Hydroelectric energy investment in Turkey remains one of the most established and profitable renewable energy sectors for foreign investors. With abundant rivers, streams, and a mountainous geography that allows for efficient energy generation, Turkey offers vast opportunities for developing both large-scale hydroelectric power plants (HEPP) and small-scale hydroelectric facilities (SHEPP). This guide outlines the legal framework, licensing process, environmental requirements, and investment incentives, helping foreign investors navigate the market with confidence.
1. Why Hydroelectric Energy Investment in Turkey Is Attractive
Hydropower has been a cornerstone of Turkey’s electricity production for decades. It provides:
- A reliable and continuous energy supply.
- Low operational costs once facilities are built.
- A renewable and clean energy source with low carbon emissions.
- Opportunities for grid stability by providing base and peak load power.
Turkey’s renewable energy strategy encourages hydroelectric development to diversify the energy mix and reduce reliance on imported fossil fuels. For foreign investors, hydroelectric energy investment in Turkey offers long-term profitability and alignment with global sustainability goals.
2. Legal Framework and Regulatory Authorities
Hydroelectric projects are regulated by:
- Energy Market Regulatory Authority (EPDK) – licensing and electricity market oversight.
- State Hydraulic Works (DSİ) – water usage rights and resource allocation.
- Ministry of Environment, Urbanization and Climate Change – environmental approvals.
- Local municipalities and provincial administrations – zoning and construction permits.
Key legislation includes:
- Electricity Market Law No. 6446.
- Law No. 5346 on Renewable Energy Sources.
- Water Law and DSİ regulations for water rights.
3. Pre-Investment Stage: Feasibility and Water Rights
Before starting a hydroelectric energy investment in Turkey, investors must:
- Identify a Suitable Site – Analyze hydrological data, river flow, and head (height difference) for power generation potential.
- Apply for Water Usage Rights – DSİ grants rights to use water resources for electricity production.
- Conduct Feasibility Studies – Technical, financial, and environmental feasibility assessments are essential to ensure viability.
4. Licensing and Permits
4.1. EPDK Generation License
Large-scale hydroelectric projects require a generation license from EPDK. The application must include:
- Turkish-registered company documents (foreign investors must set up a local entity).
- Technical feasibility report.
- Financial plan.
- Water usage rights approval from DSİ.
- Land use documentation.
Licenses are typically granted for up to 49 years.
4.2. Unlicensed Generation
Small-scale hydroelectric plants may operate without a generation license if they meet capacity limits, but must still comply with technical regulations and obtain DSİ approval.
5. Environmental Compliance
Environmental approvals are crucial for hydroelectric energy investment in Turkey:
- Environmental Impact Assessment (EIA): Required for large-scale projects; smaller projects may obtain an EIA Not Required Certificate.
- Biodiversity Protection Measures: Projects must include mitigation plans for aquatic life and ecosystems.
- Land Use and Forestry Permits: Necessary if the project affects forest or agricultural land.
6. Grid Connection and System Use
After licensing, the investor must sign a grid connection agreement with TEİAŞ or the relevant distribution company. This defines:
- Connection point and capacity.
- Technical integration requirements.
- Timelines for connecting to the national grid.
7. Construction, Installation, and Pre-Operation
Construction involves:
- Building dams, penstocks, turbines, and generators.
- Installing control and monitoring systems.
- Ensuring compliance with international safety and engineering standards.
Before starting operations:
- Conduct pre-commissioning tests.
- Sign a system usage agreement with TEİAŞ or the distribution company.
8. Commercial Operation and Energy Sales
Once operational, hydroelectric plants can:
- Sell electricity in the free market.
- Join YEKDEM (Renewable Energy Support Mechanism), which provides fixed purchase prices and incentives for renewable energy.
- Benefit from additional support for using locally manufactured equipment.
YEKDEM offers stable income streams for hydroelectric energy investment in Turkey, improving financial predictability.
9. Incentives for Foreign Investors
Investment Incentive Certificate
Granted by the Ministry of Industry and Technology, this provides:
- VAT and customs duty exemptions.
- Corporate tax reductions.
- Interest rate support.
Double Taxation Agreements
Turkey’s agreements with many countries prevent investors from paying taxes twice on the same income, ensuring efficient profit repatriation.
10. Legal Considerations and Risk Management
- Secure water usage rights early to avoid delays.
- Ensure environmental compliance to prevent project suspension.
- Use experienced legal and engineering consultants to navigate licensing and construction.
- Engage with local communities to maintain social acceptance.
11. Conclusion
Hydroelectric energy investment in Turkey offers foreign investors a reliable, renewable, and profitable opportunity backed by government incentives and a supportive legal framework. By following the correct process—feasibility studies, licensing, environmental approvals, construction, and grid connection—investors can achieve long-term, stable returns while contributing to Turkey’s renewable energy transition.
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