Turkey: Economic Incentives For The Power Plants Using Domestic Coal

Last Updated: 22 August 2016
Article by Sahin Ardiyok and Tolga Turan

Recently "Decision on Putting Supplementary Financial Obligations on Coal Imports" was promulgated by the Cabinet of Republic of Turkey. Aim and framework were indicated in the first article of the Decision as, "implementing supplementary financial obligations against specific goods in order to regulate external trade to the advantage of the economy of the country."

The specific goods mentioned in the first paragraph were shown in a chart placed in the annex, with the HS Code of 2701. and a product definition of "other goods except the ones that are not used to generate electricity." On the chart the amount of supplementary financial obligation which will be imposed on coal was indicated as US$15 per ton; the countries of origin of the goods, which will be subject to this implementation of supplementary obligation, were listed as: the European Union member states, European Free Trade Association member states, Israel, Macedonia, Bosnia and Herzegovina, Morocco, West Bank and Gazza Strip, Tunisia, Egypt, Georgia, Albania, Jordan, Chile, Serbia, Montenegro, Kosovo, South Korea, Mauritius and Malaysia. In addition, the implementation of the Decision was framed with the provisions of Turkish Customs Regulations related to the end use in the Article 2.

The supplementary obligation will be collected by the Customs Office, separated from customs taxes on imports and other financial obligations, in order to be propounded to the national budget according to the Decision. Law on Collection of Public Receivables will be applied on the collection proceedings of the obligation according to the Decision. Proceedings of assessment, accrual, collection, refund, guarantee and control related to the supplementary financial obligation will be governed by the relevant provisions of the Customs Law and other related legislation.

The Decision is in compliance with the policy pursued through Electricity Market Law ("EML") which provides authorisation for related institutions to take appropriate precautions in order to provide an efficient generation composition and prevent financial obligations derived from generation process for Public Electricity Enterprises.

A further Decision named "Procedures and Principles on Electricity Supply from Private Companies which Operate Domestic Coal Fueled Power Plants by TETAŞ" on related topic was promulgated recently.

According to EML, TETAŞ is obliged to supply electricity from Domestic Coal Fueled Private Electricity Generation Companies (domestic coal plants) if it falls short of electricity supply within the scope of the present contracts. The Decision authorizes the Cabinet to decide annually upon the quantity of additional supply which will be provided from domestic coal plants. The demand profiles approved by the Turkish Energy Market Regulatory Authority (EMRA) and quantity of electricity supply stipulated by current contracts are indicated as criteria for calculating unsatisfied supply need. TETAŞ is authorized to purchase from domestic coal plants at the rate of ±%10. The Decision indicates that the period, quantity (MWh) and unit price (TL/MWh) for the relevant year related to the electricity shall be decided by the Cabinet in October of the previous year.

However, the Cabinet specified the quantity of energy supply from domestic coal plants for 2016 and unit price for supply from them with a provisional clause as 6 billion kWh for quantity and 185 TL/MWh for unit price. Unit price at 185 TL/MWh is seen as an incentive for the power plants using domestic coal since TETAŞ is a public economic enterprise and conducts the acts of trade and contracts of electricity in compliance with the general state policy of energy and economy. It should be noted that the average day-ahead market price ("PTF") in the spot market between 1 January and 20 August 2016 is 128 TL/MWh and the average price for the last 365 days is 136 TL/MWh.

Putting both mentioned Cabinet Decisions together; the measures can be characterized as precautious against raw material imports used for generation of electricity since they both promote domestic energy supply. According to the data of Turkish Ministry of Energy and Natural Resources, in 2012 and 2013 the rates of import resources are %71.5 %73.5 respectively. Given the figures of 2013 net imports data, Turkey is 5th on natural gas imports, 13th on oil imports, 8th on coal imports and on the final total it is 11th on the world net energy imports league1. Therefore Decisions are in compliance with the decrement policy on the import dependency of Turkey.

Further leverage is provided by the assurance of 185 TL/MWh unit price of energy which will be supplied from domestic coal plants to TETAŞ through the latter Decision of Cabinet. It seems that the Government plans to subsidize the 185 TL/MWh unit price of energy, which TETAŞ is obliged to purchase from, with the revenue which will be generated from the supplementary financial obligation put on the coal imports.


[1] Oğuz Türkyılmaz, "Ocak 2015 itibarıyla Türkiye'nin Enerji Görünümü Raporu", http://www.mmo.org.tr/resimler/dosya_ekler/a5a69d7ec06d9cd_ek.pdf?dergi=1522, (February, 2015).

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