The growing importance of sustainable energy has led many countries, including Turkey, to implement various incentives and support mechanisms for renewable energy investments. Solar, wind, hydro, geothermal, and biomass projects are particularly favored due to their low environmental impact and alignment with national energy strategies. In Turkey, these incentives are primarily structured under the Renewable Energy Law No. 5346 (YEK Law) and other complementary regulations, aiming to attract both domestic and foreign investors.
This article explores the legal framework, types of incentives, tax advantages, feed-in tariffs, and financial support schemes available for renewable energy projects in Turkey.
1. Legal Framework for Renewable Energy Incentives
The legal foundation for renewable energy incentives in Turkey is based on:
- Law No. 5346 on the Utilization of Renewable Energy Sources for the Purpose of Generating Electrical Energy (YEK Law).
- Electricity Market Law No. 6446 – Sets licensing requirements and market operation rules.
- Environmental Law No. 2872 – Introduces additional obligations and exemptions for eco-friendly projects.
- Investment Incentive Program (Presidential Decrees) – Provides customs duty exemptions, VAT exemptions, and other benefits for renewable projects.
- Feed-in Tariff Regulations (YEKDEM) – Offers guaranteed purchase prices for renewable energy producers.
2. Key Incentives for Renewable Energy Investments
2.1. Feed-in Tariff Mechanism (YEKDEM)
The Renewable Energy Resources Support Mechanism (YEKDEM) provides guaranteed purchase prices for electricity generated from renewable sources. Key features include:
- A fixed tariff (in USD or TRY) guaranteed for 10 years from the plant’s commissioning date.
- Additional bonus tariffs for local equipment use (e.g., domestically produced solar panels or wind turbine components).
- Technology-specific tariffs:
- Solar PV: Approximately 32 USD/MWh.
- Wind: Approximately 32 USD/MWh.
- Geothermal: Approximately 54 USD/MWh.
- Biomass: Approximately 54 USD/MWh.
- Hydropower: Approximately 32 USD/MWh.
2.2. Local Equipment Incentives
- Renewable energy facilities using locally manufactured components receive an additional tariff of 8–13 USD/MWh depending on the component (e.g., solar modules, inverters, wind blades).
2.3. VAT and Customs Duty Exemptions
- Investors are exempt from customs duties and value-added tax (VAT) for imported renewable energy equipment.
- This exemption significantly reduces the initial capital expenditure.
3. Tax and Financial Incentives
3.1. Corporate Tax Reductions
- Companies investing in renewable energy projects may benefit from corporate tax reductions or exemptions under the general investment incentive program.
3.2. Accelerated Depreciation
- Renewable energy equipment can be depreciated faster than standard equipment, allowing investors to reduce taxable profits during the first years of operation.
3.3. Soft Loans and Credit Facilities
- The Turkish Development and Investment Bank (TKYB) and other financial institutions provide low-interest loans for renewable energy projects.
- International organizations such as the European Bank for Reconstruction and Development (EBRD) and World Bank offer financing packages for green projects in Turkey.
4. Licensing and Land-Use Incentives
4.1. Easier Licensing Process for Small-Scale Projects
- Projects under 1 MW capacity are exempt from obtaining a full EPDK license (unlicensed generation).
- Simplified grid connection and application procedures apply for such projects.
4.2. Reduced Land Leasing Fees
- For projects installed on public land or forestry areas, leasing fees are often reduced by up to 85%.
- Energy generation facilities using renewable sources have priority in land allocation.
5. Environmental and Regulatory Incentives
- Renewable energy plants are exempt from certain emission and environmental fees applied to fossil-fuel-based facilities.
- Environmental Impact Assessment (EIA) requirements may be simplified for small-scale renewable projects, reducing bureaucratic hurdles.
6. Investment Incentive Certificates
Renewable energy investors can apply for Investment Incentive Certificates from the Ministry of Industry and Technology. Benefits include:
- VAT exemption for all imported machinery and equipment.
- Customs duty exemption.
- Corporate tax reduction (up to 50%).
- Social security premium support for employer contributions.
- Interest support for investment loans.
7. Green Certificate System
The “Yeşil Tarife” (Green Tariff) and Guarantee of Origin (GO) certificates enable renewable energy producers to sell environmentally friendly electricity at premium prices to consumers seeking green energy solutions.
8. Additional Support Programs
8.1. TÜBİTAK and KOSGEB Grants
- R&D activities in renewable energy technologies are supported through TÜBİTAK programs (research and development funding).
- KOSGEB offers grants for small businesses entering the renewable energy sector.
8.2. Carbon Credit Opportunities
- Renewable energy plants can generate carbon credits under voluntary carbon markets, creating an additional revenue stream.
9. International Agreements and Incentives
Turkey’s participation in international climate agreements (e.g., the Paris Agreement) strengthens its commitment to renewable energy, leading to:
- Access to international climate finance.
- Potential participation in carbon offset projects.
10. Challenges Despite Incentives
While incentives are attractive, investors face certain challenges:
- Grid connection capacity limitations – especially in solar and wind-heavy regions.
- Fluctuating exchange rates – as tariffs were historically denominated in USD, but recent regulations shifted to TRY.
- Lengthy licensing procedures for large-scale projects (above 1 MW).
11. Legal Considerations for Investors
- A careful review of licensing requirements is crucial, particularly for projects exceeding 1 MW.
- Investors should evaluate YEKDEM eligibility deadlines since support mechanisms are subject to application windows.
- Contract negotiations with distribution companies and landowners should be handled by legal professionals to prevent disputes.
12. Timeline for Renewable Energy Incentives
- Project feasibility and design: 3–6 months.
- Application for licenses and incentives: 6–9 months.
- Construction and commissioning: 12–18 months.
- Total project duration: Approximately 24–36 months, depending on capacity and location.
13. Conclusion
Turkey’s renewable energy sector benefits from a robust incentive framework designed to promote investment, reduce reliance on fossil fuels, and encourage sustainable development.
- YEKDEM tariffs, tax incentives, and financing opportunities play a critical role in attracting investors.
- Investors should stay up to date with EPDK regulations, incentive deadlines, and new government programs to maximize returns.
Key Takeaways:
- Renewable energy investments are supported by a mix of financial, tax, and operational incentives.
- Local component bonuses and reduced land fees significantly improve project feasibility.
- Legal and technical advisors can ensure smooth navigation of licensing and incentive applications.
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