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Renewable Energy Certificates in a Nutshell: Turkish Certificate Scheme Part 2 - Onur Uyanusta

In the previous article, we have explained why using renewable energy certificates (REC), the dynamics behind it, and previous legislation that made the baseline for the YEK-G system for the Turkish energy market. In this article, we will continue with the initial dynamics of Turkey’s new YEK-G system, and Energy Market Regulatory Authority (EMRA)’s further ambitions for the future.

It is narrated in the previous article that EMRA has come up with the legislation in 6 months of collaborative action. During that time, many systems worldwide are inspected for an optimal REC system regarding the Turkish energy market and economy’s needs. In the end, the researches, the candidates, and their deductions for role modeling reduced down to three options, which are:

1-Guarantees of Origin System: European Union (EU) REC system, only usable within the EU electricity network system (ENTSO-e), highest REC trading volume, demanding walls of entry,

2-International REC System: International REC trading system, no electrical network connection required, low REC trading volume, international usability (except EU), reasonably easy to enter compared to GO

3-National REC Systems: REC systems designed for the countries’ requirements, flexible in design, a good baseline for building up know-how, easy to convert to GO or I-REC if designed correctly.

From those deductions taken from researches and many meetings with the players on the energy market, EMRA has decided to start with the “national REC system.” The main motive behind this choice was building the baseline for the system domestically before going international. In the research, we found out that EU members established their own systems before creating the GO ecosystem altogether. So we decided to go in the same way.

Starting with the EU and GO, another issue must be noted on that point. EMRA chose compliance with the GO system not only because it is significant in volume but also the problems bigger than REC trades. EU consists half of Turkey’s gross export volume according to the Turkish Exporters Assembly’s reports, which means one of every two euros entering our country is coming from an EU member country. When the Green Deal (GD) passes from the EU Commission, a new risk will arise for our export goods produced, especially carbon-intensive products such as steel. After the GD, the EU will start carbon taxation for its imports (aka Carbon Border Tax-CBT) to equalize the competition where relatively more carbon-caring EU domestic production and the imports currently clashing with the advantage of the latter. That mostly can turn the tide for their products’ level of competition for sure and reduce global carbon emissions. However, it is not good news from the perspective of the EU’s exporters like us even though its promising environmental impacts. Our exporters will pay more to the EU with CBT to sell the products or will not be able to sell the product at all because its carbon footprint is out of bounds. So the producers will either redesign their production process to emit less carbon or find some zero-carbon electric energy for a start. Although there are many ways to reduce the carbon footprint technologically, the fastest solution for this kind of imminent threat is using the RECs and carbon certificates. In the matter of issuing speed, RECs are much faster.

Coming back to our main track, that imminent threat was another reason that made EMRA do its part by releasing the novel YEK-G system. In short, EMRA tried to do its part for this threat by supplying a solution to the customers.

YEK-G system mainframe was designed in accordance with the GO system. As seen from many successful EU examples, such as Germany, EMRA has chosen EPİAŞ, the market operator, to execute certification operations on its behalf. In the YEK-G system, EPİAŞ will be the issuing body that issues, transfers, and cancels the YEK-G certificates. EMRA will stand as the competent body on the regulatory side. The main dynamics of the YEK-G system are as follows in Figure 1.

Figure 1: YEK-G system mainframe

As seen from the mainframe, the system has three main sides: The generation side, the supplier side, and the consumer side. The generation side is taking part in the actual creation of certificates. Every 1 MWh of renewable energy (renewables defined in Law No:5346) is eligible for YEK-G certificate ownership if desired. At that point, we must reply to many complaints that EMRA took during the legislation public opinion phase, which was the unlicensed generation’s exclusion from the YEK-G system. As widely known, unlicensed generation conciliation processes in EPİAŞ are handled under incumbent retailer companies (IRC). IRCs are currently reporting the unlicensed generation to EPİAŞ in total production. That is an effective way for IRCs to simplify the conciliation processes, but for REC schemes, that is bad news. Because every YEK-G certificate (and its’ similars) must disclose some explicit information on the certificate such as power plant name, resource type, et cetera. In the current conciliation mechanism, this information does not flow to the YEK-G issuing body. The problem with this issuance problem is still being studied. EMRA’s main goal is to make EPİAŞ able to issue YEK-G certificates to the entire Turkish renewable portfolio. This certificate issuing process does work relying on the past energy conciliation numbers obtained by EPİAŞ. Although there are examples of REC futures mechanisms in the world, we thought claiming a REC must be done after the actual energy flows through the grid for the time being.

The retailer side (companies that obtained a retailer license from EMRA) will have the power to trade YEK-G certificates generated by the renewable producers. As the generation license owners can act as a retailer in the market, they also will be able to trade YEK-G certificates. Certificates will be tradable via organized market and bilateral agreements. The organized YEK-G market will not operate daily but intermittently. Retailers also will have some key responsibilities in the system. The most prominent one is their disclosing duty, which means telling its customer under his portfolio some sort of announcement like “To the customer no: 1234567. You consumed 100 MWh of renewable energy last month. As proof, I bought 100 YEK-G certificates for you and told EPİAŞ to cancel them on your behalf according to our bilateral agreement. Congratulations”. The cancellation percentages can change due to the bilateral agreement, so the green energy usage can change either.

The consumer side is our final destination in the YEK-G system. They will be able to get their green energy package proposals from the retailers with bilateral agreements. In that case, we shall also give some information about the novel green tariff(GT) mechanism for non-free consumers. The GT has been in use since August’20, which is not giving proof of energy for now. The retailer companies are compelled to buy renewable energy for their GT portfolio from the energy markets, but the YEK-G certificates cannot be supplied at the moment because the system will be operative by mid-2021. By the time the YEK-G system is operational, the certificates will be canceled to the previous renewable consumption in total.

The details for the YEK-G system will be more discernible when the procedural principles for the system are released. EMRA is making the final touches with EPİAŞ for deciding the fine-tuning of the dynamics of the system. Speaking of technicalities, we can proudly say that EPİAŞ is using some cutting-edge tech to build the digital framework. A blockchain infrastructure will support the YEK-G system, which in short is expected to make the system both fast and foolproof.

By that, we are done with explaining the YEK-G system. Many argued the system during the public opinion phase and will be arguing still in the future for its purposes and dynamics, which will be the foundation for us to make the system quasi-perfect in the end. A new non-carbon world order is being established at the moment, and Turkey will surely take its place in that order by any means.


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