Financing Opportunities for Green Transition Goals in the Energy Sector

The Ministry of Energy and Natural Resources, the Energy Market Regulatory Authority (“EPDK”), and the Turkish Energy, Nuclear, and Mining Research Institute (“TENMAK”) all provide various incentives for achievement of sustainable goals in the energy sector. This article of our series will focus on financing opportunities and incentive programs for the energy sector.

The Ministry of Energy and Natural Resources implements incentive programs to reduce energy consumption, enhance efficiency, and lower carbon emissions. These programs provide financial support to projects aiming to achieve energy efficiency for economic savings and environmental benefits.

The Efficiency Increasing Project (“VAP”) Support Program aims to improve energy efficiency from production to consumption. Operating since 2009, the VAP Support Program has provided 184 million TRY to 646 projects to date, resulting in investments totaling 755 million TRY. Approximately 1.32 billion TRY in savings have been achieved alongside CO2 emission reductions of 559 thousand tons.

Recent regulatory changes have removed sectoral restrictions and increased the amount of support available to 15 million TRY. The project cost limit has also been removed, while the support rate has been set at 30% of the total project cost (this amount will be updated annually based on the revaluation rate). Applications can be submitted by real and legal entities through the Ministry of Energy and Natural Resources’ electronic application system (call applications, however, are temporarily closed until new regulatory arrangements are completed). The program, managed by the Directorate of Energy Efficiency and Environment, also supports environmental

sustainability, optimizes energy consumption, and reduces energy costs to strengthen the competitiveness of, among others, Türkiye’s industrial sector.

The Energy and Carbon Reduction (“EKA”) Support Program is implemented across all sectors to encourage reductions in energy consumption and carbon emissions. In 2024 the previous funding limit of 1 million TRY was increased tenfold to 10 million TRY and, as with the VAP Support Program, this amount will be updated annually based on the revaluation rate. Applications are evaluated according to budget availability and established criteria.

The EKA Support Program has granted a total of 8.88 million TRY to 16 applicants since 2009, enabling businesses to invest 36 million TRY. This has resulted in savings of 16 million TRY and CO2 emission reductions of 27,000 tons.

The Instrument for Pre-Accession Assistance (“IPA”) supports Turkish energy projects aimed at developing low-carbon, sustainable, efficient technologies which align Türkiye with EU regulations and establish necessary infrastructure.

A total budget of 14.5 billion EUR has been allocated for the IPA III period, a projected 4.35 billion EUR of which will be allocated to the energy sector. Applications are submitted to the Ministry of Energy and Natural Resources according to timelines determined by the European Commission. The Ministry evaluates proposals from central units, affiliated institutions, and related organizations under its strategic response document before forwarding them to the Directorate for EU Affairs. The European Commission then initiates the financial support mechanism for approved projects.

EPDK’s various regulations and incentive mechanisms promote use of renewable energy sources and strengthen the energy sector by addressing energy production processes and infrastructure improvements.

The Renewable Energy Support Mechanism (“YEKDEM”) promotes the use of renewable energy sources in electricity production, energy source diversity, reduction of greenhouse gas emissions, protection of the environment, and domestic manufacturing in the energy sector. Ten-year, dollar-based incentives are available to licensed production facilities commissioned between 2005 and 2020 (those commissioned in 2021 enjoy support for 9 years). TRY-based support prices and durations have been determined for facilities commissioned between 2021 and 2030 with prices updated monthly according to specified formulas. Unlicensed electricity production facilities can be granted incentives for 10 years from the date they began supplying energy to the grid. Licensed facility owners must submit their YEKDEM registration applications to EPDK by November 30 of the

preceding year. The process is managed by EPDK with the Energy Markets Operations Company handling payment transactions.

Land allocation practices support the use of renewable energy sources for electricity generation to promote environmental protection, resource diversification, and reduction of greenhouse gas emissions. Renewable energy facilities commissioned between 2005 and 2025 benefit from an 85% discount, applied for 10 years, on fees arising from permits, leases, and easement and usage rights (including areas for transportation routes and energy transmission lines). EPDK and the General Directorate of Forestry coordinate the process.

The Licensing Fees regulation, coordinated by EPDK, promotes the establishment of production facilities based on domestic natural resources and renewable energy sources. Only 10% of the license acquisition fee is collected for pre-license and license applications. Annual license fees will not be applied for the first 8 years from the facility’s acceptance date.