Legislative Changes to Incentives For Electricity Generation
Turkey’s dependency on imported energy sources has played a significant role in the country’s energy strategy. Under the pressure of growing energy consumption, Turkey has restructured its energy strategy in line with its potential for power generation, especially through renewable sources, in order to lower its dependency on imported energy sources. An important part of this strategy includes the provisions introduced to encourage investment in power generation facilities. Several legislative changes have been introduced recently with the aim of improving the investment environment for investors in the power generation sector.
The State Aid for Investments Decision (12/3305) was published in the Official Gazette on January 19 2012. Under the decision, incentives to be provided by the state are divided into:
- the general investment incentives scheme;
- the regional investment incentives scheme;
- the large-scale investment incentives scheme; and
- the strategic investment incentives scheme.
Under the regional investment incentives scheme, Turkey is divided into six regions to optimise the incentives and supporting instruments to be provided to investors in accordance with the regional potential and scale of the local economy. The incentives provided under the scheme include:
- a value added tax exemption;
- customs duty;
- an exemption tax reduction;
- social security premium support (employer’s share);
- income tax withholding support;
- social security premium support (employee’s share);
- interest support; and
- land allocation.
The income tax withholding support and social security premium support are available only for investments in region six. Conversely, interest support is available for investments made in regions three, four, five and six. The cities, sectors and conditions of the incentives are determined separately under Annexes 2A and 2B of the decision according to the scope of each region.
Specific investment areas are prioritised and regardless of the region that receives investment, priority investments are supported by incentive instruments applicable in region five. Conversely, if priority investments are made in region six, the incentives designated to this region are applicable.
Turbine and wing production
The Council of Ministers published Decision 29,537 in the Official Gazette on November 19 2015, which states that “investments for the production of turbines and generators to be used in renewable energy generation, and investments for the production of wings to be used in wind energy generation” are privileged investment areas and will be supported by the incentive instruments applicable in region five, unless the investment is made in region six.
Electricity Market Law
The Electricity Market Law 6446 entered into force on March 30 2013. Article 4 provides the following incentives for electricity generation companies that began operation up until January 31 2015:
- a 50% discount for transmission system use prices for five years from the date of the commissioning of generation facilities; and
- an exemption from charge for work carried out during the investment period of electricity generating facilities and an exemption from stamp duty for papers executed in that context.
The main aim of the incentives is to create the required electricity supply capacity in the short term. In line with this aim and Turkey’s general energy strategy, Decision 2015/8317 extended the deadline designated under the first draft of the provisional article until December 31 2020.