Regulation on the Unlicensed Electricity Generation

Contact: Özgür Kocabaşoğlu; Erdem & Erdem (Turkey)

Regulation on the Unlicensed Electricity Generation on the Electricity Market (“Regulation”) has entered into force through publication in the Official Gazette dated July 21, 2011 and numbered 28001.

The Regulation provides that real and legal persons fulfilling certain minimum legal requirements are exempt from the requirement of obtaining a license and establishing a company in order to generate electricity. With the Regulation, it is possible to establish a generating station or power plant, the installed power capacity of which is limited to a maximum of five hundred kilowatts based on renewable energy[1] sources, and/or cogeneration facilities[2].

 

Exemption Concerning the License and Establishment of a Company

Exemption concerning the license and establishment of a company is laid down under Article 4 of the Regulation. Pursuant to the relevant article, persons who can benefit from the exemption concerning the license and establishment of a company are as follows:

- Real and legal persons who will generate electricity in micro cogeneration[3] facilities, or generation stations with a maximum installed power of five hundred kilowatts based on renewable energy sources,

- Real and legal persons who will establish a cogeneration facility that exceeds the limit laid down under the Regulation on Increase of Productivity on the Utilization of Energy Sources and Energy, in order to meet their own needs.

The limitation on the number of power consumption station for each energy generation stations that can be established within the scope of the Regulation is important. Principally, only one cogeneration facility, micro cogeneration facility or generation facility based on renewable energy sources can be established for each power consumption station. However, in the case the distribution system has sufficient capacity to cope with the uptake, more than one cogeneration or generation facility based on renewable energy sources can be established for each consumption facility. On the other hand, the total installed capacity power of these stations may not exceed 500 kilowatts. The rule that allows the opportunity to establish more than one facility shall not be applicable on micro cogeneration facilities. Only one micro cogeneration station can be established for each power consumption station.

Another paramount issue that should be taken into consideration about the Regulation is that the power generation and consumption stations are required to be located within the same distribution zone. Stations, located outside distribution zones shall not be evaluated within the Regulation.

The Connection Principles and Connection Application

The power generation stations that fall under the scope of the Regulation are connected to the distribution system. The connection application can be made by real or legal persons willing to generate electricity in generation facilities under the Regulation, by filling out the Unlicensed Generation Connection Application Form. The application shall be made directly to the relevant distribution company, or to the legal entity holding Organized Industrial Zone distribution license. The document confirming the grant of utilization right of renewable energy sources must be accompanied with the other application documents.

Assessment of the Application

The applications are assessed against the set criteria such as the use of renewable energy sources in the generation stations, the eligibility of the station as a cogeneration station and whether the power station is located within same location with the power consumption station.

Surplus Energy

The basic principle required by the Regulation for the real and legal persons who opt to generate unlicensed energy is to generate energy to meet only their own needs. However, if surplus energy is generated, this amount of energy may be consumed in the consumption station located at the same location with the generation station, or in another consumption station belongs to the producer even if it is located outside of the power generating station’s zone.

The unconsumed energy in the abovementioned stations is qualified as surplus energy. In the event that the surplus energy is generated from renewable energy sources, it can be purchased by a distribution company holding a retail sale license, on the price determined by the Code on the Utilization of Renewable Energy Sources for the Generation of Electric Energy dated 10/5/2005 and numbered 5346. In the event that the source of the surplus energy is micro cogeneration, it shall be purchased on the average wholesale electricity price applied in Turkey.

Another important issue concerning the surplus energy is that the unlicensed generators are not permitted to sell or supply the electricity generated within the scope of the Regulation by concluding bilateral agreements. Unlicensed generators may only sell the surplus energy to licensed distribution companies. Therefore, discretionary practices of unlicensed generators concerning the sale of energy are prevented.

The system that permits the sale of surplus energy is an advantageous and prosperous system not only for medium and small sized industries, but also for the State. Industries can raise additional income by the sale of the surplus energy they generate, and the State can make saving by purchasing the energy generated from renewable energy sources rather than importing high cost natural gas. As a result of consuming domestic surplus energy the cost-effective reductions may be obtained and contributions may be made to the austerity of the State while utilization of renewable energy sources will be encouraged and promoted.

Conclusion

The Regulation of the Unlicensed Electricity Generation in the Electricity Market was prepared by the Energy Market Regulatory Board in the light of sector consultation. With the Regulation, the possibility of unlicensed electricity generation has been based on a legal framework. As a result, unlicensed electricity generation has been permitted in Turkey, a country that is convenient for electricity generation from the sources such as wind turbines in terms of engineering, machinery, infrastructure and background. In addition, the possibility of sale of the surplus electricity will be certainly beneficial for both the generators and the State.



[1] Renewable energy sources are the energy sources such as hydraulic, wind, solar, geothermal, biomass, gas obtained from biomass (including landfill gas), and non-fossil energy sources such as wave, stream energy and rise and fall.

[2] Cogeneration facilities are the facilities that generate heat and electricity and/or mechanical energy simultaneously.

[3] Micro cogeneration facilities are the facilities with a total installed power of fifty kilowatts and less based on electric energy.