Charting the future: Storage-integrated electricity generation in Türkiye

November 19, 2024

Utku Ünver Damla Çay

Posted in Environmental, social and governance (ESG) Energy

Türkiye’s journey toward sustainable energy took a significant leap with the introduction of storage-integrated electricity generation plants. Despite a temporary pause in licensing, the steady evolution of the regulatory framework reflects a clear intention to support this growing sector. For stakeholders, the question is no longer whether storage will shape the future of energy generation, but how to prepare for its resurgence.

Storage-based generation is critical for addressing the challenges of renewable energy, such as intermittency and variability in supply. By integrating storage solutions, generation plants can ensure a steady energy supply, optimize grid stability, and enable greater reliance on renewable sources like wind and solar. This capability is pivotal in advancing Türkiye’s transition to a sustainable and resilient energy future.

First steps

In 2022, Türkiye amended its legislation to permit electricity generation plants with storage facilities. According to the Turkish Ministry of Trade Green Deal Working Group Annual Activity Report, between November 2022 and October 2023:

5,968 applications for electricity generation plants with storage facilities were made to the Energy Market Regulatory Authority (EMRA);
Turkish Electricity Transmission Corporation (TEİAŞ) granted a total of 50,900.0094 MWh storage capacity for 668 projects; and
602 of these projects were granted a pre-licence.

Suspension of licence allocations

However, with an amendment made to the Electricity Market Licensing Regulation on 14 October 2023, EMRA stopped accepting pre-licence and licence amendment applications for electricity generation plants with storage facilities, until it takes another decision on this regard. The same amendment required TEİAŞ to publish, until 1 April 2024, the available regional generation plant capacities, which may be connected to its systems for the 5 and 10 years following 2023.

TEİAŞ’s most recent 5 and 10 Years Connectable Regional Generation Plant Capacity Report (2024-2028, 2029-2033), on the other hand, does not allocate any capacity for electricity generation plants with storage facilities. However, the Electricity Market Law requires TEİAŞ to renew its network capacity report every year, therefore further capacity may be allocated for the electricity generation plants with storage facilities in the near future.

Minor but continuous legislative steps – a declaration of intention?

Furthermore, EMRA and the Ministry of Energy and Natural Resources (MENR) continue to work on developing the legislative framework concerning the plants in question. In its announcement dated 17 October 2024, EMRA published its amendment proposals for four regulations in the electricity market legislation, whereas MENR published an amendment proposal on the Electricity Generation and Storage Facilities Acceptance Regulation. Accordingly, the proposed amendments are as follows:

the Electricity Network Regulation contains proposed additional definitions and requirements regarding the tracking of the capacity data of the electricity storage units of the electricity generation plants with storage facilities;
the Electricity Market Balancing and Settlement Regulation contains proposed additional rules regarding (i) the recording of storage units as the power supply/draw units subject to settlement, and (ii) the inclusion of the energy supplied to the system from the storage units in the calculation of settlement in cases where the electricity storage units of the electricity generation plants with storage facilities are not at command in accordance with the installed powers registered in their licences;
the Electricity Market Licensing Regulation contains proposed additional rules regarding (i) time periods during which the non-availability of the storage units is acceptable and the tolerated rate of unavailable installed capacity; and (ii) TEİAŞ’s and distribution companies’ duties regarding the monitoring of such storage units through SCADA; and
the Electricity Generation and Storage Facilities Acceptance Regulation is proposed to be amended in a way to include the electricity generation plants with storage facilities within the scope of the said regulation.

Despite a year-long silence on new licence amendment and pre-licence applications, neither EMRA, nor MENR seem to have set the electricity generation plants with storage facilities aside. While waiting for the regulatory authority’s green light for new applications, it is worth recalling the legislative framework for such generation plants, as the applications for pre-licences and licence amendments are basically approved on a first come, first served basis within the limits of the regional network capacity allocated for such plants.

What to know to be ready for the second licensing era?

Eligible energy resources

The Electricity Markets Law only allows the establishment of electricity storage plants with storage facilities based on wind or solar energy.

Pre-licence and Licence

According to the Electricity Market Law, legal persons wishing to establish an electricity generation plant with a storage facility have two options:

Obtaining a new pre-licence: It is possible to directly apply for a pre-licence for a wind or solar energy generation plant with a storage facility if the plant in question is a greenfield one.
Amending the existing licence: Legal persons already having a generation licence for a wind or solar energy plant, which is partially or wholly operational, can apply for the amendment of their generation licence to convert their plant into a generation plant with storage facility.

While a generation licence allows its holder to, among other things, generate electricity and sell such energy to third parties designated under the Electricity Market Law, a pre-licence is a permission (for a limited period) to obtain necessary approvals, permits, licences, and similar authorizations for starting generation plant investments.

Essentials of pre-licences

Corporate requirements: Pre-licence holders must be a joint stock or limited liability company whose shares are registered shares (except for public companies), and this requirement continues when a generation licence is obtained. The content of such companies’ articles of association is specifically regulated under the relevant legislation.
Term: The term of the pre-licence cannot exceed 36 months, except in cases of force majeure.
Installed capacity: The pre-licence for the generation plant can be granted for up to the installed capacity of the storage facility undertaken to be established. Furthermore:

applications must have an installed capacity of at least 20 MWe and 10 MWe for wind and solar energy, respectively, and must not exceed 250 MWe;
the ratio of the electricity storage capacity undertaken to be established to the installed capacity of the said electricity storage unit must be at least 1:1; and
the electricity storage unit undertaken to be established must be within the boundaries of the power plant site subject to the application.

The requested mechanical installed capacity cannot exceed the double of the electrical installed capacity.

Shareholders and managers: Direct or indirect shareholders, as well as the members of the board of directors or board of managers (as the case may be) of the pre-licence applicant cannot be among the following persons (and this requirement continues when a generation licence is obtained):

a legal entity whose licence has been cancelled;
the shareholders who have 10 percent or more of the shares in such legal entity; and
the chairman and members of the board of directors/board of managers of such legal entities, including those who have resigned from their duties within one year before the date of licence cancellation.

Such ban applies for a period of three years following the licence cancellation.

Security deposit and application fee: The pre-licence applicant is required to submit (i) a security deposit to EMRA, the amount of which is determined based on the aggregate of (a) the mechanical installed capacity based on wind or solar power and (b) the capacity of the electricity storage unit; and (ii) the pre-licence application fee.
Minimum share capital: The company’s minimum share capital should be at least 5 percent of the total investment amount foreseen by EMRA for the establishment of the plant.
Land usage rights: If the land on which the generation plant will be established is owned by the applicant, documents of proof are required to be submitted with the application.
System connection: A network capacity assessment should be obtained (by EMRA) from TEİAŞ, which may be challenged by third parties claiming that their rights are infringed.
Technical compliance: TEİAŞ's opinion is requested regarding the compliance of the electricity storage unit with the necessary technical criteria. Furthermore, a technical assessment is also made by the General Directorate of Energy Affairs.
Change of control: The pre-licence is cancelled if (i) the shareholding structure of the pre-licence holder changes directly or indirectly; or (ii) its shares are transferred or transactions and procedures that will result in the transfer of shares are carried out, until the licence is obtained, subject to the exceptions determined in the relevant legislation.

Actions required to be taken within the pre-licence term

Land usage rights: If the area where the generation plant will be established is not owned by the legal entity holding the pre-licence, the ownership or usage rights of the area in question should be obtained.
Zoning plans: The master and implementation zoning plan approvals for the generation plant should be finalized.
Project approval: The preliminary or final project approval for the generation plant should be obtained.
Connection agreement: The pre-licence holder should apply to TEİAŞ or the relevant distribution company to sign a connection agreement.
Technical Interaction Permit: The Technical Interaction Permit should be obtained for the generation plants based on wind energy.
Environmental Impact Assessment: The necessary decision within the scope of the Environmental Impact Assessment Regulation should be obtained.
Construction permit: The construction permit for the generation plant or an equivalent should be obtained.
Military zone approvals: For wind energy applications, affirmative opinions should be obtained regarding the Military Prohibited Zones and Security Zones Regulation, which was put into effect with the Council of Ministers Decision numbered 83/5949 and dated 17 January 1983, and military shooting areas and exercise zones.

Essentials of generation licences

In general:

Integrity of the plant and the storage facility: No separate licences are necessary for storage facilities and generation plants for the generation plants with storage facilities.
Term: The licence is granted for a minimum of 10 and a maximum of 49 years.
Change of control: Any transaction that will result in (i) a change of control and (ii) changes in capital shares of 5 percent or more in public companies and 10 percent or more in others (subject to the exceptions provided under the relevant legislation) are required to be notified to EMRA.
Merger and spin-off: (i) Merger of the licence holder with another legal entity with its entire assets and liabilities; and (ii) partial or full spin-off of the licence holder are subject to the prior approval of EMRA.
Exemption from licence fees: For generation plants based on domestic natural resources and renewable energy resources, no annual licence fee will be charged for the first eight years from the date of partial or full acceptance of the generation plant. After this period, a yearly licence fee is payable to EMRA.

If an application is made for a generation licence following obtaining a pre-licence:

Completion of pre-licence term actions: To apply for a generation licence, the obligations explained above which are required to be fulfilled during the pre-licence term, should be duly fulfilled.
Security deposit and application fee: The licence applicant is required to submit (i) a security deposit to EMRA, the amount of which is determined based on the aggregate of (a) the mechanical installed capacity based on wind or solar power and (b) the capacity of the electricity storage unit; and (ii) the licence application fee.
Milestone schedule: A milestone schedule, prepared by taking into account the characteristics of the generation plant and covering the period until the completion date of the said plant, should be submitted.
Minimum share capital: The company’s minimum share capital should be increased to at least 20 percent of the total investment amount foreseen by EMRA for the establishment of the plant.

If an existing generation licence is requested to be amended for a capacity increase through the addition of a storage facility:

Installed capacity: The capacity increase of the existing generation plants may be allowed up to the installed capacity of the storage facility undertaken to be established.
Frontiers of the plant site: The capacity increase should not require going beyond the areas specified in their licences.
System connection: The connection opinion within the scope of the amendment received from TEİAŞ or the relevant distribution company should be positive.
Technical compliance: A positive technical assessment should be made by the General Directorate of Energy Affairs.
Minimum share capital: The company’s minimum share capital should be increased to the amount determined by EMRA based on the increased capacity.
Security deposit and licence amendment fee: An additional security deposit must be submitted based on the amount determined by EMRA in accordance with the increased capacity. In addition, a fee for the amendment of the licence is also payable to EMRA.
Resource usage agreement: If necessary, the resource usage agreement should be revised, or a document showing that such revision is not necessary should be submitted.
Environmental impact assessment: The necessary decision within the scope of the Environmental Impact Assessment Regulation should be obtained.
Technical Interaction Permit: The Technical Interaction Permit should be obtained for the generation plants based on wind energy.

Specifically applicable system connection rules

It is mandatory that the electrical energy generated in electricity generation plants with storage facilities is supplied to the transmission or distribution system via the electrical storage unit.
The electricity storage unit established within the electricity generation plant with a storage facility is recorded as a separate power supply/draw unit subject to the settlement.
The amount of energy that the electricity generation plants with storage facilities can supply to the system on a settlement period cannot exceed the amount that the generation facility can produce with its electrical installed capacity stated in its licence.
During the periods where the electricity storage units of the generation plants with storage facilities are not in operation, the supply amounts of these plants to the system are not taken into account for the settlement calculations.

Advantages provided for electricity generation plants with storage facilities

Wind or solar measurement certificates are not required for pre-licence applications.
Competition provisions are not applicable in case there are several applications for the same connection point/region.
They can benefit from the Renewable Energy Resources Support Mechanism (YEKDEM) and special support fees for the energy they sell within YEKDEM in case the facilities are compatible with the local component use rules.
The necessary decisions regarding the environmental impact assessment are not required to be submitted at the pre-licence application.

As Türkiye continues to refine its regulatory framework for storage-integrated generation plants, the groundwork is being laid for a transformative shift in the energy sector. Staying ahead means preparing for the reopening of licensing opportunities and aligning with the latest requirements to capitalize on future developments.