Types Of Licenses In The Turkish Electricity Market

The licensing regime in the Turkish electricity market is governed by the Electricity Market Law No. 6446 (the "Law") and the relevant secondary legislation. The activities that may be carried out in the electricity market and the types of licenses required for such activities are set out under the Law.

I. Licensing Requirement

Pursuant to Article 4 of the Law, legal entities intending to operate in the electricity market are required to obtain a license for the relevant activity. The same provision stipulates that licenses are granted separately for each market activity. Licenses are granted for a definite term, and the rights and obligations of license holders are determined under the applicable legislation.

i. Generation Activity and Generation License

Generation activity is subject to licensing under the Law and relevant legislation and is carried out by public and private generation companies as well as organized industrial zone legal entities. Generation license holders are authorized to generate electricity, sell the electricity they produce to supply companies, eligible consumers or persons to whom they have established private direct lines, and to procure electricity or capacity to a limited extent.

Electricity generated and consumed directly within the generation license holder's own consumption facilities, without being supplied to the transmission or distribution system, is not considered as a sale to end-users. In addition, the total amount of electricity that may be generated through generation companies controlled by the same real or legal person may not exceed twenty percent of the total electricity generation in Türkiye for the previous year. For renewable energy-based generation activities, certification of the source of electricity as well as procedures regarding pre-licensing and capacity allocation are regulated under the relevant legislation.

ii. Transmission Activity and Transmission License

Transmission activity is subject to licensing under the Law and covers the transmission of electricity at high voltage levels. Pursuant to Article 8 of the Law, transmission activity is carried out exclusively by Türkiye Elektrik İletim A.Ş. ("TEİAŞ") within the scope of its license. TEİAŞ may not engage in any activity other than transmission.

TEİAŞ is responsible for planning, constructing and operating the transmission system, ensuring system reliability, performing load dispatch and frequency control, and preparing tariff proposals related to the transmission system. In addition, access to the transmission system must be provided to all system users on a non-discriminatory basis in accordance with the applicable legislation.

iii. Distribution Activity and Distribution License

Distribution activity is subject to licensing under the Law and covers the delivery of electricity to end-users at medium and low voltage levels. Pursuant to Article 9 of the Law, distribution activity is carried out by distribution companies within the geographical region specified in their licenses. Distribution companies may not engage in any activity other than distribution.

Distribution companies are responsible for the operation of the distribution system, maintenance and investments, installation and operation of meters, and ensuring access to electricity services for users connected to the distribution system. Access to the distribution system must be provided to all users on a non-discriminatory basis in accordance with the applicable legislation.

iv. Wholesale and Retail Sales Activities (Supply Activity)

Wholesale and retail sales activities are carried out by generation companies and public and private supply companies holding a supply license in accordance with the Law. Supply companies may sell electricity to eligible consumers without any geographical limitation. Within the scope of the supply license, electricity import and export activities may also be carried out subject to the approval of the Board and the favorable opinion of the Ministry.

Retail sales activities are carried out by the incumbent supply company in the relevant distribution region, and electricity is supplied to non-eligible consumers based on tariffs approved by the Board. In addition, the incumbent supply company is obliged to supply electricity as the "last resort supplier" to eligible consumers who do not procure electricity from another supplier.

v. Market Operation Activity

Market operation activity covers the operation of organized wholesale electricity markets and the financial settlement of transactions carried out in these markets. This activity is performed by Enerji Piyasaları İşletme A.Ş. ("EPİAŞ") within the scope of a market operation license.

EPİAŞ is responsible for operating organized wholesale electricity markets and conducting financial settlement and related financial transactions. Market participants operating in these markets are obliged to provide the necessary data for the execution of financial settlement processes. The procedures and principles regarding market operation activities and the duties and powers of EPİAŞ are regulated under the applicable legislation.

vi. Import and Export Activities

Activities relating to the import and export of electricity and/or capacity are regulated under the Law. Electricity exports may be carried out by supply license holders and generation companies, whereas imports may be carried out by supply license holders, subject to the favorable opinion of the Ministry and the approval of the Board.

Export through private direct lines from generation facilities located in border regions, without connection to the transmission or distribution system, may be permitted subject to obtaining a generation license. Additionally, in cases of technical necessity, temporary electricity imports through isolated region operation in border areas may be permitted.

vii. Aggregation Activity

Aggregation activity is regulated under the Law and is carried out by aggregators authorized by network users through agreements. Aggregators manage the consumption and/or generation programs of their contracted users, carry out market transactions for the purchase and sale of electricity and/or capacity on their behalf, and may participate in ancillary services processes.

Aggregation activity may be carried out by legal entities holding an aggregation license or a supply license. However, network users may not authorize the supply company from which they procure electricity as an aggregator. The procedures and principles regarding aggregation activities are set out under the relevant legislation.

viii. Unlicensed Generation

Pursuant to Article 14 of the Law, certain generation activities are exempt from the obligation to obtain a license and establish a company. The procedures and principles governing unlicensed generation are regulated under secondary legislation.

II. Competent Authority

The authority to grant licenses, as well as to regulate and supervise the electricity market, is vested in the Enerji Piyasası Düzenleme Kurumu. License applications, evaluation processes, and other matters related to licenses are carried out in accordance with the applicable legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.