Contributed by Dentons Istanbul
The Regulation on Renewable Energy Designated Areas (the "Regulation") has come into force following its promulgation in the Official Gazette dated 9th October. The Regulation is expected to pave the way for large-scale renewable energy investments in Turkey.
The objectives of the Regulation can be regarded as:
- forming large-scale Renewable Energy Designated Areas ("REDAs") on either property belonging to public / treasury, or privately owned property, in order to make effective and efficient use of renewable energy sources,
- rapidly completing investment projects by assigning these areas to investors, and enabling high-tech equipment used in the generation facilities to be domestically manufactured or supplied and contribute to technology transfer.
The Regulation sets out the principles and procedures regarding:
- the determination of REDAs,
- connection and capacity allocation for these areas,
- determination of usage of allocated capacity conditional on domestic manufacturing or utilization of domestic goods,
- the conditions to be met by legal entities participating in the tender, holding of the competition,
- the process of licence applications by tender winners for setting up the generation facilities in REDAs, and
- sale of the electricity generated.
The Regulation states that REDAs are to be developed by two means: As a result of operations conducted by the General Directorate of Renewable Energy ("GDRE"); or as a result of the Tender of Connection Capacity Allocation for REDAs and the operations to be conducted afterwards.
The majority of the provisions in the Regulation concern the capacity allocation tender, the agreement to be signed following the tender and finally, the licensing process.
Tender of Connection Capacity Allocation for REDA
The Notices of Tender for REDA usage, which are to be published both in the Official Gazette and on the website of GDRE, will contain information such as allocation, conditions to be fulfilled by the applicant legal entity, the amount and duration of letter of credit to be provided, dates of application, price cap and duration of power purchase.
The first such project tender notice has now been published: see Annex-1.
The notices will also include information regarding the technical and administrative specifications ("Specifications") concerning REDAs, the connection capacity of each REDA, connection capacities to be allocated on the basis of connection zones, specifications and production processes regarding the equipment subject to the Requirement of Domestic Equipment ("RoDE") and/or Requirement of Domestically Manufactured Equipment ("RoDME"), and if the REDA is considered to be subject to RoDE, the minimum specifications to be met by the factory that will be constructed for such production.
Legal entities that fulfil the requirements set out by the Regulation and the Specifications and submit a valid application will earn the right to participate in the tender.
Following the tender notice, application folders containing technical qualifications and the financial bids will be submitted. The time period between the date of notice and the submission date shall not be less than 30 days.
The five participants with the lowest bids shall proceed to the next phase, which will be by reverse auction.
The underbidding process will begin from the lowest initial bid provided by the participants, and then in turn the participants may provide lower bids than the initial bid, until the final lowest bid is given.
The final step will be the approval of the Minister himself. Overall, the tender will be over after the Minister approves the outcome and the winning participant will be invited to sign the REDA Usage Contract.
Following the signing, the winner will be applying to Energy Market Regulatory Authority ("EMRA") for pre-license and license for electricity generation. The winner has to apply for the pre-license within 45 days following the signing of the contract. Following the grant of the pre-license, if the entity fulfils the conditions set forward by article 12 of the Regulation and the requirements of the R&D plans, the entity may apply for the generation license.
The duration of the generation licenses obtained for REDAs will be 30 years. Following that period, necessary action will be taken according to the legal framework concerning the public institutions from which the right of tenancy was initially obtained.
Pursuant to the Regulation, the power plants shall be commissioned in 36 months. If the installed capacity determined in the business plan is not fully operational, price cuts will occur from the prices predetermined in the REDA contract; and the cuts will last until the foreseen installed capacity is achieved.
Power generated in REDAs will be regarded as within the scope of the Turkish Renewable Energy Support Mechanism ("YEKDEM") with the price predetermined in the contract and prices will not increase for the period foreseen in the Specifications. Following the purchasing period provided by the REDA contract, the entity will continue to be active in the electricity market under the generation license secured.
Obligation of Domestic Equipment
Within the scope of the Regulation, legal entities who fulfil the specifications announced by the Ministry and who will produce the specified equipment in Turkey and/or commit to use domestically manufactured equipment may apply for the generation of electricity based on the renewable energy sources.
Moreover, the Regulation also contains provisions regarding the use of domestically manufactured equipment during the process of licensing following the tender. Within the scope of the Requirement of Domestic Equipment, it is necessary to use domestically manufactured equipment in the generation facility that was produced in a certain factory, which was asserted under the specifications and the responses to specifications as well.
According to the Requirement of Domestic Equipment and Requirement of Domestically Manufactured Equipment, if it is understood that the domestic equipment committed is not used in the REDAs, a notice will be sent to the license-holder. If the infringement occurred is not resolved by adapting the commitments within the period specified under the notice, the REDA Usage Contract shall be terminated, the collateral shall be recorded as revenue, and the liquidation process will be initiated according to the general provisions. Moreover, EMRA will be notified for termination of the generation license.
In addition to this, for the installation of generation facilities within the scope of the REDA Usage Contract, the Law on Utilization of Renewable Energy Resources for the Purpose of Generating Electrical Energy no. 5346 shall not be applicable separately in terms of the provisions of domestic equipment incentive.
The initiation of REDAs and the legal framework of the investments on these areas have been defined with the Regulation. It is now expected that interest in Turkish renewable energy will be much greater than before.
It is worth noting that the previous scheme based on license application during windows announced by EMRA is still applicable and EMRA has already announced applications for wind power projects will be received 3-7 April 2017. We will see how the available capacity will be split between these two schemes for connecting renewables to the grid and how until and after 2020 the two schemes might proceed hand in hand.
Annex-1: From the Ministry of Energy and Natural Resources:
TENDER ANNOUNCEMENT REGARDING THE ALLOCATION OF KARAPINAR RENEWABLE ENERGY RESOURCES AREA (RERA) IN EXCHANGE FOR DOMESTIC PRODUCTION
1) Administration Details
Administration’s Name: Turkish Republic Ministry of Energy and Natural Resources
Address: Yenilenebilir Enerji Genel Müdürlüğü, Eskişehir Yolu 7. Km, No: 166, 06520 Çankaya/ANKARA
Phone Number: 0 312 – 295 55 00
Fax Number: 0 312 – 295 50 05
E-mail: yeka@yegm.gov.tr
2) Tender Details:
Name of the Tender: Tender of Usage Right of Karapınar Renewable Energy Sources Area (RERA)
Qualification, type and amount of the Tender: As allocation in exchange for domestic production for a connection capacity of 1000 MWe; it is the establishment of PV solar module with 500 MWp/year capacity and R&D Center production plant, integrated as specified in the Specification, the management of R&D operations and the establishment and functioning of the Solar Power Plant with total power of 1000 MWe at Karapınar RERA on the exact coordinates as indicated by the Specification.
a) Place of Work:
The plant that will produce PV solar module will be established within the territory of Turkish Republic, except Free Zones; Solar Power Plant will be established on the coordinates stated in the Specification and R&D Center will be established in the places stated in the relevant legislation.
b) Start and completion dates of the work:
Installation of the Plant and R&D Center will be completed within 18 months following the signing date of the agreement and Solar Power Plant will be completed within 36 months following the installation of the Plant.
c) Tender Procedure:
The Tender will be carried out according to the procedure through the reverse auction upon the initial price ceiling of electric power per kWh which was announced in the Specification.
The Financial Proposal shall not be conditional.
d) Participation requirements and required documents for the Tender:
Business experience: the participants shall have produced 3000 MWp PV solar module based on PV solar power production technology between the dates 01/01/2014 and 30/06/2016, by realizing integratedly the phases/actions of slicing, cell and module production; except the production of ingot as stated in the Schedule 1of the Specification.
Further requirements and required documents to participate to the Tender are listed in the Specification.
e) Whether the Tender is open only to the local partners:
The Tender is open to the local and foreign partners of the joint venture groups of which Technology Providers and Turkish citizens hold separately at least 25% of the shares. The Joint Venture Group which wins the Tender will incorporate a company and execute RERA Usage Right Agreement.
f) Specification price and the place where the price will be deposited, the Specification will be reviewed and provided:
Specification price is TRY 10,000 and will be deposited to the Central Accounting Directorate of the Turkish Republic Ministry of Science, Industry and Technology.
Specification can be reviewed and provided in the Renewable Energy General Directorate of the Ministry of Energy and Natural Resources. In any case, the amounts paid in order to obtain the Specification shall not be refunded.
g) Application place, date and time:
Applications shall be delivered by hand to the Renewable Energy General Directorate of the Ministry of Energy and Natural Resources until the date 12/12/2016 at 14.00 h. The applications submitted to the Administration after this date and time will not be received for consideration. The assessment of the applications will start on the same date and in the same address at 16.00 h and afterwards, the detailed examination will be carried out.
h) Tender place, date and time:
The Tender will be carried out by means of opening the financial proposal envelopes and by reverse auction procedure in the Renewable Energy General Directorate of the Ministry of Energy and Natural Resources, on 15/12/2016, at 14.00 h.
3) Security type and amount:
The guarantee letter shall be definite, unlimited in time, fully and/or partially realizable, and in the amount of USD 50 million.
4) Validity Time of the Proposals:
The proposals will be valid during at least 120 calendar days following the application.
5) Consortia cannot give a proposal to this Tender.
6) Initial ceiling price of the Tender and the Purchase Period:
- Initial ceiling price of the Tender: USD 8.00-cent/kWh
- Power purchase period: 15 years
Acquisition period of the electric energy will start as of the signing date of the RERA Usage Right Agreement.
7) Technical and administrative requirements
Technical and administrative requirements regarding the plant where the PV solar modules will be produced, the production process, the characteristics of the sections, other components of the plant to be used in the Solar Power Plant, R&D activities and RERA are stated in the Specification.
8) Tendering is at discretion of the Administration.
The Administration is entitled to delay the application date to a specified date or to a date to be determined later. This matter will be announced before the application date is expired.