CLIENT ALERT FOR THE TURKISH COMPANIES ON RENEWABLE ENERGY SECTOR AND CURRENT ISSUES RELATED TO RENEWABLE ENERGY SECTOR IN UKRAINE 23 December 2020
Renewable energy sources which include photovoltaic (PV), as well as other solar, thermal and wind technologies are becoming a sector that is more and more preferable day by day due to its environmental benefits, as it should. However, the sector still faces difficulties because it simply cannot compete with traditional electricity generation resources in terms of cost and prevalence. States that want to overcome this problem and expand the production and use of renewable energy resources find the solution in granting various forms of subsidies, mostly "feed in tariffs" to sector investors. 1 In order to promote the development of renewable energy, the Government of Ukraine has introduced two different mechanisms called “the feed-in (the green) tariff” and “green auctions”. However, this solution brought other problems that Ukraine is currently facing and Spain2 and the Czech Republic3 had similarly faced before. 4
Green Tariff
Ukraine’s promotion of renewable energy started by the introduction of a feed-in tariff in 20085. This green tariff (as referred under Ukrainian Law) is currently the main incentive offered to foreign investors want to operate in the renewable energy sector. Current regulations regarding the green tariff6 give the renewable energy producers “the right to sell the energy to the state at the green tariff rate for the period from 2009 to the end of 2029”. 7
In order to benefit from the green tariff, producers must enter the electricity market and then enter into contracts with state enterprises that buys/sells electricity (the Guaranteed Buyer). Afterwards, the Guaranteed Buyer sells this electrical power at market price. Moreover, most of the price difference between the market price and the price of the green tariff is compensated by another state entity, the Transmission System Operator (Ukrenergo) with the electricity transmission tariff paid by the citizens / businesses using the transmission system.8
Green Auctions
Green auctions, the second main mechanism promoting renewable energy sector in Ukraine, are for the producers of renewable energy that have not entered into a contract with the Guaranteed Buyer. Therefore, the state cannot purchase the energy produced by them at the green tariff rate, however, the state aims to support these enterprises in the form of a quota to the winners of the auctions, which means the state gives a guarantee to the producers for buying electrical power from them at the winning price - which should not exceed the relevant green tariff rate. As of now, the green auctions have been postponed for an indefinite period of time, even though they were planned to start as of April 1, 2020.9
Current Issues
In 2019, The Government of Ukraine announced that the green tariff rates could be potentially decreased as the current tariff had become too burdensome.10 The disruption of the industrial sector due to Covid-19 negatively affected the use of electricity in Ukraine, as in other countries. For this reason, although there were problems regarding the issue previously as mentioned, Ukraine had difficulty in paying the green tariffs it promised to investors, as electricity usage is much lower than expected in 2020.11 According to Guaranteed Buyer’s official website, as of August 20, 2020, approximately 70% of these promised fees remain unpaid.12
In order to discuss the problems, under the supervision of Energy Charter Treaty (“ECT”) Secretariat, mediation proceedings started particularly between large investors and the Government and afterwards, a Memorandum of Understanding on the Settlement of Problematic Issues in the Renewable Energy Sector (“the MoU”) was signed on June 10, 2020 as a basis for the potential legislative changes in the future for the reduction of green tariff rates, to ban the construction of new wind and solar power plants and to make relevant changes to the green auction system.13 In order for the commitments of the parties’ mentioned in the MoU to be come into force legally, the State has amended the Law No 810-?? “On the Amendments to Certain Laws of Ukraine on Improving the Conditions of Support for Electricity Production from Alternative Energy Sources”. 14
Although the situation with the State's payments to investors has improved slightly, we cannot mention a significant change as the total debt of the State to investors is reported as UAH 26.2 billion as of November 26, 2020.15 Therefore, Ukraine's inability to pay its debts to investors eventually resulted in the increase of the tariff on electricity transmission by Ukrainian national power company (“Ukrenergo”), by the adjustment of the National Commission for State Regulation of Energy and Public Utilities (“NKREKP”). According to this adjustment, starting from December 1 2020, the new tariff, rising by 30.2 percent, was fixed at UAH 312.76/MWh.16
Even though it was expected that Ukraine will increase the tariff further by 2021 in order to make the necessary payments owed to RES producers17, upon the criticism regarding the increase in the tariff, at the meeting held on December 9, 2020, NKREKP decided to reduce the tariff by 6%, effective from January 1, 2021. As we have mentioned, the tariff for electricity transmission was fixed at the level of UAH 312.76 per MWh effective from 1 December 2020, and with the recent decision of NKREKP, it will be reduced by 6% and will be fixed at the level of UAH 293.93 per MWh effective from January 1, 2021.18 It is possible to say that these changes regarding tariff on electricity transmission have two different results.
First of all, as we mentioned, this tariff directly contributes to the payment of the debt to the RES investors, and even though the first increase was not sufficient enough to provide an effective payment plant for the debts in a short time, the aforementioned decrease on the tariff again raises the concerns about the time of the full payment of the debt to the investors. As a result of the fact that there is still no clear solution to the problems related to payment, it is highly likely that the issue will be brought to arbitral tribunals by the investors as international investment arbitration claims against Ukraine based on the bilateral investment treaties signed with the countries of the investor companies and the Energy Charter Treaty, of which Ukraine is a party.19
Secondly, the increase in the tariff naturally increases the cost of electricity use by citizens and businesses, bringing along other problems. It is believed that such an increase in the cost of use will affect the economy of Ukraine negatively and will bring along a huge unemployment problem, and all sector enterprises that use electricity effectively, from transportation to metal industry, will be highly affected to the extend where it may lead the closure of enterprises.20
As we conclude this post, we would like to remind our readers that there is a bilateral investment treaty re-signed between Turkey and Ukraine in 201721 and that Turkish investor companies that were adversely affected by these actions of Ukraine, may try to resolve their disputes and compensate their damages by bringing an investment arbitration claim according to this treaty.
_____________________________
1 Reed Smith LLP & Sayenko Kharenko, Green tariff in Ukraine: lessons from Spain and the Czech Republic, p. 2, 25 June 2020, retrieved from: https://www.reedsmith.com/en/perspectives/2020/06/green-tariff-in-ukraine-lessons-from-spain-and-the-czech-republic
2 Some of the relevant cases: Novenergia II - Energy & Environment (SCA), SICAR v. Kingdom of Spain, SCC Case No. 2015/063; Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1; Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V. v. Kingdom of Spain, ICSID Case No. ARB/13/31; SolEs Badajoz GmbH v. Kingdom of Spain, ICSID Case No. ARB/15/38.
3 Some of the relevant cases: WA Investments-Europa Nova Limited v. The Czech Republic, PCA Case No. 2014-19; Voltaic Network GmbH v. The Czech Republic, PCA Case No. 2014-20; Photovoltaik Knopf Betriebs-GmbH v. The Czech Republic, PCA Case No. 2014-21; I.C.W. Europe Investments Limited v. The Czech Republic, PCA Case No. 2014-22.
4 I. Dykunskyy & Y. Anikevv, The legal framework for renewable energy in Ukraine, 22 July 2020, retrieved from: https://www.lexology.com/library/detail.aspx?g=e7ab9123-2512-413e-906f-84fd8a2e9cc6
5 2008 Amendment to the 1997 Law of Ukraine on the Electric Power Industry.
6 “2003 Law of Ukraine on Alternative Sources of Energy” and “2017 Law of Ukraine on the Energy Market”.
7 Reed Smith LLP & Sayenko Kharenko, p. 2.
8 Reed Smith LLP & Sayenko Kharenko, p. 3.
9 Reed Smith LLP & Sayenko Kharenko, p. 3-4.
10 Id.
11 Id.
12 T. Lyctovchenko, Is There Still Any Future for Renewable Energy in Ukraine? September 29, 2020, retrieved from: https://golaw.ua/insights/publication/chy-zalyshylys-u-vidnovliuvalnoi-enerhetyky-v-ukraini-perspektyvy-rozvytku/
13 Reed Smith LLP & Sayenko Kharenko, p. 4-5; Government Signs Memorandum with Green Energy Producers, Communications Department of the Secretariat of the CMU, June 10, 2020 – official government portal at https://www.kmu.gov.ua/en/news/uryad-pidpisav-memorandum-zvirobnikami-zelenoyi-elektroenergiyi
14 O. Kurdydyk & D. Pshenychniuk, Ukrainian Parliament adopted law aimed at feed-in tariff reduction, August 6, 2020, retrieved from: https://www.lexology.com/library/detail.aspx?g=d4e63efe-93ad-443f-bef9-a263fbecd65b; Volodymyr Zelensky signs into law bill amending some Ukrainian laws to improve conditions for promoting electricity generation from renewable sources, The President Of Ukraine, July 31, 2020 – official government portal at https://www.president.gov.ua/en/news/volodimir-zelenskij-pidpisav-zakon-pro-vnesennya-zmin-do-dey-62541
15 Tetiana Mylenka, The renewable electricity market in Ukraine: answers to the key questions, December 7, 2020, retrieved from: https://energypost.eu/the-renewable-electricity-market-in-ukraine-answers-to-the-key-questions/
16 Id.
17 O. Holubeva, Return debts at consumers' expense: Why electricity tariffs are rising again?, November 12, 2020, retrieved from: https://112.international/finance/return-debts-at-consumers-expense-why-electricity-tariffs-are-rising-again-56407.html;
18 Metallurgprom, Electricity transmission tariffs from January 1, 2021 reduced by 6%, December 9, 2020, retrieved from: https://metallurgprom.org/en/news/ukraine/6172-tarify-na-peredachu-jelektrojenergii-s-1-janvarja-2021-goda-snizheny-na-6.html
19 Reed Smith LLP & Sayenko Kharenko, p. 6; T. Lyctovchenko, Is There Still Any Future for Renewable Energy in Ukraine? September 29, 2020, retrieved from: https://golaw.ua/insights/publication/chy-zalyshylys-u-vidnovliuvalnoi-enerhetyky-v-ukraini-perspektyvy-rozvytku/; O. Kuchynska, Ukrainian government and renewable energy associations sign pivotal Memorandum of Understanding to stabilise the renewables market, June 2020, retrieved from: https://www.kinstellar.com/insights/detail/1171/
20 O. Holubeva; Metallurgprom.
21 Turkey - Ukraine BIT (2017) - Agreement Between the Government of Ukraine and the Government of the Republic of Turkey Concerning the Reciprocal Promotion and Protection of Investments at https://jusmundi.com/en/document/treaty/en-turkey-ukraine-bit-2017-turkey-ukraine-bit-2017-monday-9th-october-2017
Other News
-
24.10.2025
The Obligation for the Principal and Subcontractor Employers to Jointly Participate in Mediation Has Been Annuled by the Constitutional Court
An important Constitutional Court decision has been published regarding the mediation process that an employee can apply to with a request for reinstatement after the termination of employment relations in the workplace. The Constitutional Court ruled that the provision in paragraph (15) of Article 3 of the Labor Courts Law No. 7036, which states, "In cases where there is a principal employer-subcontractor relationship, for a request for reinstatement to be submitted to a mediator, the employers must participate in the mediation talks together and their intentions must be compatible for an agreement to be reached," is unconstitutional. The decision was published in the Official Gazette dated October 17, 2025, and numbered 33050.
-
23.10.2025
The Constitutional Court Has Annulled The Provision Granting The President Authority To Restrict Foreign Exhange And Money Movements!
In its decision No. 2024/193 Merits 2025/136 Decision1 dated 17 June 2025 ("Decision"), published in the Official Gazette on 15 October 2025, the Constitutional Court ("Court") annulled Article 1 of Law No. 1567 on the Protection of the Value of the Turkish Currency ("Law"). The annulled provision had stated that: "The President is authorized to make decisions for the regulation and restriction of the export from or import into the country of currencies, securities, and bonds, and of the purchase and sale of foreign exchange, cash, securities, bonds, precious metals, precious stones, and any goods and valuables made of or containing them; as well as of commercial papers and all means and instruments used for payment, and to take decisions aimed at protecting the value of the Turkish currency."
-
21.10.2025
Seizure of Property Belonging to Persons Other than the Debtor and Protection of Legal Rights
In enforcement proceedings, the seizure of property that does not belong to the debtor but rather to third parties is a situation frequently encountered in practice that leads to significant aggrievements. Uncertainties arising from property regimes complicate ownership relations, making it difficult to accurately determine to whom the property belongs during enforcement measures. Within this framework, when seizure is imposed on property belonging to the debtor's spouse or another third party, the most important legal remedy is the ownership claim (assertion).
-
20.10.2025
Mergers and Acquisitions and the Notification Obligation within the Framework of Competition Law
Mergers and acquisitions (M&A) are at the center of the growth and restructuring strategies of companies. These transactions, serving the purpose of companies to expand both nationally and internationally to increase their market shares or to enter into new markets, not only give rise to economic and commercial consequences but also carry the potential to directly affect the competition dynamics in the relevant market. Therefore, merger and acquisition transactions may affect the competition structure in the market. In this respect, while M&A transactions create strategic opportunities, they are also among the areas carefully scrutinized by regulatory authorities to preserve competitive order.
-
17.10.2025
Important Amendment to the Organized Industrial Zones (OIZ) Implementation Regulation: Additional Time Granted To Participant
Published in the Official Gazette No. 33050, dated October 17, 2025, the "Regulation Amending the Organized Industrial Zones Implementation Regulation" introduces a new Provisional Article 13 to the existing regulation.This new provision allows OIZ participants who have not yet obtained a building permit or a workplace opening and operating license to apply for an extension period under certain conditions.
-
15.10.2025
Current Status Of The Obligation To Maintain Commercial Books In Electronic Form
1. INTRODUCTION With the Communiqué Amending the Communiqué on Keeping Commercial Books Not Related to the Accounting of the Enterprise in Electronic Form, published in the Official Gazette dated September 20, 2025 and numbered 33023 (“Amendment Communiqué”), significant amendments have been introduced to the Communiqué on Keeping Commercial Books Not Related to the Accounting of the Enterprise in Electronic Form, published in the Official Gazette dated February 14, 2025 and numbered 32813 (“Communiqué”).
-
25.9.2025
Social Security Procedures To Be Carried Out By The Employer Following A Reinstateme
Upon receiving notification of a final and binding reinstatement decision, if the employee communicates their intention to return to work within 10 business days, the employer may either reinstate the employee or refuse reinstatement by paying both the four months' idle period wages determined by the court and the compensation for non-reinstatement. As seen, the employer has two alternative courses of action in this situation; however, the procedures to be carried out before the Social Security Institution (SGK) differ in each case.
-
19.9.2025
The Court of Cassation has Ruled That The Competent Court Fot Cases Brought On The Grounds Of Volation Of The Non-Competition Clause Is The Commercial Court of First Instance
1. Introduction The duty not to compete is a type of loyalty obligation owed by the employee to the employer. The employee undertakes not to compete with the employer during the term of the employment contract as part of their loyalty obligation. However, Turkish law does not contain any legal provisions prohibiting the employee from competing with the employer after the employment contract has ended. However, the parties may freely agree that the employee will not compete with the employer after the termination of the employment contract. Articles 444-447 of the Turkish Code of Obligations also contain provisions and restrictions regarding non-competition agreements that may be established between the employee and the employer.
-
16.9.2025
Transfer Fee: Legal Characterization and Practical Application
1. Introduction The concept of a transfer fee is not directly defined in the Turkish Labor Code; its framework and legal nature in practice have largely been shaped by the decisions of the Court of Cassation (Turkey). This practice, which arises particularly in sectors with intense competition and limited skilled labor, is a type of payment that employers must carefully consider within the scope of their employment policies.
-
5.9.2025
Competition in the Labor Market: HR Practices to Avoid
The Turkish Competition Authority ("Authority"), which is entrusted with ensuring the proper functioning of markets, identifying practices that restrict competition, and imposing sanctions against infringements, operates under Law No. 4054 on the Protection of Competition ("Law") without distinction between input and output markets. Labor markets have recently emerged as one of the primary arenas in which entities compete in input markets and, with the influence of various additional dynamics, have become a market increasingly prioritized by the Authority. The Guidelines on Competition Violations in Labor Markets ("Guidelines"), adopted by the Authority on November 21, 2024, serve as an important reference for the prevention of competition infringements in labor markets. In this bulletin, in light of the Guidelines and decisions of the Competition Board ("Board") within the Authority, (i) the fundamental principles and information regarding the application of competition law to labor markets, and (ii) the main prohibited practices to be observed when competing in labor markets will be addressed.
-
29.8.2025
Does An Employee's Extended Period Of Sick Leave Grant The Employer The Right To Terminate The Emploment Contract?
In employer-employee relations, the direct impact of long-term medical reports on the status of the employment contract holds critical importance for both employees and employers. In particular, uninterrupted periods of sick leave lasting for a certain duration are regulated under Article 25/I(b) of the Labour Law as a specific provision that grants the employer the right to immediate termination for just cause and determines the rights to be granted to the employee. In this context, how the employer may exercise the right of termination for just cause following the employee's extended medical leave and the legal basis of this process should be examined in detail.
-
27.8.2025
Regulation On Direct Selling Was Published
The Regulation on Direct Selling ("Regulation"), issued by the Ministry of Trade ("Ministry") pursuant to Articles 47/A and 84 of the Consumer Protection Law No. 6502, was published in the Official Gazette dated 08.08.2025 and numbered 32980, thereby entering into force.
-
18.8.2025
SMS Verification Codes and the Personal Data Protection Board's Guideline Decision No. 2025/1072
The Personal Data Protection Board's Guideline Decision dated 10 June 2025 and numbered 2025/1072 introduces significant regulations regarding personal data processing activities conducted through SMS verification codes, which have become a widespread practice in commercial life. The decision requires significant adjustments to customer relationship management, particularly in the service and retail industries.
-
11.8.2025
Mergers And Acquisitions Of Companies Engaged In Renewable Energy Gereration
In recent years, notable developments in Turkey's electricity market have extended beyond investments aimed solely at increasing generation capacity. The sector has also come into focus through strategic investments and merger and acquisition (M&A) transactions involving companies operating in the field of renewable energy.
-
31.7.2025
Annual Leave, Severance Pay, and Notice Pay in Part - Time Employment Contracts
Part-Time Employment Contract Article 13 of the Labor Law No. 4857 defines a part-time employment contract as "a contract in which the employee's normal weekly working hours are significantly less than those of a full-time employee performing similar work."
