emergency loading or balancing market loading instructions of the system operator will not be included in the RER Support Mechanism calculations, and the relevant market participant will not receive the RER Fee for such amount.

Unlicensed Electricity Regulation:

  • Option to increase capacity of the existing facility: The draft amendments on Unlicensed Electricity Regulation provide for a new exemption to licensing (foreshadowed in December 2020) to enable unlicensed generation for renewable plants up to the capacity permitted under the connection agreement. This provision also enables the owners of unlicensed generation facilities—up to the current 5 MW limit for installed capacity—to expand their facilities’ capacity to the consumption capacity stipulated in their connection agreements.
  • Requirement to build storage capacity: The draft amendments on Unlicensed Electricity Regulation require the building of a storage facility with a minimum installed capacity of 20% of the integrated generation facility for unlicensed renewable energy-based plants that are with the capacity not exceeding the capacity stipulated in generation facilities’ connection agreements.

Conclusion

Storage facilities are desired by many market players. They provide more flexibility for grid-related activities, and interest in this space has grown as the costs of building storage facilities has lowered. Although amendments made in 2018 to the Electricity Market Law (No. 6446) recognised the use of storage facilities, EMRA has yet to enact any regulations detailing the regulation of these facilities.  As this is the second public consultation (after 2019) concerning the regulation of storage facilities, EMRA is now closer to meeting the expectations of market actors.

Market actors have, however, raised some concerns regarding the non-storage-related amendment drafts in other regulations, although some amendments have been viewed positively, such as the option to expand the installed capacity of existing unlicensed renewable energy facilities.

Following public feedback on the draft legislation, EMRA is expected to make further revisions to the drafts and to proceed with bringing into force the draft amendments and regulations.

For more information please contact Şeyma Olğun, Senior Associate, at solgun@gentemizerozer.com, or Tara Direkoğlu, Intern, at tdirekog@gentemizerozer.com.