1) What “unlicensed generation” really means (and what it does not mean)
In Turkey, unlicensed electricity generation (often referred to as “license-exempt” generation) is a legally defined pathway that allows certain real and legal persons to generate electricity without obtaining a generation license and without establishing a company solely for that purpose, provided they meet specific statutory and regulatory conditions. The core policy objective is to enable consumers to meet electricity needs from generation facilities close to the consumption point, strengthen supply security, integrate small-scale generation into the economy, and reduce network losses.
This is where many projects go wrong: unlicensed generation is not a deregulated free zone. It is a regulated model with its own:
- eligibility criteria,
- application steps (call letter, connection agreement, project approvals),
- settlement and set-off rules,
- caps on what can be sold and paid,
- transfer restrictions,
- audit and enforcement exposure.
A project may be “unlicensed” but still face serious legal consequences—lost payments, cancellation of call letters, multi-year application bans, contractual defaults, and disputes with distribution companies or regulators—if the legal limits are not respected. (Çakmak Attorney Partnership)
2) The legal basis: Article 14 (Law No. 6446) and the Unlicensed Generation Regulation
2.1 Primary law: Electricity Market Law No. 6446, Article 14
Unlicensed activities are anchored in Article 14 of the Electricity Market Law No. 6446, which identifies the categories of activities exempt from the licensing and company-formation requirement. (Türkiye Büyük Millet Meclisi)
Historically, one key category has been renewable energy-based facilities up to a maximum installed capacity, originally framed around 1 MW in the law text. (Türkiye Büyük Millet Meclisi)
2.2 Capacity increase to 5 MW (for certain cases)
A major turning point was Presidential Decision No. 1044, published in the Official Gazette dated 10 May 2019 (No. 30770). Among other changes, it increased the installed capacity upper limit to 5 MW for renewable-based unlicensed facilities that qualify to receive a connection agreement call letter after the effective date, and it tied installed power to the contractual power of the associated consumption facility. (LEXPERA)
Practical takeaway: Capacity is not just a technical decision; it is a legal parameter tied to call-letter timing, subscriber type, and contractual power constraints.
2.3 Secondary law: the Unlicensed Generation Regulation
The Unlicensed Electricity Generation Regulation sets the detailed procedures and principles for:
- connecting unlicensed generation facilities to the grid,
- evaluating applications,
- handling surplus electricity and payments,
- rights/obligations of producers and network operators,
- supervision of the facilities and market practices.
It is expressly based on Article 14 of Law No. 6446 and also refers to the renewable support law (Law No. 5346) for aspects tied to renewable support mechanics.
3) Policy direction: from “sell to the grid” to “self-consumption first”
A crucial evolution occurred after regulatory updates around 2019: policy moved away from using the unlicensed regime as a way to build merchant plants that primarily sell power into the grid. Instead, the regime increasingly emphasizes self-consumption, with surplus sales limited and controlled.
A widely cited policy rationale is that earlier incentives made it more profitable for many investors to sell to the grid rather than meet on-site demand; later amendments sought to re-center the model on consumption-linked generation and monthly set-off.
Why it matters legally: Your project’s compliance file should tell a consistent story of demand linkage, contract power alignment, and lawful surplus treatment. If your documents and actual operation reflect a merchant model disguised as self-consumption, you increase regulatory and payment risk.
4) Who can benefit: eligible persons and the “consumption facility” concept
The regulation applies to real and legal persons who are entitled to generate without a license and without establishing a company for this activity, to meet consumption from a facility close to the consumption point.
A recurring concept is the consumption facility (your electricity consumption point(s)). In most common structures—rooftop solar for a factory, shopping mall, warehouse, or residential building—the generation facility is legally “associated” with a consumption facility, and your ability to receive payment for surplus is tied to that association and the applicable caps.
Common eligible project archetypes
- Industrial self-consumption (factory/plant rooftops or on-site land)
- Commercial rooftops (malls, warehouses, offices)
- Residential rooftop systems
- Agricultural irrigation / water infrastructure needs
- Public institutions’ renewable installations
Presidential Decision No. 1044 is notable because it sets differentiated rules for various subscriber categories and allows certain public-sector models to serve multiple consumption facilities, subject to contractual power limits. (LEXPERA)
5) Capacity limits and structural constraints you must design around
5.1 Installed capacity: what is the legal ceiling?
- The baseline statutory exemption in Law No. 6446 is historically expressed as up to 1 MW for renewable-based unlicensed generation in the core clause. (Türkiye Büyük Millet Meclisi)
- Presidential Decision No. 1044 introduced a 5 MW upper limit for certain renewable-based unlicensed facilities that qualify for a call letter after the decision’s effective date. (LEXPERA)
Do not treat “5 MW” as a universal rule. The effective threshold and the configuration depend on (among other things):
- your call-letter timing,
- your subscriber type (residential/industrial/commercial/agricultural/public),
- whether the project is rooftop/facade or land-based under the applicable category,
- and whether the installation is limited by contractual power.
5.2 Contractual power limits: the hidden compliance wall
Decision No. 1044 ties installed capacity to the contractual power of the consumption facility (and/or sum of contractual powers where multiple facilities are involved). (LEXPERA)
Separately, the post-2019 regulatory direction also emphasizes consumption-linked limits and the concept that generation beyond certain consumption levels may not be paid and may be treated as a free contribution into the support mechanism.
5.3 Rooftop/facade vs. ground-mounted solar: a frequent “deal breaker”
After the 2019 restructuring, commentary and practice notes emphasize that many solar projects under the unlicensed model (up to 5 MW in that reform context) were pushed toward rooftop or facade configurations rather than greenfield merchant fields. (Moroğlu Arseven Hukuk Bürosu)
However, Decision No. 1044 also reflects differentiated allowances for certain categories (including public institutions) that may include land applications, so you must map your project to the correct legal category rather than applying a one-size-fits-all assumption. (LEXPERA)
6) Step-by-step: how the unlicensed application pathway works in practice
Although details vary by technology and connection level, most projects follow a recognizable legal sequence:
Step 1 — Eligibility and structuring memo (before any application)
- Identify the applicable Article 14 exemption category and the relevant regulation article track.
- Confirm consumption facility alignment (ownership/usage rights, subscription group, contract power).
- Choose configuration: rooftop/facade or land, and confirm category compatibility.
Step 2 — Connection application to the relevant network operator
Applications are evaluated by network operators under the regulation’s connection and application framework.
Step 3 — Technical assessment (and EİGM involvement for certain sources)
Following amendments published in the Official Gazette dated 25 November 2025 (No. 33088), the technical assessment workflow was expanded and systematized for geothermal and biomass in addition to wind and solar, and the regulation’s mechanism involves sending technical assessment information to EİGM within specified timelines and handling overlap/collision issues. (LEXPERA)
Practical consequence: If your technology is geothermal or biomass, your project is now more likely to pass through a centralized technical review designed to manage site overlaps and resource interaction risks.
Step 4 — Call letter and connection agreement
The call letter triggers a time-sensitive process to sign the connection agreement and complete pre-acceptance steps.
A key amendment effective 14 May 2024 changed the timing logic:
- If you received a call letter after 14 May 2024, the period to sign the connection agreement is regulated as one year.
- There is also a transitional approach for call letters issued before that date (including minimum 180-day protections depending on remaining time), and certain extension mechanisms were removed. (Çakmak Attorney Partnership)
Step 5 — Permits and acceptance
The same 2024 amendment commentary highlights changes to which permits must be submitted at which stage, including moving certain environmental/zoning items into the acceptance period in practice, and introducing partial acceptance possibilities under conditions. (Çakmak Attorney Partnership)
Step 6 — Operation, set-off, and settlement
Once operational, your project enters the settlement life cycle:
- monthly set-off/netting rules,
- tracking of production/consumption and surplus,
- invoicing/payment mechanisms and limits.
7) Surplus electricity, payment caps, and “free contribution” to YEKDEM
7.1 Monthly set-off is the core commercial mechanic
Post-2019 design moved strongly toward monthly net metering / set-off, where your production is offset against consumption, and only remaining surplus becomes the “needs-excess” energy that may be subject to payment—subject to legal caps.
7.2 The annual consumption cap: if you exceed it, you may not get paid
A major compliance risk is exceeding the amount of electricity that can be sold (and paid) as surplus.
Practice notes and policy summaries describe the rule as limiting paid surplus so it does not exceed the relevant annual consumption benchmark, with generation beyond that becoming non-payable and treated as a free contribution to the support mechanism. (erdem-erdem.av.tr)
7.3 The November 2025 amendment tightened “consumption facility change” economics
News coverage summarizing the 25 November 2025 amendments reports that when changing the associated consumption facility, the new facility’s contractual power and annual consumption cannot be lower than the existing generation capacity; otherwise, surplus energy may not be paid and will be recorded as a free contribution to YEKDEM. (Anadolu Ajansı)
Why investors should care: Many portfolio deals and restructurings try to “move” generation to a different consumption point to optimize set-off economics. Under the tightened rules, a weak consumption point can destroy the payment logic.
8) Selling surplus through an aggregator (Toplayıcı): a newer commercial route
One of the notable developments referenced in summaries of the November 2025 amendments is the ability for surplus electricity (and related settlement positions) to be marketed through an aggregator. (Anadolu Ajansı)
From a transactional perspective, aggregator models raise legal questions that must be addressed contractually:
- Who is the counterparty for settlement and payment?
- How are metering data and set-off results allocated?
- What warranties does the generator give to the aggregator regarding compliance and eligibility?
- What happens if payments are denied due to consumption caps or storage-related non-payment rules?
Aggregator arrangements can be powerful for portfolio owners, but they require careful drafting to avoid turning a regulatory non-payment into a private contractual default.
9) Transfers, asset deals, and “silent” restrictions that block future applications
Unlicensed generation portfolios are increasingly bought, sold, and financed. But transfers are not purely private law matters; they can change the regulatory posture of the consumption facility and the project’s ability to expand.
A 2025 amendment summary notes that when generation facilities associated with a consumption facility are transferred under certain unlicensed categories (such as Article 5/1-h structures), a new connection application may no longer be possible for the consumption facility associated with that transferred generation facility—subject to specified exceptions (e.g., transferring both generation and consumption facility together to the same person, or transfers between public institutions). (Türk Hukuk Blogu)
Deal implication: If you are buying a plant, you must diligence not only the plant but also the future “headroom” of the consumption point for additional capacity and whether the transfer will lock the consumption facility’s future application rights.
10) Storage integration: opportunity with strict payment consequences
By late 2025, regulatory change packages also addressed storage in connection with unlicensed generation.
A December 2025 legal note summarizing Official Gazette changes indicates that certain unlicensed generation facilities that have received a call letter and are subject to set-off rules may be allowed to install storage, but if energy is injected from storage after set-off, the portion attributable to storage may not be paid and could be treated as a free contribution; if the storage contribution cannot be measured, then the entire “needs-excess” energy may become non-payable and recorded as free contribution. (dkb.av.tr)
Practical compliance point: Storage creates measurement and attribution risk. Without a clear metering configuration and compliance plan, you can unintentionally convert an otherwise payable surplus stream into a non-payable stream.
11) Enforcement and sanctions: how projects lose rights
11.1 Call letter / agreement cancellation and multi-year bans
Under amendments discussed in 2024 practice commentary, if call letters and connection agreements are issued but the process fails and they are cancelled, the facility owner may be unable to submit new applications under the regulation for three years in certain scenarios. (Çakmak Attorney Partnership)
11.2 Non-payment as a “soft sanction”
Not every enforcement action looks like a penalty. Often the most damaging outcome is simply:
- no payment for surplus, and
- recording energy as a free contribution.
From an investor’s standpoint, non-payment can be worse than a fine because it can silently break financial models and trigger lender covenant issues.
11.3 Audit trail matters
The regulation includes supervision logic and contemplates objections and fee obligations in the operating life cycle, which means a project should keep a compliance record that is litigation-ready: call letters, agreements, acceptance documents, metering specs, set-off calculations, and communications with the network operator.
12) Common disputes and how to protect your position
Unlicensed generation conflicts typically fall into a few buckets:
A) Connection capacity and application ranking disputes
Where capacity is scarce, criteria and timing become contentious. The 2025 amendment summaries point to prioritized criteria in wind/solar contexts and more formal data handling systems. (Anadolu Ajansı)
Protection strategy: submit a technically complete file, document time stamps, and be prepared to challenge procedural irregularities quickly.
B) Payment disputes and set-off disagreements
These include disputes on:
- which consumption values are used,
- whether production exceeds the payable cap,
- whether a consumption facility change invalidates payment,
- storage attribution issues.
Protection strategy: insist on transparent calculation logic, keep consumption history evidence, and structure contracts so that regulatory non-payment does not automatically become a private default.
C) Transfer / restructuring disputes
Transfers can inadvertently block future applications or break eligibility assumptions. (Türk Hukuk Blogu)
Protection strategy: regulatory due diligence should be a closing condition; transfer documents should allocate regulatory risk and include cooperation obligations for post-closing notifications.
13) Practical checklists
13.1 Before you invest (or sign EPC)
- Confirm which exemption category you fit under Article 14 and the regulation. (Türkiye Büyük Millet Meclisi)
- Model self-consumption realistically (contract power, annual consumption, growth/decline scenarios). (LEXPERA)
- Validate whether rooftop/facade constraints apply to your solar structure. (Moroğlu Arseven Hukuk Bürosu)
- If geothermal/biomass: anticipate centralized technical review and overlap checks. (LEXPERA)
- Build a timeline that respects call letter / connection agreement deadlines (especially post-14 May 2024). (Çakmak Attorney Partnership)
13.2 If you already have a plant and payments are at risk
- Reconcile monthly set-off records with consumption history.
- Check whether the paid surplus exceeds annual consumption caps; if yes, quantify the non-payable portion. (erdem-erdem.av.tr)
- If you changed the consumption facility, test compliance with the post-2025 tightening described in amendment summaries. (Anadolu Ajansı)
- If storage exists, confirm metering attribution; otherwise, you may lose payment eligibility for surplus. (dkb.av.tr)
13.3 If you plan to sell or buy an unlicensed portfolio
- Diligence transfer restrictions affecting the consumption facility’s future applications. (Türk Hukuk Blogu)
- Review call letter history and deadlines; verify that the project did not trigger a multi-year ban scenario. (Çakmak Attorney Partnership)
- Confirm whether aggregator-based sales are contemplated and how risk is allocated contractually. (Anadolu Ajansı)
Conclusion: unlicensed does not mean “unregulated”—it means “compliance-heavy”
Turkey’s unlicensed electricity generation model can be an excellent route for industrial self-consumption, commercial rooftop solar, and portfolio strategies—especially when designed around lawful set-off mechanics and well-documented consumption linkage. But the regime has tightened over time: it now focuses more clearly on self-consumption, formalizes technical assessment (including for geothermal and biomass), tightens consumption-facility change economics, and introduces new market roles such as aggregators—while also expanding storage integration with strict payment consequences.
If you are planning a new project, restructuring an existing one, facing a payment denial, or buying/selling a portfolio, the legal work that protects value is typically the same:
- correct category classification,
- consumption linkage strategy,
- robust timelines for call letters and acceptances,
- metering + documentation discipline,
- contracts aligned with regulatory caps and non-payment scenarios.
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