Renewable Power Purchase Agreements: Legal Framework, Areas of Application and Recent Developments in Türkiye

Introduction

Ensuring energy supply security, combating climate change, and achieving sustainable development objectives have become among the principal drivers accelerating the transformation of energy market in recent years. In this transition process, increasing the share of renewable energy resources in electricity generation has evolved not merely into a technical or economic preference, but into a legal and institutional necessity.  In this context, renewable power purchase agreements (“RPPA”) have gained increasing significance as market-based instruments for both electricity producers and consumers.

Legal Character and Practical Advantages

In general terms, RPPAs are long-term agreements governing the purchase of electricity generated from renewable energy sources under pre-determined commercial conditions. Given the high upfront investment costs characteristic of renewable energy projects, the need for predictable long-term revenue streams has transformed such agreements into essential financing instruments.

From this perspective, RPPAs do not merely regulate an electricity sale–purchase relationship; rather, they establish a contractual structure that secures the long-term bankability and sustainability of renewable energy investments.

One of the primary benefits offered by RPPAs is price stability. The volatile nature of electricity market prices creates significant financial risks, particularly for industrial and commercial consumers with high electricity demand. Long-term supply agreements substantially mitigate such uncertainty for both parties.

Another critical function of RPPAs is facilitating project finance. For producers, contracts providing stable and foreseeable cash flows significantly enhance project credibility before banks and financial institutions. Accordingly, RPPAs frequently form the cornerstone of financing structures in renewable energy projects.

In addition, RPPAs play a pivotal role in reducing carbon footprints, documenting green electricity consumption, and fulfilling corporate sustainability and ESG commitments.

Global Trends and the Situation in Türkiye

International energy market trends demonstrate that fixed-feed-in tariff models—widely used during periods of high renewable energy costs—have gradually been replaced by market-based corporate RPPA structures as technology has matured and generation costs have declined.

In Türkiye, however, renewable energy capacity expansion has predominantly been shaped through state-supported mechanisms such as the Renewable Energy Support Mechanism (“YEKDEM”) and the Renewable Energy Resource Areas (“YEKA”) model. As a result, corporate RPPAs have not yet achieved widespread adoption in Türkiye.

Corporate RPPAs

Corporate RPPAs are long-term electricity supply agreements executed between renewable energy producers and private-sector consumers with substantial electricity demand.

Under this model, the state does not act as a contractual party; instead, it assumes a regulatory and supervisory role. The parties retain broad contractual freedom in determining pricing structures, contract duration, delivery models, and risk allocation.

Nevertheless, the practical enforceability of such agreements is directly influenced by electricity market legislation, including rules on licensing, grid connection, balancing, settlement, and market operation.

Renewable Energy Resource Areas (YEKA)

The YEKA model is an investment planning mechanism established under Law No. 5346 on the Utilization of Renewable Energy Resources for the Purpose of Electricity Generation (“Law No. 5346”).

Under this framework, specific zones are designated as renewable energy resource areas, and investment rights are allocated through competitive tender procedures.

The primary objectives of the YEKA model include reducing infrastructure costs and promoting domestic production. Site selection, tender conditions, and allocation of usage rights are administered by the Ministry of Energy and Natural Resources. These agreements regulate the allocation and use of specific renewable energy resource areas and define the rights and obligations of the investor with respect to project development, construction, and operation. The tender process generally emphasizes competitive electricity pricing, local manufacturing commitments, and technological capacity.

In other words, under Turkish law, model constitute an important legal mechanism for the large-scale development of renewable energy projects. the YEKA model aims to facilitate the efficient utilization of renewable energy resources through the allocation of designated resource areas for wind, solar, or other renewable energy investments.

A central feature of YEKA agreements concerns the integration of renewable energy generation into the national electricity system. The agreements typically include provisions relating to grid connection, project timelines, licensing procedures, and compliance with technical and environmental standards. In addition, they often incorporate long-term electricity purchase arrangements or other regulatory support mechanisms to ensure investment stability and financial viability.

Risk allocation is another key component of YEKA agreements. These contracts commonly address issues such as delays in project development, permitting requirements, land use rights, and force majeure events. Furthermore, developers are expected to comply with obligations related to domestic equipment production or technology transfer that reflect Türkiye’s broader industrial and energy policy objectives.

Due to the administration’s extensive authority over tender terms, project timelines, and implementation processes, the YEKA model provides a more limited scope of contractual autonomy compared to corporate RPPAs. However, YEKA agreements are applicable for longer terms as a consequence of power purchase agreements (PPAs).

Renewable Energy Support Mechanism (YEKDEM)

YEKDEM is a public support scheme established under Law No. 5346 with the objective of shielding renewable energy investments from market price volatility.

Under YEKDEM, electricity generated from renewable sources benefits from fixed-price or feed-in premium support for a predetermined period.

The operational principles of YEKDEM are regulated in detail under the Regulation on the Certification and Support of Renewable Energy Resources (“YEKDEM Regulation”). The regulation define eligibility criteria, settlement-based generation calculations, and cost-sharing mechanisms among market participants.

Under this system, price risk is borne by the public sector, investors, and consumers, distinguishing YEKDEM fundamentally from market-based corporate RPPAs.

Although recent regulatory developments—such as limitations on support periods and special rules for capacity increases and storage-integrated power plants—signal a gradual shift toward market-based structures, experts generally consider these measures insufficient for ensuring widespread adoption of corporate RPPAs.

Recent Regulatory Developments

In recent years, Türkiye has introduced significant legislative amendments in the renewable energy sector. While these changes do not directly regulate RPPAs, they materially influence their practical applicability.

In particular, amendments to the YEKA Regulation replacing the “lowest price” criterion with the “most advantageous offer” approach have created a more flexible and market-oriented investment environment. This development may facilitate projects supported by long-term RPPA structures.

Furthermore, amendments to the YEKDEM Regulation have clarified the YEKDEM status of capacity increases and storage-integrated generation facilities. These changes have reshaped risk assessments for market participants.

Notably, the legal separation of electricity storage activities from generation has made it necessary to define the legal nature of the energy source with greater precision in RPPA structures.

Key Issues to Consider in RPPAs

Clear and transparent pricing mechanisms are essential to maintaining contractual balance in the face of market price volatility. Similarly, production commitments must precisely define the extent to which resource risk is allocated to the producer.

Adaptation clauses addressing legislative amendments, termination of support mechanisms, or structural changes in the electricity market are critical in long-term agreements.

In addition, risks arising from grid connection, balancing responsibilities, settlement procedures, and system usage charges should be expressly allocated between the parties.

Conclusion

Overall, YEKA agreements play a strategic role in Türkiye’s renewable energy policy. By combining competitive tendering with contractual commitments and regulatory oversight, the YEKA framework seeks to promote investment, strengthen energy security, and accelerate the country’s transition toward a more sustainable energy system.

On the other hand, RPPA have become central market-based instruments in the global energy transition. Through such agreements, renewable energy investments gain enhanced bankability, while consumers benefit from long-term cost predictability.

In Türkiye, although RPPAs have not yet been governed by a comprehensive and explicit regulatory framework and remain constrained by the predominance of public support mechanisms, they nevertheless constitute a legally viable contractual structure within the existing electricity market legislation. As Türkiye continues its transition toward market-oriented energy policies, corporate RPPAs are expected to assume an increasingly significant role in renewable energy investments and corporate sustainability strategies.