THE AUTHORS:
Georg Scherpf, Head of Arbitration at Clyde & Co
Lale Defne Mete, Managing Partner at CBC Law
Daniel Theo Solomos, trainee solicitor at Clyde & Co
Arina Naumova, trainee solicitor at Clyde & Co
Maciko Chan, trainee solicitor at Clyde & Co
As Türkiye is seeking to develop its share of wind energy, the pivotal role of government support is clear. Strategic subsidies, regulatory measures and fewer bureaucratic procedures have significantly driven the expansion of wind farm projects. Such targeted efforts have not only pushed Türkiye—and particularly Izmir—to lead the wind energy development but have also spurred local government bodies and private enterprises to continually advance the nation’s renewable capabilities. This article explores the current regulatory landscape of Türkiye’s wind energy sector and addresses the scope for disputes arising out of the industry’s rapid expansion. It was drafted in collaboration with our Turkish colleagues from CBC Law in Istanbul and is part of another post that also examines in more detail the crucial aspects of investment protection and means of effective dispute resolution.
Regulation
In 2005, Türkiye’s Renewable Energy Law set the groundwork for the development of renewable energy, with subsequent enhancements through the Renewable Energy Resources Support Mechanism (YEKDEM) providing a structured incentive system, albeit subsequently being affected by currency devaluation to the detriment of investors. This legal framework has nevertheless incentivised the use of domestic materials and labour in renewable energy projects, offering a ten-year subsidy period for renewable electricity plants, which has been instrumental in the expansion of wind farms in the Izmir region.
The Energy Market Regulatory Authority (EMRA) has further supported growth by granting licenses for projects that integrate battery storage with wind and solar capacity. These regulatory efforts have underpinned Türkiye’s substantial increase in renewable energy production, particularly in wind energy.
As per the Decree on the State Aids to Investments, certain state incentives are also granted for renewable energy projects. For context, Türkiye is divided into six regions and based on the socio-economic development status, the scope of incentives broadens as the investment expands to more disadvantaged regions. State aid varies and includes customs duty exemptions, VAT exemptions, tax reductions, employer’s social security contribution support, interest and dividend support, land allocation, and VAT refunds, depending on the region and the amount of investment. Since the manufacturing of turbines and generators for renewable energy production, as well as blades used in wind energy production, is listed under the primary investment subjects, these projects qualify for the incentives granted to the fifth region, regardless of the place of investment. Lastly, the changes to the Regulation on Environmental Impact Assessment made in July 2022 mandate that all wind power plants, irrespective of their capacity, undergo an environmental impact assessment (EIA). Additionally, the EIA report must include an environmental and social action plan.
Türkiye’s Push for Renewable Wind Energy
Türkiye’s commitment to renewable energy, especially wind power, is further reinforced by significant developments in the sector, spearheaded by key industry players like Nordex SE. Recently, Nordex SE secured contracts for three major wind projects in Türkiye, totalling 189 MW, from Rönesans Enerji. These projects, part of the YEKA RES-3 tender, highlight the growing emphasis on renewable energy investments in the country. The “Kayalar” wind farm in Sivas, “Osmancık” in Çorum, and “Sağlıktaş” in Malatya, all equipped with advanced N163/6.X turbines, are set to significantly enhance Türkiye’s renewable capacity.
This expansion aligns with Türkiye’s broader energy strategy, aiming to boost the share of renewables in its energy mix. The Turkish Energy Ministry has announced ambitious plans to add 18 GW of onshore and offshore wind power by 2035, targeting a total of 30 GW. With a current wind power generation capacity of 11 GW, Türkiye is steadily increasing its reliance on wind energy. This shift aligns Türkiye with global sustainability goals, as outlined in the COP27 manifesto, establishing the country as a major contributor to the global shift towards renewable energy and as a designer of innovative policies that promote the growth of renewable energy. At COP28 this year, Dr. Alparslan Bayraktar, the Turkish Minister for Energy and Natural Resources, unveiled new pledges, revealing the country’s goals to significantly expand renewable energy capacity within the next twenty years. Additionally, there are plans to overhaul the electricity grid to meet the needed capacities, bolstered by a billion-dollar funding promise from the World Bank.
Türkiye’s Renewable Policy Focus
Türkiye’s energy policies are focused on enhancing renewable energy use and efficiency. The Twelfth Development Plan (2019-2023) targeted increasing the proportion of renewables in the country’s energy mix, with special emphasis on expanding solar and wind capacity, by 38% (which was already achieved by 2021). The Green Industry Project, backed by the World Bank, supports Turkish industries in adopting more sustainable practices, including renewable energy investment, with a $450m investment. The Energy Efficiency Strategy Paper lays out a strategy for reducing energy consumption and increasing the use of renewable sources across various sectors, such as transportation and construction.
The Green Electricity Certification System enables Turkish consumers to opt for electricity generated from renewable sources and document the use of renewables at all stages in the power supply and distribution in Türkiye, boosting green energy’s market presence. In line with global climate goals, Türkiye has set a Net-Zero Emission Vision for 2053, focusing on a shift to renewable energies like wind and solar. The International Renewable Energy Certificate (I-REC) and Renewable Energy Guarantee of Origin (YEK-G) schemes have been introduced to promote the generation and use of renewable energy, ensuring transparency and accurate production data for Turkish renewables. Additionally, the Electricity Market Law no. 6446 established a certification process for energy produced through renewable means, further increasing power transparency and incentivising energy producers to increase renewable energy production to appease current global trends towards sustainability.
These policies have succeeded in refocusing the Turkish economy in a sustainable direction, particularly in areas on the sunny and windy Aegean coast, such as Izmir.
Izmir’s Leading Role in Wind Energy
Building on the legislative foundation laid by the 2005 Renewable Energy Law and YEKDEM, Izmir’s advancements in renewable energy, particularly wind power, have been further accelerated by targeted municipal strategies and global investments. Izmir Metropolitan Municipality’s involvement in programs like the European Bank for Reconstruction and Development (EBRD) Green Cities Program illustrates a deep commitment to environmental sustainability. The City’s plans, including the Izmir Green City Action Plan and the Sustainable Energy and Climate Action Plan, aim for significant reductions in greenhouse gas emissions by 2030, showcasing a proactive approach to climate action.
These policies have made Izmir an attractive investment opportunity for foreign investments by companies like Enercon, leading to the creation of specialised jobs and a boom in the local economy. The city also ranks highly in the production of wind turbine components, with international companies such as Siemens Gamesa investing in production facilities in the region, establishing production facilities and forging partnerships with local Turkish companies. Notably, the Turkish civil engineering group Guris will receive 165 MW of wind turbines from Siemens, a move that significantly supports the construction of the country’s Aegean wind farms. Meanwhile, Turkish firms like Tuiz Wind Energy Service (TWS) have contributed to domestic manufacturing. This domestic turbine production has a combined turnover north of $700m and an export revenue of more than $500m for the Turkish economy. Izmir was the site of Türkiye’s first wind power plant, and on the back of these policies has a wind power labour force of $2.5m and supports 20% of the country’s wind power production.
Dispute Resolution in the Turkish Renewable Sector
To conclude, any large-scale energy investment, especially in offshore wind farms, carries the risk of related disputes of the developer with contractors or subcontractors or vice versa. Also, possible disputes regarding state subsidies or regulations may arise. The 1999 amendment to the Turkish Constitution, Law No. 4501, outlines the regulation of certain services performed by public legal entities under private law contracts. This law permits the resolution of conflicts stemming from concession agreements through arbitration. Additionally, if there is a foreign element involved, these disputes may be eligible for international arbitration. Introducing such arbitration clauses into contracts, perhaps even coupled with so called stabilisation clauses, is generally the gold standard for international projects as it offers a neutral forum for dispute resolution, ensuring internationally enforceable awards.
Such clauses could even be combined with adjudication during the project. It is also necessary to consider issues of investment protection when embarking on large scale projects abroad and seek advice on investment protection and even structuring at the outset. We have commented together with our colleagues from CBC on this and, in particular, on the German-Turkish investment perspective in a separate blog on JusMundi, see Turkish-German Investment Protection – An Outline and Common Pitfalls.
The contractual framework commonly used for construction in Türkiye, especially for renewable energy projects involving international investments, often follows the International Federation of Consulting Engineers (FIDIC) standard contracts, although there are specific considerations to keep in mind depending on the applicable law chosen. Since becoming a member of FIDIC in 1987 through the Union of Turkish Consulting Engineers and Architects, Türkiye has progressively adopted FIDIC contracts for major international projects. Notable examples include the Baku-Tbilisi-Ceyhan Pipeline and the Istanbul-Ankara Highway, both executed under FIDIC guidelines. The increase in the use of FIDIC contracts for offshore renewable projects has led to the ongoing development of a new fit-for-purpose FIDIC offshore contract. Parties seeking to enter the wind energy sector in Türkiye may choose to use the new contract, subject to the final wording when published and its efficacy in balancing competing interests.
The introduction of the new FIDIC contract and the ongoing incentives for investment in renewable projects in Izmir may bring challenges when navigating this new legal landscape. Georg Scherpf has been monitoring these challenges and advising on related opportunities, having participated in various webinars on renewable energy in Türkiye and has spoken on a panel with the Turkish Offshore Wind Energy Association in relation to wind projects in the Black Sea. Please also see our post on German-Turkish investment protection and arbitration with many issues also applicable to investors from other countries.
ABOUT THE AUTHORS:
Georg Scherpf is Head of Arbitration Germany at Clyde & Co. He advises both private and State parties on complex arbitrations and cross-border litigations. His commercial arbitration work covers a broad range of legal issues and sectors including international trade (CISG), corporate disputes (joint venture and post M&A) and energy (particularly offshore wind and construction disputes). His public international law experience includes advising clients in relation to bilateral investment treaties (BITs) and multilateral investment treaties including the Energy Charter Treaty (ECT). He has acted for investors in several complex treaty cases (ICSID, UNCITRAL and ad hoc) relating to infrastructure and energy investments in Spain, Czech Republic, Albania, and Germany.
Lale Defne Mete is Managing Partner at CBC Law. A highly skilled attorney who excels in corporate, litigation, and dispute resolution with a notable career, she adeptly advises a diverse range of clients, including international institutions, national governments, Turkish and international companies, and startups. Her expertise spans asset acquisitions, business transactions, and the resolution of cross-border disputes involving administrative, tax, customs, employment, business crime, and commercial issues. As an active member of professional organizations, Defne’s unique strengths lie in her deep legal understanding gained from in-house counsel roles and NGO
Daniel Theo Solomos is a second-seat trainee solicitor at Clyde & Co, currently sitting in Planning, having previously sat with the Occupational Disease team. Daniel was recently selected as the lead for the Legal Response International (LRI) initiative, where he works closely with the trainee-led Climate Change Group at Clyde & Co helping to shape legal strategies to address global climate, economic, and societal challenges.
Arina Naumova is a fourth-seat trainee solicitor at Clyde & Co, having previously done seats in International Arbitration, Aviation Liability and Shipping Litigation, the latter being an international secondment at the firm’s Hamburg office. Arina is involved in co-leading the Energy sub-team of the trainee-led Climate Change Group at Clyde & Co, which focuses on the climate transition and renewable energy solutions.
Maciko Chan is a fourth-seat trainee solicitor at Clyde & Co, having previously done seats in Insurance, Professional & Financial Disputes, International Arbitration and Energy, Engineering and Marine Disputes. Maciko is involved in co-leading the Energy sub-team of the trainee-led Climate Change Group at Clyde & Co, which focuses on the climate transition and renewable energy solutions.
The views and opinions expressed in articles posted on Daily Jus are those of the authors and do not reflect the official policy or position of Daily Jus.
