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I. INTRODUCTION
The Regulation on Unlicensed Electricity Generation in the Electricity Market (the “Regulation”), published in the Official Gazette dated 12 May 2019 and numbered 30772, constitutes the primary legislation governing the procedures and principles applicable to unlicensed electricity generation activities. Significant and systematic amendments have been introduced to the said Regulation through the Regulation Amending the Regulation on Unlicensed Electricity Generation in the Electricity Market (the “Amendment Regulation”), published in the Official Gazette dated 2 April 2026 and numbered 33212.
The regulations introduced by the Amendment Regulation are of a nature to reshapes the fundamental parameters of the unlicensed generation model. In this context, the reconfiguration of the netting mechanism from a monthly basis to an hourly basis, the subjection of the relationship between production and consumption to stricter technical and legal criteria, and the clarification of the framework regarding storage activities are noteworthy.
II. FUNDAMENTAL PRINCIPLES
1. How Has the Transition to the Hourly Netting System Been Regulated by the Amendment Regulation?
Prior to the Amendment Regulation, netting transactions were conducted (setting aside thehierarchy of norms and taking into consideration the nature of special-general regulations)pursuant to (i) the Regulation, (ii) the Board Decision numbered 11917 (the “Board Decision”), published in the Official Gazette dated 24 June 2023 and numbered 32231, and (iii) the Law No. 5346 on the Utilization of Renewable Energy Resources for the Purpose of Generating Electrical Energy (the “YEK Law”).
During the period in which the monthly netting structure was applicable, the arrangement established by the Board Decision led to the result of an SPP established for self-consumption purposes acquiring a form of “IPP – independent power producer” character, if the production and consumption points were located in two separate distribution / supply regions. Accordingly, the portion of electricity matching the consumption was evaluated based on the last resort supply tariff, where the relevant consumer was within the scope of such tariff; whereas, provided that it remained within the annually monitored sales limit, the excess production was evaluated on the basis of the unit prices set forth in the tariff tables.
Accordingly, even if a differentiation in terms of unit price was present, an invoice was issued for the entirety of the produced electricity, and the corresponding amount was collected from the incumbent supply company within the determined term. On the other hand, the consumer was obliged to pay the equivalent of the electricity at the consumption point to its supplier within the framework of bilateral agreement provisions.
With the Amendment Regulation, it is observed that the netting mechanism, which was previously carried out in practice on a “monthly” basis, has been reorganized to be based on an “hourly” time period. From a purposive interpretation, we are of the opinion that this fundamental change has essentially been issued with the expectation of synthetically constructing a “behind-the-meter netting” paradigm similar to rooftop SPPs. Indeed, with the Amendment Regulation, the concept of netting has been redefined and expressed as “the process of finding the net production or net consumption value in kWh as a result of offsetting production and consumption occurring within an hourly time period.”
In this case, during the first 10-year operation period of unlicensed SPPs, within the framework of the operation of the hourly netting mechanism, we are of the opinion that, considering the data set collected, managed, and coordinated by Energy Exchange Istanbul (“EXIST“), and taking into account the letter of the Amendment Regulation, three different situations may theoretically arise; however, whether this configuration will be implemented in practice in the same manner will gain clarity within the framework of the procedures and principles to be updated and published by the EMRA and explanatory additional regulations regarding settlement processes.
- In the event that consumption exceeds production in the relevant time period, the difference shall be characterized as net consumption; while no separate invoice is issued for production, an invoice shall be issued to the consumer by the supplier based on the net consumption amount, taking the current electricity consumption cost as the basis.
- In the event that production and consumption are equal, no invoicing shall be in question.
- In the event that production exceeds consumption, the difference shall be evaluated as “surplus energy”; the price regarding this energy shall be determined within the scope of Schedule No. I annexed to the YEK Law (based on the unit prices set forth in the tariff tables), and shall be invoiced by the consumer depending on its purchase by the incumbent supply company within the framework of the relevant legislation
In all cases, the unit benefit provided by the electricity subject to netting must be deemed equal to the unit supply cost of the relevant commodity.
It is observed that the “miracle” of hourly netting does not lie in the unit price at which the produced electricity will be evaluated. On the contrary, provided that the consumption profile of the relevant consumer is taken as the basis, this practice may result in reaching the annual limit on the sale of excess electricity (permission to sell up to one times the consumption) more rapidly. This is because, within the monthly netting structure, a neutralization is carried out based on approximately 720 hours. Undoubtedly, in the monthly netting regime, the breadth of the sample group serves a function of reducing uncertainty and imbalance. This flexibility does not exist in the new system.
As briefly mentioned above, it is understood that, under the hourly netting system introduced by the Amendment Regulation, the calculation and settlement processes will be carried out by EXIST, the market operator, and that, within this scope, production and consumption data provided by the relevant grid operators will be consolidated into a single source and rendered suitable for settlement.
Within this framework, netting transactions will be carried out by EXIST, and accordingly the payment amounts will be calculated, and payment and invoicing processes will continue to be carried out through incumbent supply companies based on the calculated amounts. Within this scope, it is clear that the settlement process carried out by EXIST performs a technical balancing and netting function by comparing production and consumption data for each hour.
Within the framework of the current regulations, it is understood that there is a tendency towards a change in the existing structure established by the Board Decision. In other words, it is expected that the implementation principles regarding the netting system will be determined and clarified by a new Board Decision to be adopted in this direction. In this respect, in order to make a final and sound assessment on the matter, it is necessary to follow the procedures and principles to be published by the Energy Market Regulatory Authority.
At this juncture, we would like to state that, when the evolution of the market and the historical tendencies of the rule-maker are observed; in the current situation, the reference made to the tariff table with respect to the sale of excess energy may, over time, be updated towards the market clearing price (MCP) through an amendment to the law or by a Presidential decision. This is because the tariff, by its nature, is an umbrella covering subsidized groups. A pricing mechanism aligned with market formation (and therefore to – MCP) will also be in line with the fundamental mantra of self-consumption investments.
2. What Are the Regulations Introduced with Respect to Storage Activities in Unlicensed Generation Facilities?
When the regulations concerning storage activities within the scope of unlicensed generation facilities are examined, it is regarding storage activities within the scope of unlicensed generation facilities are examined as a whole, it is observed that permitting the establishment of storage units does not constitute a new approach, and that such possibility had already existed previously. Indeed, pursuant to the Regulation on Storage Activities in the Electricity Market, published in the Official Gazette dated 9 May 2021 and numbered 31479, it was possible to establish electricity storage facilities in unlicensed generation facilities that had received a call letter within the scope of the Regulation and where netting was applied for surplus energy. However, it was made mandatory that such storage facilities meet certain technical and legal conditions; in particular, it was explicitly regulated that no payment would be made for the energy remaining as surplus after netting with respect to the energy supplied to the grid from storage facilities. Even, in cases where the amount of energy supplied from the storage unit could not be separately determined, it was envisaged that the entirety of the surplus energy would be evaluated without consideration, and such energy was deemed to have been generated by the incumbent supply company within the scope of YEKDEM and reflected to the system as a gratuitous contribution.
Within this framework, it is understood that the regulations introduced by the Amendment Regulation, rather than establishing an entirely new system, render the existing structure more explicit and systematic. Indeed, with the new regulation, the establishment of integrated storage units in unlicensed generation facilities has been expressly permitted, and it has been stipulated that the capacity of such units may not exceed the electrical capacity of the generation facility.
On the other hand, the approach that the energy supplied to the grid from storage units is not evaluated within the scope of the support mechanism has been maintained; within this scope, it has been explicitly regulated that no payment shall be made for the energy supplied to the system from the storage unit that remains as surplus after netting. In addition, in cases where the energy supplied from the storage unit cannot be separately determined, it has been envisaged that no payment shall be made for the entirety of the surplus energy, thereby confirming the previous approach and establishing a clearer framework for implementation.
When these regulations are evaluated together, it is understood that, although it is possible to establish integrated storage units in unlicensed generation facilities, due to the fact that the energy supplied to the grid from the storage unit is not evaluated within the scope of any payment mechanism, it is not possible to generate income by storing energy during low-price hours and supplying it to the grid during high-price hours. In other words, storage units that would provide a flexibility mechanism within the scope of unlicensed electricity generation will essentially be used for “peak shaving” purposes; at present, it does not appear possible for them to be allocated to arbitrage.
3. What Are the Regulation Introduced with Respect to the Association of Consumption Facilities with the Generation Facility?
With the Amendment Regulation, within the scope of transfer transactions, the new consumption facility or facilities intended to be associated with the generation facility must have the following characteristics:
- Based on the date on which the generation facility obtained the connection agreement call letter, the total of the contracted capacities in the connection agreements of the relevant consumption facilities;
- In the event that the call letter has been obtained after 12 May 2019, (i) provided that the exceptions set forth in the Regulation are reserved, it must not be less than the installed capacity of the generation facility, (ii) where the generation facility falls within the scope of subparagraph (h) of paragraph one of Article 5 of the Regulation and the associated consumption facility or facilities belong to municipalities, their affiliated entities, industrial facilities, or agricultural irrigation subscribers, the said total must not be less than the contractual capacity forming the basis of the application in cases where the installed capacity of the generation facility is greater than this total, and must not be less than the installed capacity of the generation facility in cases where the total of the contracted capacities is greater than the installed capacity of the generation facility
- In the event that the call letter has been obtained before 12 May 2019, the total of the contracted capacities in the connection agreements of the relevant consumption facility or facilities must not be less than the contractual capacity forming the basis of the application in cases where the installed capacity of the generation facility is greater than the contractual capacity forming the basis of the application, and must not be less than the installed capacity of the generation facility in cases where the contractual capacity forming the basis of the application is greater than the installed capacity of the generation facility
- For generation facilities that have been entitled to receive a connection agreement call letter as a result of the priority evaluation and for which a connection agreement has been executed, the total annual electrical energy consumption of the new consumption facility or facilities to be associated with the generation facility must not be less than the consumption amount forming the basis of the application.
III. CONCLUSION
While the fundamental structure of the unlicensed generation system has been preserved with the Amendment Regulation, the rules regarding the functioning of the system have been made more explicit through the transition of the netting mechanism to hourly principles, the establishment of a clearer framework for the regulations on storage activities, and the re-determination of the conditions regarding the consumption facilities to be associated with generation facilities on the basis of the technical and consumption data forming the basis of the application. Within this scope, it is understood that, in particular, the reflection of the hourly netting system on invoicing and settlement processes will be clarified together with the regulations for implementation.
You may access the Amendment Regulation via this link.
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