THE AUTHORS:
Lale Defne Mete, Managing Partner at CBC Law
Georg Scherpf, Head of Arbitration Germany at Clyde & Co
Tutku Şen Demirel, Associate at CBC Law
Oya Tekelioğlu, Trainee Lawyer at CBC Law
Explore our comprehensive series on investment opportunities in Türkiye. Each article delves into critical facets of the Turkish investment landscape—from ambitious renewable energy policies and streamlined regulatory frameworks to insights on Turkish-German investment protection, this series highlights the strategies driving growth and fostering a dynamic business environment.
Introduction
With growing concerns over climate change and energy security, nations are implementing enhanced policies to meet green energy commitments. Against that backdrop, Türkiye is pursuing its share of 2053 Net Zero targets while upholding its objective to maintain energy security and independence. This has driven the country to implement ambitious updates to its policy agenda for 2035, leveraging its geographical position and advancing a comprehensive investment framework for renewable energy projects. This article will examine Türkiye’s historical initiatives in the renewable energy sector, review the recently updated policy objectives and proposed regulatory reforms such as “the super permit”, and point to potential areas for disputes.
Historical Efforts to Advance Renewable Energy Sector in Türkiye
As of 2024, Türkiye ranks 11th globally and 5th in Europe in terms of installed renewable energy capacity, a result of dedicated efforts to advance the sector since the early 2000s. Central to these efforts was the adoption of the Law on the Use of Renewable Energy Sources for Electricity Generation in 2005, which established the groundwork for the Renewable Energy Resources Support Mechanism (“YEKDEM”). The YEKDEM scheme introduced a structured incentive system to promote investment in renewable energy projects by providing a 10-year feed-in tariff per kilowatt-hour for electricity generated from renewable sources while encouraging the use of locally manufactured equipment. Notably, the initial USD-based YEKDEM scheme attracted significant investor interest, proving highly profitable following the sharp decline in the market clearing price in 2015, which led to a substantial increase in the installed renewable energy capacity between 2016 and 2019.
The YEKDEM mechanism laid the foundation for advancing renewable energy efforts, which were further elevated by introducing the Regulation on Renewable Energy Resource Zone in 2016. This regulation facilitated the construction of large-scale renewable energy plants in designated areas through Renewable Energy Resource Zone (“REZ”) tenders starting in 2017, which facilitated the establishment of factories for manufacturing plant equipment. Within the scope of the first round of REZ tenders, significant achievements were realized, including the construction of Türkiye’s largest solar power plant with a capacity of 1 GW in Konya Karapınar by the Kalyon Holding-South Korean Hanwha partnership, and the wind turbine factory in İzmir Aliağa developed by the Siemens-Türkerler-Kalyon partnership.
Despite financial pressures from the currency devaluation that led the Ministry of Energy and Natural Resources (“Ministry”) to narrow the scope of YEKDEM beneficiaries and implement Turkish Lira-denominated tariffs for post-June 2021 plants, Türkiye reached a first milestone in 2020, with installed renewable energy capacity rising from 11,221 MW in the early 2000s to 49,581 MW, surpassing 50% of the total installed capacity for electrical energy.
With the revision implemented in May 2023, the YEKDEM mechanism has been adjusted to become more responsive to fluctuations in USD and Euro exchange rates. While YEKDEM payments continue to be made in Turkish Lira, as of June 1, 2023, the escalation formula used for YEKDEM feed-in tariff guarantees has been updated monthly based on floor and ceiling prices indexed to USD. This adjustment aims to mitigate currency risk for renewable energy producers, similar to the initial advantageous USD-based YEKDEM scheme.
2022 National Energy Plan: Projections for 2035
In alignment with its Net Zero emission target set for 2053 under the Paris Agreement, Türkiye announced the National Energy Plan in 2022, setting national benchmarks for 2035. The principal objective of the National Energy Plan was to increase the installed electrical energy capacity to 189.7 GW by 2035. Within this framework, the National Energy Plan anticipated expanding solar energy capacity to 52.9 GW and wind energy capacity to 29.6 GW, with the overarching goal of increasing the share of renewable energy sources within the total installed electrical energy capacity from 54% to 64.7%. The projections also included the integration of battery and storage technologies, aimed at maximizing the benefits of renewable energy sources and mitigating their vulnerability to seasonal variations. Accordingly, the battery storage capacity was projected to rise to 7.5 GW by 2035.
2035 Renewable Energy Road Map: Updates to Previous Objectives
Recently, in October 2024, the Minister of Energy and Natural Resources, Dr. Alparslan Bayraktar, presented the 2035 Renewable Energy Road Map (“Road Map”), introducing significant updates to Türkiye’s renewable energy objectives in the National Energy Plan. As highlighted in the presentation, Türkiye’s installed renewable energy capacity reached 67.4 GW as of September 2024, representing 59% of the total installed electrical energy capacity. The primary objective of the Road Map is to increase the installed capacity of solar and wind energy from the current 31.1 GW to 120 GW, which marks a substantial 45% increase over the previous target of 82.5 GW set in the National Energy Plan.
To achieve the target of 120 GW of installed wind and solar energy capacity, the Road Map plans for the launch of several REZ projects, allocating a total of 2 GW through competitive tenders by the end of 2024, with plans to add at least 2 GW annually in the following years. Indeed, the Ministry has recently announced the “Tender for the Allocation of Renewable Resource Areas and Connection Capacities Based on Solar Energy” in the Official Gazette dated November 4, 2024, No. 32712 which encompasses six solar energy projects (“REZ-SPP 2024”) to be developed in Konya, Karaman, Malatya, Van, Antalya, and Kütahya, with a total connection capacity of 800 MW. The sites are expected to be allocated with 49-year usage rights to successful bidders.
This new framework also introduces a new incentive mechanism offering a minimum feed-in tariff of USD 4.95 per kWh for the first five to six years following the project’s commissioning. For the subsequent 20 years, a fixed rate will apply, and the remaining license period will be subject to free market conditions. The proposed incentives notably include exemptions from transmission fees, additional payments based on production capacity, and the availability of international arbitration as a method of dispute resolution.
Complementing Updated Objectives: “Super Permit”
The updated objectives have prompted discussions on legislative reforms aimed at reducing administrative burdens on investors and project developers, thereby accelerating the development of renewable energy projects. To ensure an expedited procedure, a scheme called “super permit” for renewable energy projects has been proposed by the Ministry to facilitate investment by reducing the approval period of renewable energy projects from an often burdensome 48 months to two years or less.
In this framework, the Ministry has proposed reforms to simplify administrative procedures, including expediting Technical Interaction Analyses to 4-5 months, concluding expropriation permits within 6-9 months, streamlining forest permits to 4-6 months, and finalizing zoning and licensing procedures within approximately 3 months. Perhaps most notably, the Ministry envisages the process for Environmental Impact Assessment (“EIA”) —a vital measure to ensure that all potential adverse environmental impacts of a planned project are identified in advance and that necessary measures are taken—to be completed within 3 to 6 months, with other permit applications potentially being conducted simultaneously with the EIA process. These proposed incentives, designed to attract investors and position Türkiye as a global competitor in the renewable energy sector, have sparked concerns among NGOs, who warn that such rapid advancements may come at the cost of the country’s environmental values.
The 2024-2028 Strategic Plan
The Road Map was followed by the Ministry’s publication of its 2024-2028 Strategic Plan (“Plan”), which outlines several objectives as part of the new policy framework. The foremost objective reiterates the Ministry’s commitment to ensuring sustainable energy security. To achieve this, the Plan aims to increase the installed electricity capacity to accommodate the rising demand, enhance grid flexibility for the integration of additional renewable energy sources, and foster greater international investment collaboration within the domestic energy sector.
Importantly, a key focus of the Plan is the transition to a net-zero carbon energy framework. To this end, the Ministry projects that the share of renewable energy in total electricity production will rise from 45% in 2024 to 50% by 2028. The REZ tender model and similar initiatives are anticipated to play a significant role in achieving this target, with the Plan specifically highlighting the implementation of innovative renewable energy projects, including offshore wind farms and floating solar power plants. The Plan also highlights the importance of revising and updating the regulatory framework to support the clean energy transition. It is further projected that, by 2028, new regulations will be implemented to improve investment climate and simplify approval and permit procedures within the energy sector. Taken together, these objectives align with the Ministry’s recent initiatives for advancing the future of the renewable energy sector.
The Draft Contract for the 2024 REZ Projects and Potential for Disputes
As Türkiye emerges as an increasingly attractive market for renewable energy investments, investors should be mindful of potential contentious risks associated with renewable energy projects. In this context, the draft contract published for the REZ-SPP 2024 tenders (“Draft Contract”) may provide valuable insights into potential disputes within Türkiye’s renewable energy landscape in the coming years.
Change in Legislation
A common type of dispute encountered in recent years has been investor-state claims, often arising when subsidies and incentives for renewable energy are retrospectively revoked or reduced due to financial strain on the host state. This complex legal issue of balancing investors’ legitimate economic interests with the host states’ sovereign right to regulate has been illustrated in the “Spanish Saga”, where Spain has faced over sixty investment arbitrations following its rollback of renewable energy subsidies between 2012 and 2014. Similar disputes arose in the Czech Republic, Italy, Germany and Ukraine (before the Russian invasion) Considering the legal challenges, it becomes important for investors in long-term energy projects to analyse the safeguards in place to protect their economic expectations, particularly through the review of change in legislation or stabilisation clauses within contractual agreements.
In this context, the financial safeguards in question are addressed under Article 6 of the Draft Contract which enables investors to receive compensation to a certain extent to mitigate losses resulting from potential policy changes. Accordingly, the clause stipulates that if any amendments to legislation or incentive mechanisms result in either:
- an increase or decrease exceeding 3% of the total investment costs during the investment period, or
- an increase or decrease exceeding 10% in the annual operating costs until the end of the contract—excluding any tax-related legislative changes
the affected party is entitled to compensation, provided they submit necessary evidence which should later be verified by the relevant authority.
Notably, Article 12 of the Draft Contract, titled Circumstances and Conditions Under Which Extension of Time Can Be Granted, recognizes changes in legislation as a valid ground for a claim of extension, alongside force majeure events and other circumstances that may render the contract void or unenforceable. This provision is of particular significance to investors, as delays are a frequent cause of disputes, especially during the construction/installation phase of renewable energy projects. Consequently, investors need to ensure that contractual safeguards shield them from the repercussions of policy shifts that could disrupt the project’s timeline.
Governing Law and Settlement of Disputes
The Draft Contract would be concluded with the Ministry of Energy and Natural Resources. Article 32 of the Draft Contract specifies that disputes arising in connection with the Draft Contract will be resolved through arbitration by the ISTAC (Istanbul Arbitration Centre) Arbitration Rules, with Istanbul, Türkiye designated as the venue and Turkish as the language of arbitration.
Notably, the Draft Contract incorporates a revised clause enabling international arbitration under the International Chamber of Commerce (ICC) for disputes involving foreign elements. Circumstances deemed to involve a foreign element include situations where the parties to the arbitration agreement have their domiciles, habitual residences, or places of business in different states, or where critical aspects of the arbitration are outside the state of the parties’ domiciles or habitual residences. Additionally, foreign element may be found where, pursuant to the underlying contract, there is cross-border movement of capital or goods; where a shareholder of a contracting company has introduced foreign capital into Türkiye under relevant laws; or where loan and/or guarantee agreements are required for the contract’s execution.
The choice of dispute resolution is a crucial consideration for all stakeholders in renewable energy projects, especially where a project involves cross-border elements. Arbitration emerges as a suitable method, providing an impartial forum equipped to handle multijurisdictional disputes with added benefits of confidentiality, expedited proceedings, and ease of enforcement under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (“New York Convention”). A particularly advantageous feature of arbitration is the flexibility it affords in selecting a panel of arbitrators with technical expertise in the subject matter. Given that renewable energy projects are inherently technical, giving rise to complex evidence and highly specialized disputes, the integration of industry-specific knowledge becomes crucial.
Potential Environmental Disputes
Renewable energy projects often require land acquisition and interaction with local communities, leading to disputes regarding environmental protection and social rights. In the past, the majority of lawsuits initiated in response to renewable energy projects in Türkiye have comprised administrative actions against the Ministry of Environment and Urbanization, challenging the annulment of EIA decisions, zoning plans, licenses, and urgent expropriation orders—essential milestones for project viability. These lawsuits commonly cited concerns related to air and noise pollution, land rights, damage to biodiversity and wildlife, incorrect or missing scientific data on the flora and fauna in the selected area, and the inadequate assessment of impacts on health and the environment. The proposed incentives like super permit, aimed at accelerating project development by streamlining crucial administrative processes like EIAs and construction permits pose a risk of similar disputes arising in the future.
Conclusion
With growing global efforts to combat climate change and enhance energy security, renewable energy projects are experiencing substantial growth. In this context, Türkiye has recently indicated its commitment to advancing its renewable energy policy with the 2035 Renewable Energy Road Map and the 2024-2028 Strategic Plan. The updated objectives are expected to be supported by legislative reforms like the ‘super permit’, introducing new incentives that simplify administrative procedures and project development. However, the anticipated growth in renewable energy projects may bring with it the risk of disputes. As Türkiye is becoming an increasingly attractive hub for investments in renewable energy projects, investors should be mindful of common technical and legal challenges inherent to these projects, and strategically review risk allocation in contractual agreements to mitigate potential disputes, dispute resolution mechanisms and overall investment protection as well as political risk insurance.
ABOUT THE AUTHORS
Lale Defne Mete is a 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 representation.
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 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.
Tutku Şen Demirel is an associate at CBC Law. She advises domestic and international clients on corporate law, employment law, and data privacy, specializing in compliance programs across diverse sectors, including tourism, health software, transportation, and energy. She supports clients in managing legal risks, resolving commercial and employment disputes, and navigating regulatory changes. Tutku’s interdisciplinary approach and focus on innovation enhance her work in environmental law, healthcare, and technology. A graduate of Robert College and Istanbul University, she is pursuing an LL.M. in private law at Ankara University.
Oya Tekelioğlu is a trainee at CBC Law. She works across corporate and commercial law, ethics, and compliance. She has experience in competition and compliance law from internships with leading law firms, where she also gained skills in contract review and monitoring regulatory developments. A graduate of Robert College and the University of Nottingham, Oya is actively pursuing her equivalence degree in Türkiye while preparing for the UK Solicitors Qualifying Exams. Her involvement in university societies, including the Law Society, reflects her commitment to building a dynamic and dual-qualified legal career.
