Regulatory Amendments On Energy Sector

Law No. 7501 on the Amendment of the Mining Law and Certain Laws entered into force with the Official Gazette dated 11 May 2024 and numbered 32543, and various amendments were made to the "Mining Law", "Coast Law", "Natural Gas Market Law", "Utilization of Renewable Energy Sources", "Energy Efficiency Law", "Electricity Market Law" and "Nuclear Regulatory Law".

Law No. 7501 was submitted to the Presidency of the Turkish Grand National Assembly on 29 January 2024 and was adopted by the General Assembly of the Turkish Grand National Assembly on 2 May 2024. The amendments that entered into force with the publication of the adopted Law on 11 May are examined as follows:

Turkish Mining Law No. 3213

Under the amendment, the obligation to report according to the National Mineral Resource and Reserve Reporting Commission ("UMREK") code within the scope of Article 24 of the Mining Law will be maintained only for Group IV Mining Operation Licences among the mining groups, and the obligation for other mining groups has been abolished. Accordingly, other groups of mines are subject to the UMREK reporting system voluntarily.

Another amendment brought by Law No. 7501 within the scope of the Mining Law is that the General Directorate of Mineral Research and Exploration ("MTA") will gain the right of discovery for the mines that it finds by obtaining an exploration license within the scope of paragraph 4 of Article 47 of the Mining Law, with the reports prepared by MTA without the requirement to prepare reports according to the UMREK code. Therefore, it is aimed to accelerate the fulfillment of the demand for raw materials through the acquisition of the right of discovery by the General Directorate of MTA.

Coast Law No. 3621

With the addition of a new paragraph to Article 6 of Law No. 3621 on Coast Law, the possibility of declaring Renewable Energy Resource Areas ("YEKA") by the Ministry of Energy and Natural Resources ("Ministry") in reservoirs and wetlands other than those providing drinking-water supply, such as dam lakes, artificial lakes, and natural lakes, without the need for urban planning, has been provided for the establishment of facilities based on renewable energy sources. Additionally, within the scope of the newly added paragraph, it is allowed for legal entities holding pre-licenses or licenses to establish multi-source production facilities in dam lakes, artificial lakes, and natural lakes outside reservoirs and wetlands providing drinking water supply.

Furthermore, it is regulated that renewable energy-based unlicensed electricity generation facilities can be established by the General Directorate of State Hydraulic Works ("DSI") in these areas to meet the electricity needs of agricultural irrigation facilities belonging to the DSI or irrigation cooperatives. Not only by the DSI but also within municipal boundaries, in the aforementioned areas, it has been made possible to establish unlicensed electricity generation facilities based on renewable energy sources by municipalities and affiliated organizations with the permission of the DSI General Directorate.

Natural Gas Market Law No. 4646

Under Article 5 of Law No. 7501, the definition of Liquefaction "Liquefaction: Liquefaction of domestically produced and/or imported natural gas for export abroad or resale within the country" was added to the Natural Gas Market Law and the said activity was separated from the storage activity and took its place in the Law as an independent market activity. Accordingly, the legal entities that will operate the liquefaction facilities to be established are obliged to obtain permission from the Energy Market Regulatory Authority ("EPDK" or "Board"), and the legal entities applying for a license are required to have technical and economic power and meet other conditions determined by the regulations.

With the amendment that entered into force, it is stipulated in the Natural Gas Market Law No. 4646 that exceptional arrangements within the scope of operation and relocation of floating LNG facilities can be made by EPDK in consultation with the Ministry of Energy and Natural Resources.

Within the scope of the Law, storage companies are obliged to publish the unit prices and facility capacities for the services they will provide.

Utilization of Renewable Energy Sources Law No. 5346

According to the amendment published in the Official Gazette, the provision regarding the determination, protection, and use of resource areas under Article titled "Determination, Protection, and Use of Resource Areas" of Law No. 5346 has been removed, stipulating that the ceiling price in YEKA tenders will be provided in Turkish Lira and this price will be updated during the tender specification process. Instead of the removed provisions, it is stipulated that the procedures and principles regarding the tender will be determined by the Ministry in the relevant tender specifications, and the price and/or value resulting from the tender will be evaluated within the scope of the YEK Support Mechanism for the period specified in the tender specifications.

Regarding facilities under unlicensed production activities that have completed their ten-year period, the amendment introduces a provision allowing them to transition to licensed production activities by paying the difference between the current YEK Support Mechanism price applied on an hourly basis in the electricity market throughout the licensing period and the current market trading price applied on an hourly basis, if it exceeds the current YEK Support Mechanism price, as a contribution fee to the YEK Support Mechanism. Before this amendment in Article 6 of the said Law, there was a restriction where the electricity sales price, upon transitioning to licensed production activities for facilities under unlicensed production activities, would be limited to 85% of the market trading price, with the remaining 15% contributed to the RES Support Mechanism. Under the new amendment, the amount to be paid to the RES Support Mechanism is determined as the ceiling price. The application fee for licenses, license duration, and other matters related to licensed production activities will be determined separately by the Energy Market Regulatory Authority (EPDK). For production facilities continuing under unlicensed production, the price to be applied for excess electricity generated, with the market trading price as the ceiling, and the procedures and principles regarding its implementation will be determined by the President.

Energy Efficiency Law No. 5627

With the amendment, the following expressions have been added to the scope of Law No. 5627 on Energy Efficiency, and their definitions have been made as follows:

"Applicant: Natural or legal person who wish to benefit from energy efficiency supports,

Specific energy consumption: The amount of energy consumed per unit product and/or area or similar,

Carbon intensity: The amount of carbon dioxide emissions per unit product and/or area or similar..."

According to the amendment made in Article 8 titled "Supports" of Law No. 5627, projects prepared to increase energy efficiency will be supported by the Ministry up to a maximum of thirty percent of their cost, provided that it does not exceed fifteen million Turkish Liras. The support will be provided in the form of grants or interest subsidies, and the support amount will be increased annually, as of the beginning of the calendar year, by the revaluation rate announced for the previous year.

Applicants who reduce energy or carbon intensity or specific energy consumption according to the criteria determined by the Ministry will be eligible for support payments, taking into account budgetary possibilities provided that it does not exceed ten million Turkish Liras. The support payment will be up to thirty percent of the determined energy expenditure for the relevant year, and the support amount will be increased annually, as of the beginning of the calendar year, by the revaluation rate announced for the previous year. The procedures and principles regarding the support for these applicants will be determined by regulations to be prepared by the Ministry.

In cases of non-compliance with the legislation, issuance, and use of counterfeit or misleading documents, provision of false or misleading information, or detection of any irregularity in the application or project, the support payments made to the applicants or project owners will be requested to be repaid within one month with interest at the rate determined by Article 51 of Law No. 6183 on the Procedure for the Collection of Public Receivables.

Previously, under the provision, the Scientific and Technological Research Council of Turkey ("TUBITAK") would prioritize support for research and development ("Ar-Ge") projects aimed at increasing energy efficiency and utilizing new and renewable energy sources, and the guidance and evaluation of these projects would be subject to the opinion of the General Directorate. With the amendment, it is regulated that TUBITAK will consult with the Ministry during the process of guiding and evaluating projects.

Electricity Market Law No. 6446

With the amendment, Board has been granted through the addition of a paragraph to Article 9 titled "Distribution activity" of the Electricity Market Law, stating that temporary electricity demand in places where a State of Emergency is declared or recognized as a disaster area affecting general life can be met by the decision of the Board to ensure uninterrupted electricity services.

By adding a new paragraph to Article 19 titled "Real Estate Acquisition Procedures" of Law No. 6446, it is stipulated that the servitude area regarding electricity distribution facilities or transmission lines will be determined by the relevant legislation, taking into account the minimum approach distance, conductor swing distance, and distance between poles. Accordingly, as stated in the rationale of the article, the technical criteria for determining the servitude area are clarified without any doubt, aiming to prevent excessive expropriation costs and achieve savings in public resources in compensation lawsuits filed due to expropriation without registration and expropriation of energy transmission lines.

Temporary provisions have been added to the Electricity Market Law within the scope of the amendments brought by Law No. 7501. According to the added temporary provision, legal entities applying for production licenses, pre-licenses, or licenses will have the right to apply to the EPDK to cancel their licenses, pre-licenses, or applications if they cannot carry out their investments due to increases in investment costs due to pandemics and wars, economic and technical difficulties, or supply processes. Within the scope of this right of application, if they apply to the Board within two months from the date the article comes into force, their licenses, pre-licenses, or applications will be terminated or amended, and the securities they have provided to the EPDK will be partially or fully refunded depending on the situation.

By the second paragraph of the temporary provision, it is stipulated that if legal entities wishing to cancel their contracts signed as a result of YEKA tenders apply to the Ministry within two months after the article comes into force, all their rights and obligations will cease, their applications will be terminated, and the securities they have provided to the Ministry and the Board will be refunded.

Under Article 15 of the Law Amending Certain Laws Including the Mining Law, regulations regarding the obligation to obtain reports based on the UMREK code for only Group IV minerals shall come into effect as of the publication date of the Official Gazette; other regulations shall come into effect on the publication date of the Official Gazette.

The main objectives of the amendments made with the Law No. 7501 on the Amendment of Certain Laws Including the Mining Law, which entered into force through the Official Gazette dated May 11, 2024, include achieving compatibility with global practices, opening the way for the establishment of renewable energy production sources, enabling Turkey to play an active role in natural gas trade, eliminating potential delays due to changing conditions such as the determination of the principles to be applied in YEKA tenders by the Ministry, following a dynamic method, supporting individuals who reduce energy consumption and carbon intensity with a focus on energy efficiency to make progress in international standards, facilitating the provision of energy in case of disasters such as earthquakes in Turkey, ensuring uniformity in the calculation of servitude areas for energy transmission lines, increasing investment amounts accordingly, and enabling new investments to be realized more effectively and rapidly by granting the right to cancel applications to individuals who have been granted connection capacity rights under the Electricity Market Law and who have applied for production licenses, pre-licenses, or licenses.

(See also: Text of Law No. 7501 Amending Certain Laws Including the Mining Law, which entered into force through the Official Gazette dated May 11, 2024: https://www.resmigazete.gov.tr/eskiler/2024/05/20240511-1.htm )

The Regulation Amending the Regulation on Unlicensed Electricity Generation in the Electricity Market ("Amending Regulation"), which entered into force with the publication of the Official Gazette dated May 14, 2024, and numbered 32546, has made changes to 9 articles of the Regulation on Unlicensed Electricity Generation in the Electricity Market ("Regulation") and added a temporary article to the said regulation. The amendments made are examined as follows:

Temporary Subscriptions within the Scope of Connection Principles

Under the Amending Regulation, changes have been made regarding offsetting within the scope of temporary subscriptions in Article 7 titled "Connection Principles" of the Regulation. It is stated in the twelfth paragraph of Article 7 that production facilities cannot be established by individuals or legal entities for consumption facilities within the scope of temporary connections, except for temporary subscriptions related to consumption facilities under construction. With the sentence added by the Amending Regulation published in the Official Gazette, it is regulated that consumptions within the scope of temporary subscriptions can be offset with production facilities in the same business owned by the same individual or legal entity and within the same subscriber group.

The Return of Documents within the Scope of Applications Made Electronically

With the sentence added under Article 2 of the Amending Regulation, it has been stipulated that no document return will be made for the applications received electronically for the applications of real or legal persons who wish to generate within the scope of the subjects specified in Article 10 of the Regulation to the relevant grid operators with the information and documents determined by the Board decision.

Site Change within the Scope of Wind Energy Applications

According to the sentences added to the third paragraph of Article 16 of the Regulation by the Amending Regulation, in case the technical interaction permission for wind energy-based applications results negatively, the applicant will be granted the right to apply to the relevant network operator for field modification or revision within sixty days, provided that they connect from the same substation at the distribution level or the same transmission zone at the transmission level. However, it is explicitly stated that if the applicant fails to submit the field modification or revision to the relevant network operator within sixty days for each modification or revision, the application will be rejected. In other words, the owner of the wind energy-based application has been granted the right to apply to the relevant network operator for field modification or revision within sixty days if they meet the conditions stated above.

Connection Agreement Applications

The Amending Regulation has introduced changes to the timeframes specified in Article 17 of the Regulation titled "Connection Agreement Application". Additionally, the Environmental Impact Assessment and the document issued by the relevant authority within the scope of the Environmental Impact Assessment and its Regulation, which were listed among the documents that connection agreement applicants must submit to the relevant network operator in the second paragraph of the same article, have been removed from the content of the article by the Amending Regulation. The provision regarding granting additional time to applicants who fail to obtain the documents specified in the second paragraph promptly provided that they meet the conditions, has been abolished.

In the previous text of the Regulation, individuals or legal entities to whom a connection agreement call letter has been served were granted one hundred and eighty days from the date of service of the connection agreement call letter. With the amendment made by the Amending Regulation, this period has been determined as one year. According to the amended provision, the period granted for obtaining the Environmental Impact Assessment ("ÇED"), zoning, and other permits and approvals is within the specified one-year period.

In the previous text, the Regulation included conditions for granting additional time if the documents were not submitted within the period granted to the applicant. With the amendment made to the Regulation, no additional time is granted, and it is stipulated that if the documents are not submitted to the relevant network operator within one year, the applicant individuals or legal entities will lose their right to sign the connection agreement, and the existing documents will be returned to them.

With the paragraph added to the same Article 17 titled "Connection Agreement Application," a restriction has been introduced stating that the requested mechanical installed capacity increase for production facilities entitled to receive a connection agreement call letter before May 12, 2019, cannot exceed twenty percent of the electrical installed capacity. For production facilities entitled to receive a connection agreement call letter after May 12, 2019, the restriction has been set so that the requested mechanical installed capacity increase cannot exceed twice the electrical installed capacity.

Commissioning of Production Facilities and System Utilization

The phrase "the acceptance processes of production facilities to be connected to the grid according to the provisions of the Regulation" in the first paragraph of Article 19, which was present in the previous text, has been changed to "the acceptance processes and obtaining the necessary Environmental Impact Assessment (ÇED), zoning, and other permits and approvals for the commencement of investment of production facilities to be connected to the grid according to the provisions of the Regulation". Additionally, it has been stipulated that a partial acceptance can be made for each installation, provided that it is not less than 10 MWe in capacity each time while continuing the provision that only one acceptance can be made for non-licensed production facilities except for power increase procedures. It is mentioned that if the acceptance for the remaining power is not completed within the specified period, the connection agreement will be updated based on the accepted portion.

With the paragraph added under the same Article 19, which is examined under this title, regarding the situation where the system usage agreement is not signed for production facilities that have completed acceptance and commissioned, if the system usage agreement is not signed by the parties within one month following the date the facility commences commercial operation, the energy generated during the period until the network operator carries out the disconnection procedures for the production facility will be considered as a free contribution to the Renewable Energy Resources Evaluation Mechanism ("YEKDEM"). It is stated that the system usage fee incurred for the energy considered as a free contribution to YEKDEM under this paragraph will be paid to the relevant network operator through the responsible supply company, and no invoice will be issued to the owners of non-licensed production facilities for the energy considered as a free contribution to YEKDEM.

Principles of Offsetting in Cogeneration and Renewable Energy Generation Facilities and Surplus Energy Supplied to the Grid

With the paragraph added to Article 24 titled "Excess Energy" of the Regulation, in the case of renewable energy-based generation facilities established together in the same or different distribution regions and at different metering points, with cogeneration and trigeneration facilities in the category meeting the efficiency value determined by the Ministry, provided that no energy is supplied from the cogeneration facility to the grid, the excess energy supplied to the grid after monthly offsetting will be evaluated under the Renewable Energy Resources Evaluation Mechanism (YEKDEM) at the price set for non-licensed generation facilities in Table I attached to the Law on the Use of Renewable Energy Resources for Electricity Production.

Implementation of Monthly Offsetting

According to the amendment, the principles regarding the application of monthly offsetting for enterprises with licensed cogeneration plants under Article 26 of the old Regulation have been stated as enterprises with licensed generation plants. It has been changed to state that if the production facilities and enterprises covered by the paragraph do not have separate consumption subscriptions, the contracted power in the connection agreements signed for the relevant production facility will be based on the active power specified in the connection agreements.

Implementation of Consumption Needs

The seventh paragraph of Article 30 of the Regulation concerning the acceptance procedures of production facilities to be connected to the grid according to the provisions of the Regulation for meeting the electricity demand of consumption facilities has been amended to include the following sentence for non-licensed production facilities: "Partial acceptance can also be made, provided that it is not less than 10 MWe in capacity each time. However, if the acceptance for the remaining power is not completed within the specified period, the connection agreement will be updated based on the accepted portion."

Clauses Added and Points Changed within the Scope of Other Provisions

The paragraphs added to Article 37 titled "Other Provisions" of the Regulation are examined below:

Regarding Reducing Installed Capacity:

Article 37/(3): "Except for facilities subject to partial acceptance, individuals who have been issued a connection agreement call letter may, upon request and for one time only, reduce the installed capacity specified in the connection agreement call letter and the connection agreement by a maximum of ten percent."

Regarding Site Change in Force Majeure Cases:

Article 37/(12): "In case of force majeure circumstances, a site change may be allowed by the decision of the Authority for production facilities for which a connection agreement call letter has been issued, a connection agreement has been signed, and acceptance has been completed, provided that in distribution-level connections, they are connected from the same transformer center, and in transmission-level connections, they are connected from the same transmission zone."

Regarding Determining the Commissioning of Production Facilities Established Without Acceptance Procedures:

Article 37/(13): "In case it is determined that a production facility has been established and commissioned without undergoing acceptance procedures, the relevant grid operator shall disconnect the production facility from the grid without the need for any notification. Within sixty days following the determination, all equipment related to the production facility shall be dismantled and removed from the parcel where the facility is located by the facility owner. If available, the connection agreement call letter and the connection agreement shall be canceled. The individual or legal entity that established the production facility shall not be able to apply within the scope of this Regulation for three years."

In addition to the seventh paragraph of Article 37, the obligation to notify the relevant grid operator of merger or division information has been imposed on the entity conducting the merger or division.

Provisional Article

According to the provisional article added to the Regulation, the one year specified in the amended Article 17 titled "Procedures for Connection Agreement Call Letters" will also be applied to existing connection agreement call letters for the remaining durations. However, if the remaining period is less than the one hundred and eighty days stated in the previous version, the remaining period will be applied as one hundred and eighty days.

The amendments made to the Regulation by the Amending Regulation include granting the right to the applicant to apply for site change or revision in wind energy-based applications; changing the approval period for connection agreement call letters; enabling partial acceptance procedures at the commissioning of production facilities and system usage points; considering the electricity produced by applicants as a free contribution to the Renewable Energy Resources Support Mechanism (YEKDEM) if the system usage agreement is not signed; subjecting the excess electricity produced by facilities with cogeneration plants to monthly offsetting instead of hourly offsetting; determining that the contract power to be considered in the monthly offsetting and connection agreement for facilities with licensed production plants will be the contract power in terms of withdrawal direction; and providing one year for those with call letters as of the publication date of the regulation. The Regulation came into effect on the date of publication, May 14, 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.