New Turkish-Lira tariff scheme for renewable energy projects in Turkey
February 2021 – On 30 January 2021, Presidential Decision No. 3453 (the “Decision”) was published in Turkey’s Official Gazette and entered into force on the same date. The Decision is based on the authority granted to the Turkish president on 2 December 2020 pursuant to the Law on Renewable Energy Resources for the Generation of Electric Energy (No. 5346) to set feed-in tariffs and local-component usage bonuses available under the “RER Support Mechanism” for renewable energy plants commencing operations after 30 June 2021 on a Turkish-lira basis.
As per the Decision, the following terms apply for renewable energy projects commencing operations as of 1 July 2021:
- the local-component bonus payment will be set at 8 TL kuruş/kWh for a period of 5 years following the commencement of operations of eligible renewable energy facilities, and the detailed principles and procedures applicable to this payment shall be determined by the Ministry of Energy and Natural Resources.
- feed-in tariffs will apply for 10 years following the commencement of operations, with the initial tariffs as set forth in the table below. For comparison we have included a column with the USD-based tariffs that currently apply.
- the feed-in tariff and local component bonus prices are subject to an index-based escalation mechanism on a quarterly basis, and the escalated prices will apply for the following quarter. The escalations will be made based on the producer-price index, the consumer-price index, and the buying rates for EUR and USD, as per the formulation given in the Decision. The first escalation is scheduled for 1 April 2021.
For feed-in tariffs, the Decision also envisages ceiling prices for the escalated prices, in order not to exceed a ceiling amount based on USD. Where an escalated price would exceed the ceiling price, the ceiling price as converted into Turkish liras (based on average of daily buying rates for USD announced by the Turkish Central Bank for the second, third and fourth months prior to the first month of the relevant quarter[1]) shall apply. The relevant ceiling prices determined by the Decision are listed below:
Conclusions
The most striking change under the Decision—and one that has long been flagged since the enabling legislation in December 2020—is the conversion of the feed-in tariff and bonus for the local-component use from a USD-priced scheme to a Turkish-lira priced scheme. Indeed, USD pricing now sets a maximum price ceiling for incentives. The Decision will only apply to plants commencing operations as of 1 July 2021.
This new scheme under the Decision is also different to the current scheme in that the same price applies for local-component bonuses irrespective of the component type and envisages different prices for biomass-based generation facilities, based on the specific characteristics of the facility.
For more information please contact Şeyma Olğun, Senior Associate, at .
[1] The letter of the provision is not clear; therefore, it is reflected as written in the Decision. Nevertheless, our interpretation is that, for the escalation to be made on 1 April 2021, the ceiling price will be calculated by converting it into Turkish liras based on the average of the daily buying rates of December 2020, January 2021 and February 2021.