Turkey introduces significant amendments to the Electricity Market Licensing Regulation

Recent Development

The Regulation Amending the Electricity Market Licensing Regulation (“ Amending Regulation “) was published in the Official Gazette No. 31774 and dated 10 March 2022 and entered into force on the same date. Please click here for the full text of the Amending Regulation in Turkish.

What does the Amending Regulation provide?

Significant amendments brought by the Amending Regulation can be summarized as follows under four categories: (i) provisions regarding electricity generation facilities, (ii) provisions regarding electricity distribution and authorized supply companies, (iii) provisions regarding share transfers, mergers and acquisitions, and (iv) provisions regarding storage facilities.

1. Provisions regarding electricity generation facilities:

• Explicit licensing exemption for trigeneration facilities : Before the Amending Regulation, trigeneration facilities were not explicitly listed as exempt from the licensing obligation. Yet, the exemption granted for cogeneration facilities that met the Ministry of Energy and Natural Resources’ efficiency criteria were applied to trigeneration facilities in practice. Now, it is explicitly provided that the trigeneration facilities which met the mentioned criteria are exempt from the licensing obligation.
• Amendment to minimum capital requirement for facilities established within the scope of the Renewable Energy Resource Areas (YEKA): Before the Amending Regulation, all generation license applications made within the scope of the YEKA required the applicant legal entity to increase its capital amount to at least 5% of the relevant investment amount. With the Amending Regulation, the rate of %5 is now only applicable to generation facilities within the scope of the YEKA with a mechanical power higher than 100 MW. Accordingly, other applicants within the scope of the YEKA will need to increase their capital to 20% of the investment amount.
• Amendment to the exemption in relation to establishing license-exempt facilities within licensed facility areas: Prior to the Amending Regulation, an exemption was provided from the prohibition of establishing license-exempt facilities over licensed areas for generation activities. In accordance with the exemption, applications for license-exempt facilities to be established over the landowner’s own land could be accepted, on the condition that the technical evaluation of the license-exempt facility is affirmative and the licensed generation facility in question or other licensed generation facilities are not affected. The Amending Regulation amended this exception to only be applicable to licensed wind power plants.
• New exemption from the technical assessment requirement in site changes for wind power plants: Concerning site changes, the Amending Regulation provided that the technical assessment will not be required for wind power plants, on the condition that a part of the facility remains in the same site, the total size of the facility’s site does not change, the change is required within the scope of force majeure and the facility is partially or completely operational. However, the opinion of the Directorate General of Energy Affairs will be required for the site changes in case of overlapping and intersection of turbines in the neighboring lands.
• Termination of generation licenses upon finalizing the sale of the relevant generation facility through enforcement proceedings: The Amending Regulation provided that generation licenses will be terminated in the case of a finalized sale of the relevant generation facility through enforcement proceedings.
• Obligation for generation license holders to promptly notify the cancellation of their permits: The Amending Regulation introduces the obligation for generation license holders to notify the Energy Market Regulatory Authority (“ EMRA “) immediately, in case their permits, approvals and licenses, which are the basis of their generation licenses, become invalid.
• Obligation to submit environmental permits to the EMRA for biomass power plants: According to the Amending Regulation, legal entities holding generation licenses for operational biomass power plants must submit the permits they have obtained under the Environmental Permit and License Regulation to the EMRA within 24 months following the acceptance of their facilities. Even though the obligation to obtain the mentioned permits is already regulated under the Environmental Permit and License Regulation, by the introduction of an additional obligation to submit the relevant permits to the EMRA, a mechanism has now been introduced that will enable the EMRA to monitor compliance with the permitting requirements. The biomass power plants that are operational as of 10 March 2022 will be required to comply with this obligation by 10 March 2024.

2. Provisions regarding distribution and authorized supply companies:

• Additional provisions for unbundling the management of distribution and authorized supply companies: The scope of unbundling the managers of distribution and authorized supply companies has been expanded to cover the supply companies within the same control structure. The Amending Regulation also provided a similar unbundling requirement for: (i) distribution companies and other companies providing services related to the electricity market within the electricity market, except the other distribution companies within the same shareholding structure; and (ii) authorized supply companies and other companies providing services related to the electricity market within the electricity market, except the other authorized supply companies within the same shareholding structure. If there is noncompliance with these provisions, it needs to be remedied by 1 July 2022.
• Obligation for distribution companies to have their notification addresses within their own regions: The Amending Regulation regulates that a notification address registered for a distribution company’s license cannot be in a location that is outside of the distribution area in which they operate. If there is currently noncompliance with this requirement, such noncompliance must be remedied by 1 July 2022.
• Obligation to set up a website for authorized supply companies: It is now obligatory for authorized supply companies to set up and operate a website that is separate from other companies, including their parent companies, for their operations, especially for operations that are subject to tariff regulations within the scope of their licenses.
• Expansion of the exception for distribution companies to obtain services for consumer services from third parties : Distribution companies were generally prohibited from receiving services from third parties for operating consumer service centers, with the exception of call centers. With the Amending Regulation, in addition to call centers, services received from third parties regarding debt collection operations are also included within the scope of the exemption. Accordingly, distribution companies will be able to receive services from third parties for debt collection operations in addition to their call centers.

3. Provisions regarding share transfers, mergers and demergers:

• The notification obligation applicable to generation license holders in the case of a share transfer or change in control has been extended to all license holders whose tariff is not subject to regulation: The obligation to notify the EMRA in the case of share transfers that are equal to or more than 10% (5% for publicly traded companies) or change in control, which used to only be applicable to generation license holder legal entities, will now be applied to all license holders whose tariff is not subject to regulation.
• The EMRA now has the discretion to extend the six-month period envisaged for completion of mergers and demergers: The Amending Regulation sets out that the six-month period provided for a license holder company to complete their merger and demerger after the license holder company is permitted to execute the merger and demerger transaction by the EMRA can be extended by the EMRA. Accordingly, the EMRA now has the discretion to foresee a longer period for the completion of mergers and demergers.

4. Provisions regarding storage facilities:

• New provisions regarding obtaining TEİAŞ’s approval for storage facilities: In accordance with the Amending Regulation, TEİAŞ’s (the national electricity transmission company) opinion will be sought for integrated electricity storage units to be established for generation facilities (at the pre-license or license stage) and for independent electricity storage facilities to be established within the scope of a supply license.
• Environmental Impact Assessment (EIA) obligation for independent storage facilities to be established under the supply license: An EIA decision for the independent storage facilities to be established under supply licenses must be submitted to the EMRA within the period determined by the relevant EMRA Board decision. It is expected that amendments will also be made to the Environmental Impact Assessment Regulation accordingly.

Conclusion:

The Amending Regulation sets out various provisions to be applied to generation, distribution, authorized supply and supply license holders, and aims to adapt the regulatory framework to the developments within the market.