NEW TARIFF IN YEKDEM AND LOCAL CONTENT PRICES, DURATIONS AND UPDATE PRINCIPLES IN TURKEY

Some investment incentives were introduced and the Renewable Energy Resources Support Mechanism (“YEKDEM”) was established to increase investments in the field of renewable energy and to prevent investors from avoiding entering the market because of high investment costs.

YEKDEM is a support mechanism that guarantees the purchase of electricity generated from renewable energy sources at predetermined price levels. Under Article 6 of Law No. 5346 on the Use of Renewable Energy Resources for the Purpose of Generating Electrical Energy (“Law No. 5346”), it is envisaged that the prices within the scope of YEKDEM will be applied to the generation facilities, which have commenced operations from 18 May 2005, which is the effective date of this Law, to 31 December 2020 for a term of 10 years.

The amendment made by Law No. 7257 dated 25.11.2020 (“Law No. 7257”) on Article 6 of Law No. 5346 stipulates that the prices and duration to be applied according to Law No. 5346, will be determined by the President, not to exceed the prices in the Table I attached to the said Law.

Besides, the amendment made in Article 6/B of the same Law stipulates that the local content prices to be applied in Turkish Lira for the generation facilities holding YEK certificates and the unlicensed plants that will be established to meet the needs of the generation facilities to be operational after 30.06.2021, updating of the prices, durations to be applied and other principles regarding the implementation are determined by the President.

In this context, under Article 6 and 6/B of Law No. 5346, Presidential Decision, No. 3453 (“Decision No. 3453”), regarding the prices and periods to be applied for electricity generation facilities based on renewable energy sources holding YEK certificates will commence operations from 01.07.2021 until 31.12.2025, was published in the Official Gazette dated 30 January 2021 and numbered 31380.

Presidential Decision No. 3453 determined the YEKDEM feed-in-tariff that will be available to electricity generation facilities based on renewable energy sources holding YEK certificates will commence operations between 1 July 2021 and 31 December 2025, as well as the duration and the principles for price updates.

The principles of the new tariff introduced by Presidential Decision No. 3453 are as follows:

• YEKDEM and local content prices to be applied for generation facilities holding YEK certificates that will commence operations from 1 July 2021 to 31 December 2025 were determined.

The prices to be applied for the relevant facilities within the scope of YEKDEM are determined in Law No.5346. Under the decision of the Council of Ministers dated 18.11.2013, a fixed purchase price guarantee for a term of 10 years within the scope of the YEKDEM incentive is provided to the generation facilities that have been or will be in operation until 31/12/2020 (This period has been extended to 30 June 2021 with the Presidential Decision No. 2949 published in the Official Gazette dated 18.09.2020).

Under the Council of Ministers decision, the fixed purchase guaranteed prices to be applied until 30/06/2021 per the reference made to the Table I attached to the Law No.5346 vary according to each energy source and are as follows;

• 13.30 (USD cent/kWh) for generation plants based on biomass and solar energy,
• 7.30 (USD cent/kWh) for generation plants based on hydroelectric and wind power,
• 10.50 (USD cent/kWh) for generation plants based on geothermal energy.

Per the new tariff mechanism in Turkish Lira introduced by Presidential Decision No. 3453, the prices of YEKDEM to be applied for generation facilities with YEK certificates from 1 July 2021 to 31 December 2025 will be as follows;

• 0.40 TL/kWh for generation plants based on the hydroelectric,
• 0.32 TL/kWh for generation plants based on wind and solar power,
• 0.54 TL/kWh for generation plants based on geothermal energy,
• 0.32 TL/kWh for resources obtained from landfill gas or by-products from the processing of waste tires, 0.54 TL/kWh for biomethanization, 0.50 TL/kWh for thermal disposal in biomass-based generation facilities.

The facilities will benefit from YEKDEM for a term of 10 years as of the commencement of their operations.

• It was determined that the local content price will be 0.08 TL/kWh for the facilities where YEKDEM price will be applied, and this price will be implemented for a term of 5 years as of the date of commencement of operations.

According to the Decision of the Council of Ministers dated 18.11.2013, if the mechanical and/or electro-mechanical parts used in the YEK certificate holding generation facilities to be commenced operations from 01/01/2016 until 31/12/2020 are manufactured domestically, for the electrical energy generated in the plants and supplied to the distribution system, the prices specified in the Table II attached to the Law No.5346 are added to the prices specified in the Table I attached to the said Law for a term of 5 years as of the commencement of their operations.

Under Decision No. 3453, the local content price for the generation facilities holding YEK certificate that will be operational from 1 July 2021 to 31 December 2025 was determined as 0.08 TL/ kWh. In this regard, the local content price has been determined to be the same for all facilities, regardless of the facility type or domestic production type. The facilities will benefit from local content price incentives for a term of 5 years as of the commencement of their operations.

On the other hand, under Decision No. 3453, it is also stipulated that the Ministry of Energy and Natural Resources will issue a regulation concerning the procedures and principles on the implementation of local content prices.

• The Turkish Lira based YEKDEM and local content prices to be applied to the generation facilities holding YEK certificates to commence operations from 1 July 2021 to 31 December 2025 will be updated quarterly in January, April, July, and October each year starting from 1 April 2021.

Under Decision No. 3453, it is stipulated that YEKDEM prices and domestic contribution prices will be updated quarterly, and the update will be made within the framework of a specific formula. In this formula, the Producer Price Index, the Consumer Price Index, the average of the US Dollar and Euro purchase rates for certain months will be used as variables.

However, a fee cap has been determined in terms of USD cent/kWh for the updates to be made. Accordingly, the fee cap will be applied as follows;

• 6.40 (USD cent/kWh) for hydroelectric generation plants,
• 5.10 (USD cent/kWh) for wind and solar power based generation plants,
• 8.60 (USD cent/kWh) for generation plants based on geothermal energy,
• 5.10 (USD cent/kWh) for resources obtained from landfill gas or by-products from the processing of waste tires, 8.60 (USD cent /kWh) for biomethanization, 8 (USD cent /kWh) for thermal disposal in biomass-based generation plants.

Therefore, the update will be made by using various factors such as inflation rates and exchange rates, taking into account the determined fee cap and by using the following formula consisting of change in USD/TL (24%), Euro/TL (24%), consumer price index (26%), and producer price index (26%).

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