Solar Power Plant Projects in Turkey: Legal Process Guide

Solar Power Plant Projects in Turkey: Comprehensive Legal Guide

Turkey ranks among the most attractive countries globally for solar energy investments, owing to its high solar irradiation potential. Solar power plant (SPP/GES) projects are attracting increasing investor interest for both environmental sustainability and economic returns. However, the successful realization of a solar power plant project requires a multi-stage and complex legal process. This guide provides a detailed examination of all legal stages of SPP projects.

Land Acquisition and Leasing

The first step in SPP projects is securing suitable land. Key considerations in the land acquisition process include:

Land Type and Agricultural Conversion Permits

SPP projects typically require large tracts of land. Using agricultural land for energy investments requires obtaining a non-agricultural use permit under the Soil Conservation and Land Use Law No. 5403. This permit is granted by the Provincial Soil Conservation Board.

• Absolute agricultural land: Cannot be converted to non-agricultural use as a rule; however, permission may be granted in exceptional circumstances through a public interest determination.
• Marginal agricultural land: Non-agricultural use permits are relatively easier to obtain.
• Treasury land: May be allocated through lease or easement rights from the Ministry of Treasury and Finance.
• Private land: Secured through purchase or long-term lease agreements.

Land Lease Agreements

For SPP land leases, a minimum lease term of 30 years is recommended. The agreement should clearly specify the purpose of land use, rent escalation mechanisms, decommissioning and land restoration obligations upon expiry, and annotation on the title registry.

EMRA Pre-Licence and Licence Application

SPP projects with an installed capacity of 1 MW or above require a pre-licence and generation licence from the Energy Market Regulatory Authority (EMRA/EPDK).

Pre-Licence Stage

The pre-licence is a document issued to fulfill prerequisites for obtaining a generation licence. The pre-licence period is typically 24 months, during which the investor is expected to complete:

• Finalization of land use rights
• Completion of the EIA process
• Obtaining TEİAŞ/distribution company grid connection opinion
• Initiation of zoning plan and building permit processes

Generation Licence

Following completion of the pre-licence phase, the generation licence application is submitted. The generation licence is valid for up to 30 years and constitutes the legal basis for electricity generation activities. Required documents include company incorporation documents, financial adequacy certificate, technical project, EIA decision, and grid connection agreement.

Obtaining expert energy law counsel is critical for effective management of the licensing process.

Environmental Impact Assessment (EIA) Process

SPP projects may be subject to the Environmental Impact Assessment (EIA) process depending on installed capacity:

• Projects above 10 MW: A full EIA report is mandatory with comprehensive environmental impact analyses.
• Projects between 1-10 MW: A project introduction file (PIF) determines whether EIA is required.
• Projects below 1 MW: Generally exempt from the EIA process.

The EIA process is coordinated by the Ministry of Environment, Urbanization and Climate Change and takes an average of 6-12 months. Public participation meetings, environmental monitoring plans, and risk assessments are important components of the process.

Zoning and Building Permits

Obtaining the necessary zoning and building permits is required before construction of SPP projects can commence:

• Zoning plan amendment: A zoning plan modification may be necessary to designate the land as an energy production area.
• Building permit: A building permit from the relevant municipality is mandatory.
• Electricity facility installation permit: An installation permit is obtained from the Ministry of Energy and Natural Resources.

Grid Connection (TEİAŞ/Distribution Companies)

Connecting SPP projects to the grid is a mandatory step for commissioning. The grid connection process involves:

• Connection application: Applications are made to TEİAŞ for transmission grid connection or to the relevant distribution company for distribution grid connection.
• Capacity allocation: Available capacity and technical suitability at the connection point are assessed.
• Connection agreement: Grid connection conditions, connection point, and technical requirements are established by agreement.
• System usage agreement: A system usage agreement is signed for feeding generated electricity into the grid.

EPC Contracts

In SPP projects, EPC (Engineering, Procurement, Construction) contracts ensure turnkey project delivery. Key considerations in EPC contracts include:

• Performance guarantees: Guarantees that the plant will produce at the specified capacity
• Delay liquidated damages: Penalties for delays in construction and commissioning
• Warranty periods: Panel, inverter, and other equipment warranties (typically 20-25 year panel performance warranties)
• Operation and maintenance (O&M): Scope of post-commissioning operation and maintenance services
• Risk allocation: Force majeure, regulatory changes, and technical risks

Power Purchase Agreement (PPA)

A Power Purchase Agreement (PPA) must be executed for the sale of generated electricity. The PPA is a long-term contract establishing electricity purchase-sale terms between the producer and buyer. In Turkey, electricity sales may be conducted through the free market, bilateral agreements, or under YEKDEM.

YEKDEM (Renewable Energy Resources Support Mechanism)

YEKDEM provides guaranteed feed-in tariff pricing to facilities generating electricity from renewable energy sources. Under YEKDEM for solar power plants:

• Guaranteed electricity purchase at fixed feed-in tariff prices
• Additional price premiums for use of domestically manufactured equipment
• YEKDEM duration is set at 10 years from the commissioning date
• After the YEKDEM period expires, producers may continue selling electricity on the free market or through bilateral agreements

Unlicensed Generation

SPP projects with installed capacity below certain thresholds may be evaluated under the unlicensed generation framework. Advantages include no EMRA licence application requirement, faster process, lower investment costs, self-consumption focused generation, and sale of surplus production to the grid. Rooftop and facade applications, self-consumption plants at industrial facilities, and agricultural irrigation SPP projects are commonly preferred under the unlicensed framework.

Investment Incentives and Tax Benefits

Renewable energy investments in Turkey benefit from various incentives and tax advantages:

• Investment incentive certificate: VAT exemption, customs duty exemption, and tax reduction under strategic or regional incentive schemes
• VAT exemption: VAT exemption on renewable energy machinery and equipment
• Customs duty exemption: Customs duty exemption on equipment imported under the investment incentive certificate
• Corporate tax reduction: Corporate tax reduction under regional incentive schemes
• Social security premium support: Employer social security contribution support for employed personnel
• Land allocation: Allocation of Treasury lands for renewable energy investments on favorable terms

Project Finance

SPP project financing may be structured through various methods depending on project size and structure, including project finance based on future cash flows, corporate finance based on the investor's balance sheet, international development bank green energy loans (EBRD, IFC, EIB), and green bonds issued for renewable energy projects.

Common Disputes

The most frequently encountered legal disputes in SPP projects include:

• Land disputes: Conflicts regarding lease agreements, non-agricultural use permits, and easement rights
• EPC contract disputes: Performance guarantees, delay damages, and technical disagreements
• Grid connection issues: Capacity allocation, connection delays, and technical requirements
• Licence disputes: Appeals against EMRA decisions, licence cancellation or modification
• Environmental disputes: Appeals against EIA decisions, pollution claims
• YEKDEM-related disputes: Price calculations and payment processes

Conclusion and Recommendations

SPP projects offer high return on investment potential but require navigating a complex legal landscape. Obtaining professional legal counsel at every stage, from land acquisition to licensing, from EIA to grid connection, ensures timely and trouble-free project completion.

The Emir Law & Consulting energy law team provides comprehensive advisory to investors at all legal stages of SPP projects. For expert assistance with EMRA licence applications, EPC contracts, land law, and project finance, please contact us.