Türkiye’s Green Energy Project Financing Landscape 2025

International investors in Türkiye’s renewable energy sector face a rapidly evolving landscape of laws, financial tools, and sustainability obligations. This insight offers a comprehensive 2025 update – reflecting HERDEM Attorneys at Law’s perspective – on how to finance green energy projects in Türkiye. We examine the regulatory framework, innovative financing mechanisms, ESG integration, cross-border implications, and legal structuring for renewable projects. Each section provides depth and actionable insights, helping investors navigate opportunities while managing risks.

1. Türkiye’s Evolving Renewable Energy Regulatory Landscape (2025)

Türkiye’s regulatory framework for renewables has undergone significant reforms to spur investment and align with global standards. Key developments through October, 2025 include updates to the Renewable Energy Law, extension of support mechanisms like YEKDEM, integration of EU climate policies (notably CBAM), and the launch of a Green Taxonomy aligned with the EU:

• Renewable Energy Law & “Super Permit” Reforms: In July 2025, Türkiye adopted Law No. 7554 (dubbed the “Super Permit Law”) to accelerate renewable energy investments. This law simplifies Environmental Impact Assessment (EIA) and permitting processes – allowing investors to apply for licenses and incentives concurrently with the EIA process. The reform aims to cut project lead times in half, slashing permitting from four years to two. It also opened new land for renewables (e.g. permitting use of pasture lands for solar/wind) and introduced an urgent expropriation mechanism to resolve land acquisition hurdles. While these changes improve predictability and legal certainty for investors, NGOs have cautioned that faster permits must not undermine environmental standards.
• YEKDEM Support Mechanism: Türkiye’s Renewable Energy Support Mechanism (YEKDEM) continues to underpin project revenues via feed-in tariffs. Facilities commissioned between July 1, 2021 and December 31, 2025 qualify for Turkish Lira-denominated feed-in tariffs for 10 years, plus a 5-year bonus for using domestically manufactured equipment. These Lira tariffs are indexed and updated quarterly (with caps tied to USD to mitigate currency risk). Importantly, recent legislation extended YEKDEM’s timeline: projects starting operation by end-2030 remain eligible, and the incentive duration was extended from 10 to 15 years. This extension, combined with a new 85% fee reduction for permits/leases on renewable projects until 2030, reinforces long-term revenue stability for investors. New “YEKA” auctions (Renewable Energy Resource Areas) also offer long-term power purchase guarantees – for instance, upcoming 2024–2025 tenders will feature 20-year fixed-price contracts (indexed to foreign exchange rates) under a contract-for-difference model. Such measures are exceptionally significant for financing, as they provide price floors and protection from currency volatility.
• Carbon Border Adjustment Mechanism (CBAM) Integration: Although not an EU member, Türkiye is aligning its climate regulations with the EU Green Deal to protect its exporters and attract investment. Climate Law No. 7552 (2023) laid the groundwork for carbon pricing, and in August 2025 a draft regulation for a Turkish Emissions Trading System (TR-ETS) was released. The draft ETS regulation (open for public consultation through Aug 4, 2025) establishes monitoring, reporting, and verification rules and outlines a cap-and-trade market to price CO₂ emissions. Notably, the framework is designed to ensure compatibility with the EU’s Carbon Border Adjustment Mechanism (CBAM). By pricing carbon domestically and aligning with EU standards, Türkiye aims to shield its industries from CBAM levies and demonstrate its commitment to global climate goals. The CBAM integration also incentivizes renewable energy use in carbon-intensive sectors, since lower project emissions will directly benefit export-oriented companies once EU carbon tariffs fully kick in after the 2025 transition period.
• Green Taxonomy Alignment with the EU: In late 2024, Türkiye published a Draft Green Taxonomy Regulation to define what qualifies as a “sustainable” economic activity. This taxonomy mirrors the EU’s classification system, requiring that projects make a substantial contribution to at least one environmental objective (climate change mitigation, adaptation, etc.), do no significant harm to others, and meet minimum social safeguards. The draft, prepared under the Green Deal Action Plan, aims to prevent greenwashing and guide capital towards truly green projects. It sets technical screening criteria for various industries (energy, water, pollution prevention, etc.) in line with EU standards. While still in draft, the regulation signals that financiers in Türkiye will soon use a common language with the EU when labeling green projects. Indeed, institutions already subject to new sustainability reporting rules in Türkiye will have to report taxonomy-aligned revenue and capital expenditures by 2026, with mandatory disclosures from 2027. This alignment is expected to facilitate cross-border green investments, as international investors can trust that Turkish “green” projects meet EU criteria.

2. Financing Mechanisms for Green Energy Projects in Türkiye

Financing green energy projects in Türkiye now leverages a diverse mix of instruments and institutions, combining public and private funding sources. International investors can tap into several financing mechanisms, each with growing traction in the Turkish market:

• Blended Finance and Development Banks: Many renewable projects use a blended finance approach – layering commercial loans with concessional funds, guarantees, or equity from development finance institutions. For example, the European Bank for Reconstruction and Development (EBRD) has committed over €22 billion in Türkiye since 2009, predominantly in private-sector projects. In 2024 alone, the EBRD invested €2.6 billion, nearly 60% of which was in green projects. The bank often partners with the World Bank’s IFC and others to co-finance renewables, infrastructure, and even corporate green loans. A recent initiative is the Türkiye Industrial Decarbonisation Platform, aiming to deploy $5 billion by 2030 with EBRD, IFC, and World Bank support for low-carbon investments. Other DFIs like the International Finance Corporation (IFC), Islamic Development Bank (IsDB), and French Development Agency (AFD) play key roles by providing long-term debt, credit lines via local banks, or political risk guarantees. Blended finance reduces risk for private lenders, enabling lower interest rates and longer tenors vital for capital-intensive wind and solar projects.
• Green Bonds and Sukuk: Türkiye’s capital markets are embracing green bonds and green sukuk (Islamic bonds) as tools to raise funding for renewables. The Turkish government itself made a splash with its inaugural sovereign green bond in April 2023, issuing $2.5 billion (maturing 2030) to international investors. This debut issue was more than three times oversubscribed, indicating strong global appetite for Turkish green debt. It also signaled policy commitment – proceeds are earmarked for climate-friendly projects, and the success paves the way for future sovereign ESG issuances. On the corporate side, Turkish banks and companies have been active since 2016 in issuing green and sustainable bonds to finance solar, wind, and energy efficiency ventures. For instance, İşbank issued a TL 500 million green bond domestically in 2022 to fund renewable energy loans, and development bank TSKB pioneered the country’s first green bond back in 2016.

Green sukuk are an emerging Sharia-compliant option: Türkiye’s first green sukuk was issued by Zorlu Energy in June 2020, a TRY 50 million lease certificate program to fund sustainable infrastructure and clean transport. This opened the door for others – in 2022, the Turkish Presidency’s Finance Office even published a Green Sukuk Working Report to guide issuers. Islamic banks like Kuveyt Türk have since issued sustainable tier-2 sukuk to broaden their investor base. For international investors, sukuk provide exposure to renewables in a format accessible to Islamic liquidity pools. Municipal green bonds have also appeared; notably, Istanbul’s Metropolitan Municipality raised $715 million via a 5-year green eurobond in 2021 to finance metro and sustainable transport projects. These capital-market instruments are supported by Turkey’s Green Finance Framework and regulatory guidelines (the Capital Markets Board has aligned its rules with ICMA Green Bond Principles), ensuring transparency and reporting on use of proceeds.

• Public-Private Partnerships and Yieldcos: Although renewables in Turkey are typically developed by private Independent Power Producers (IPPs) under license, the government has promoted public-private collaboration through YEKA tenders. Under YEKA, winning bidders often form consortia (including local and foreign firms) to build large-scale renewable farms with government-supported offtake agreements. These structures attract financing by reducing market risk (via guaranteed tariffs) and sometimes providing public land or grid support. Additionally, some sponsors have created yield companies (Yieldcos) or renewable investment funds to recycle capital – bundling operational solar/wind assets into a portfolio that pays dividends to investors. While still nascent in Turkey, this model could grow as more projects come online and sponsors seek to free up balance sheets for new developments.
• Local Bank Lending and Credit Enhancement: Turkish banks, increasingly conscious of sustainability, are important financiers of mid-sized projects and provide local-currency loans. Many have signed onto the Equator Principles or Turkey’s own sustainability initiatives, committing to assess environmental and social risks in lending. To support green lending, the Turkish government and international donors offer credit enhancement: e.g. Türkiye’s Green Climate Fund programs and EBRD’s Turkey Sustainable Energy Financing Facility (TurSEFF) extend on-lending credit lines to local banks for renewable and efficiency projects, often with partial guarantees or technical assistance. Export credit agencies (ECAs) can also support foreign investors – for example, if turbines or solar panels are imported from abroad, the exporter’s ECA may provide favorable financing or guarantees for that portion. Investors should explore ECA cover for large equipment supply contracts, which can improve the overall financing terms of the project.

3. ESG Integration and Compliance in Project Finance

Environmental, Social, and Governance (ESG) factors have become integral to project financing and governance in Türkiye’s renewable sector, especially for cross-border investors who demand high sustainability standards. In practice, this means ESG metrics and reporting obligations are now routinely embedded into financing agreements, due diligence, and ongoing project management:

• Mandatory Sustainability Reporting: Türkiye has recently introduced Turkey Sustainability Reporting Standards (TSRS), ushering in a new era of corporate ESG disclosure. As of 2024, large companies and financial institutions must report on sustainability performance in line with international standards. The TSRS (issued by the Public Oversight Authority) mirror the IFRS’s new ISSB standards – General Requirements for sustainability-related financial disclosure (TSRS-1) and Climate-related disclosures (TSRS-2). Companies, including banks and listed firms above certain size thresholds (e.g. >₺500M assets, >250 employees), are required to publish annual sustainability reports starting from the 2024 fiscal year, with first reports due in 2025. These reports must detail climate risks, GHG emissions (Scope 1 and 2, with Scope 3 phased in), and how sustainability issues affect financial performance. For project companies and sponsors, this regulatory shift means greater transparency – investors and lenders will expect robust ESG data, and project SPVs may themselves be drawn into parent company reporting. Cross-border investors benefit from this alignment, as Turkish projects will produce ESG disclosures comparable to European companies.
• ESG Covenants in Financing Agreements: International lenders (DFIs, export credit agencies, and many commercial banks) typically include specific ESG covenants and monitoring requirements in loan documentation. For instance, loans from IFC or EBRD require compliance with the IFC Performance Standards on environmental and social sustainability, covering areas like biodiversity protection, labor practices, community health and safety, and land acquisition. Borrowers must implement an Environmental and Social Management Plan (ESMP) and often hire independent consultants to monitor compliance. Covenants may mandate periodic ESG reporting, maintenance of certain certifications (e.g. ISO 14001 for environmental management), and prompt notification of any incidents or breaches. Equator Principles-signatory banks also require projects to undergo environmental and social due diligence commensurate with project risk category. As a result, a wind farm or solar project in Türkiye seeking international financing will undergo rigorous assessment of its environmental impact (birds, habitat, etc.) and social impact (land use, community consultation), with mitigation measures contractually enforceable.
• ESG Metrics and Performance Incentives: Increasingly, financing terms may be linked to ESG performance. Some Turkish corporates have obtained sustainability-linked loans where interest rates adjust based on achieving targets such as renewable energy output, carbon intensity reduction, or ESG ratings improvement. While not yet common at the project SPV level, this concept is growing. For example, a green bond’s coupon might step up if the issuer fails to install a certain renewable capacity by a deadline. Even absent formal sustainability-linked pricing, DFIs often tie disbursements to ESG milestones – e.g. completion of reforestation programs or community investment plans might be conditions precedent for loan tranches.
• Cross-Border ESG Reporting Obligations: International investors are also driven by their home jurisdictions’ ESG rules. EU-based investors in a Turkish renewable project must consider the EU Sustainable Finance Disclosure Regulation (SFDR) – they will ask the project for data on principal adverse impacts (like emissions, biodiversity effects, etc.) to satisfy their own reporting. If the project hopes to count as a sustainable investment under EU definitions, it will need to demonstrate alignment with the EU Taxonomy (which, as noted, Türkiye is adopting in draft form). This means project sponsors should be prepared to report detailed ESG metrics such as lifecycle carbon footprint of the energy produced, water usage, waste management, and community development indicators. Fortunately, the draft Turkish Green Taxonomy provides clarity on technical criteria – for example, a solar plant can be considered taxonomy-aligned if it contributes to climate mitigation without significant harm, meets efficiency thresholds, and upholds labor and human rights standards.
• Governance and Project Integrity: ESG governance is another focal point. Lenders may require the project company to implement anti-corruption and transparency measures (important in the construction phase to prevent fraud) and to have a grievance mechanism for stakeholders. For cross-border equity investors, good governance practices – such as an independent board director, audited financials, and compliance with OECD Guidelines – are often a prerequisite. In fact, the EBRD launched a Board Nomination Toolkit in 2025 to promote diverse, skilled boards in Turkish companies, reflecting the emphasis on corporate governance as part of sustainability. Renewable energy projects often involve joint ventures between local and foreign firms, so establishing clear governance structures and compliance programs at the SPV level is essential to satisfy all partners and financiers.

Compliance with ESG requirements is no longer just a “nice-to-have” but a central pillar of project finance in Türkiye. Adhering to these standards yields multiple benefits: it mitigates risks (environmental accidents, social license issues) that could otherwise derail the project, it satisfies the due diligence of premier financiers (unlocking cheaper capital), and it enhances the project’s reputation and alignment with global climate goals. Investors should budget for the costs of ESG compliance – such as environmental studies, community engagement initiatives, and reporting systems – as these are now part and parcel of doing business in the green energy space.

4. Cross-Border and Geopolitical Considerations

Türkiye’s push for renewables sits at the intersection of EU integration, global climate commitments, and regional geopolitics. International investors must consider how cross-border dynamics and Turkey’s strategic position influence project structuring, technology choices, and market opportunities:

• Alignment with the EU Green Deal: As an EU Customs Union partner, Türkiye is voluntarily syncing with many aspects of the European Green Deal to smooth trade and investment ties. This has concrete effects on project structuring. For example, the looming enforcement of the EU’s Carbon Border Adjustment Mechanism (CBAM) on imports like steel, aluminum, and cement has Turkish industries scrambling to decarbonize. Renewable energy projects are being structured to supply “green electricity” or green hydrogen to these export-oriented industries, thereby lowering their product emissions and avoiding CBAM fees. We see innovative partnerships where a solar farm or wind park is co-located with or dedicated to a manufacturing plant that exports to the EU. In such cases, investors might structure the offtake as a private PPA with the factory, tying electricity price and supply to the EU-linked production needs. Additionally, to qualify for EU climate funding or taxonomies, projects may choose technology solutions preferred by Europe (e.g. using turbine models that meet EU network codes or solar panels with low carbon footprints) to ensure compatibility and easier certification for green product exports.
• Global Climate Goals and National Targets: Türkiye ratified the Paris Agreement in 2021 and set an ambitious net-zero emissions target for 2053. Its updated Nationally Determined Contribution (NDC) commits to a 41% reduction in GHG emissions by 2030 compared to business-as-usual. These commitments influence government policies like targets for 120 GW of wind and solar by 2035. For investors, this policy certainty (backed by international climate goals) means robust project pipelines and political support for renewables in the long term. It also means that high-carbon options are off the table – new coal power is increasingly untenable, and natural gas, while still used for grid balancing, faces a decline beyond 2030. Projects that contribute to Turkey’s climate goals (e.g. solar-plus-storage installations, offshore wind, or green hydrogen electrolyzers) may enjoy extra incentives, fast-track permits, or preferential financing from climate funds. Global climate initiatives also open avenues for carbon credits: Turkey is piloting emissions trading and could link with EU carbon markets in the future. Projects with surplus carbon reductions might structure carbon offset revenue streams or future-proof designs to participate in carbon trading once frameworks mature.
• Technology Localization and Supply Chains: Türkiye has cultivated a strong local supply chain for renewable energy equipment, which carries both investment advantages and requirements. The government’s localization policies – such as requiring a high share of locally-produced equipment and workforce in YEKA tenders – mean foreign investors often partner with Turkish manufacturers or commit to local factories. This has led to a burgeoning manufacturing base: Turkey now hosts producers of wind turbine towers, blades, generators, and photovoltaic panels (even gigawatt-scale solar module plants). For project structuring, this might involve joint ventures or technology transfer agreements with local firms. An investor bringing in foreign technology may negotiate licensing or set up assembly in Turkey to qualify for incentives (previous YEKDEM feed-in tariffs, for instance, offered bonus payments for using Turkish-made components). Geopolitically, Turkey’s location also positions it as a potential export hub for renewable hardware – e.g. solar panels made in Turkey can be exported tariff-free into the EU and Middle East, leveraging trade agreements. Some investors thus structure projects not only to generate energy but to serve as anchors for manufacturing. For example, a large wind farm investment might be accompanied by a turbine factory investment, fulfilling local content rules and creating an exportable product for regional markets.
• Export-Linked Renewable Ventures: Beyond supplying domestic demand, Turkey envisions becoming a net power exporter by mid-century. This creates opportunities for export-linked renewable ventures. One scenario is building excess renewable capacity in Turkey’s windy and sunny regions to export electricity or green fuels to Europe. Projects in Thrace or the Aegean may explore future electricity interconnections to EU neighbors (Greece, Bulgaria) for direct power export – something the government’s 108 billion USD energy roadmap hints at by boosting transmission infrastructure for cross-border trade. Another burgeoning area is green hydrogen and ammonia: investors are studying using Turkey’s renewables to produce hydrogen for export, given EU demand for clean hydrogen imports. With its proximity and pipeline networks, Turkey could become a supplier to Europe’s industry. We may see project structures where a solar/wind farm is integrated with an electrolysis plant, backed by export-oriented offtake agreements (for ammonia shipments to Europe or blending into pipelines). Geopolitically, such projects align with EU’s strategy to secure green energy imports and reduce reliance on Russia or other fossil fuels. Turkey’s role as an energy corridor (traditionally for oil and gas) could evolve into a corridor for renewable electricity and hydrogen – e.g. through new subsea cables or repurposed pipelines.
• Geopolitical Risk and Investor Protections: While Turkey offers a large market, investors consider geopolitical and macroeconomic risks. Currency volatility and past political tensions (with the EU or within the region) are factored into project risk management. Many cross-border investors mitigate these by political risk insurance (from MIGA or private insurers) and by structuring dispute resolution on neutral grounds (discussed in the next section). The EU accession process and Green Deal alignment have generally had a stabilizing influence, orienting Turkey’s legal system toward EU norms. However, regional dynamics – such as relations with neighboring energy producers (Azerbaijan, Iran) or competition in emerging technologies – can impact projects. A positive angle is Turkey’s bridging role: it participates in forums with both European and Middle Eastern countries on clean energy, which can unlock financing from Gulf sovereign funds or partnerships with EU utilities. For instance, Saudi and UAE investors have recently shown interest in Turkish renewables, a trend facilitated by improved diplomatic ties. Projects might thus be co-financed by regional partners, blending Gulf capital with EU technology, in Turkey’s renewable auctions. Such geopolitical diversification can be a boon, but it also underscores the importance of solid legal frameworks to manage multi-national stakeholder interests.

5. Legal and Contractual Structuring for Risk Allocation and Protection

Proper legal structuring is critical to manage the myriad risks in a renewable energy project and to protect investor interests. In Türkiye, as in other project-finance markets, a successful green energy project relies on robust contracts and clear allocation of risks among the parties. Key considerations include power purchase arrangements, construction and operation contracts, regulatory stability, and dispute resolution mechanisms:

• Power Purchase Agreements (PPAs): Securing a long-term offtake contract is fundamental for project bankability. In Turkey, many renewable projects benefit from government-mediated offtake: either the YEKDEM feed-in tariff (a statutory PPA at fixed prices for a set term) or a awarded PPA through YEKA auctions. Under YEKDEM, the law guarantees the utility or market operator will purchase renewable electricity at the published tariff (with the Treasury covering the difference if needed), for 10–15 years as noted. For new YEKA projects, 20-year PPAs with a fixed minimum price (indexed to FX) are becoming standard. These contracts allocate price risk to the state or off-taker, allowing the project to have predictable revenue. It’s crucial that PPAs also address curtailment risk (what happens if the grid cannot take power) and grid connection obligations of the off-taker (typically TEİAŞ, the transmission system operator, ensures grid availability). Some investors also pursue corporate PPAs directly with private consumers (e.g. a factory or tech company buying green power). While the Turkish market for corporate PPAs is still developing, recent regulatory changes allow “renewable energy resource guarantee” (YEK-G) certificates and bilateral contracts. In any PPA, foreign investors will want clauses for hard-currency indexing or adjustment, given that major equipment and debt may be in EUR/USD. The new YEKA model’s FX-based pricing formula addresses this concern directly. Also, international lenders often insist on direct agreements with the off-taker – giving them step-in rights if the project company defaults – and clear termination compensation provisions (to ensure debt can be repaid even if the PPA is ended early due to off-taker default or political force majeure).
• EPC Contracts (Engineering, Procurement, Construction): The EPC contract governs the construction phase, where delays or cost overruns are key risks. Sponsors typically engage an experienced EPC contractor (sometimes a consortium) to deliver the project turnkey. In Turkey, many EPC contracts for large wind and solar farms are governed by international standards (e.g. FIDIC conditions) and often in English, especially if a foreign contractor is involved. These contracts allocate construction risk squarely on the EPC: including schedule guarantees (with delay liquidated damages for missing the commercial operation date), performance guarantees (the plant must meet output or efficiency levels, with performance LDs or remediation if not), and comprehensive warranties on equipment. It’s advisable to include provisions for Turkish local content and permitting requirements in the EPC scope – for example, the contractor must use specified local suppliers to qualify for incentives, or must obtain necessary construction permits and grid tie-in permissions in coordination with the sponsor. Because currency risk can impact construction (e.g. many components priced in EUR/USD), EPC contracts sometimes include price adjustment clauses or splits (a portion in foreign currency, portion in TRY) to hedge against FX moves. Another important element is interface risk: for instance, if the project uses separate contracts for different lots (say, one for turbines, one for civil works), ensure there’s a clear interface matrix or a wrap-up guarantor. Many investors prefer a single-point responsibility EPC wrap to avoid gaps. Given Turkey’s seismic activity (as tragically seen in 2023), EPC contracts also incorporate robust force majeure clauses and design criteria for earthquake resilience.
• O&M and Asset Management: Post-construction, a long-term Operations & Maintenance (O&M) contract ensures the plant runs efficiently. Often the turbine or panel supplier (OEM) provides O&M services for a initial term (5–10 years) with extension options. O&M agreements in renewables typically include an availability guarantee – the service provider commits to a minimum uptime (e.g. 97% availability per year), with penalties if not met. They also cover routine and major maintenance schedules, spare parts supply, and performance monitoring. As projects age, investors might also engage asset management firms for administration (handling regulatory reporting, YEKDEM applications, invoicing the off-taker, etc.). Clear contractual roles between the O&M firm and asset manager prevent issues. Localization can come into play here too: Turkey has a growing pool of local O&M providers, but for cutting-edge tech (like large offshore wind in the future), foreign OEMs will be involved. The contracts should account for technology transfer or training of local teams over time, and key personnel clauses (ensuring experienced staff operate the plant, with replacements subject to owner approval). Health, safety, and environmental (HSE) provisions must align with Turkish law and lender requirements – O&M crews must follow specified safety protocols, and any environmental incidents (like an oil spill from a transformer) must be reported and remedied per contract.
• Risk Allocation and Insurance: Comprehensive insurance is a cornerstone of risk management in project finance contracts. Typically, the project company is required (by lenders and law) to carry construction all-risk insurance, third-party liability, operational insurance, and possibly political risk insurance. Uninsurable risks (like certain force majeure events) need allocation in contracts – for example, if an uninsurable force majeure (war, certain natural disasters) occurs, the PPA might excuse performance or allow termination with a payout. The Turkish Insurance Market has been evolving to offer specialized products for renewables, such as reduced-yield insurance (insuring against lower-than-expected energy output due to resource variability). However, such products are still developing locally, and foreign insurers often fill the gap. Investors should ensure the lender’s insurance advisor reviews all policies to meet coverage requirements (often 110% of debt for property damage, etc.) and that Turkish insurance regulations (which may mandate using local underwriters for certain risks) are followed. Contracts (EPC, O&M, PPA) should clearly enumerate force majeure events and relief, and link with insurance proceeds (e.g. if a lightning strike damages turbines, insurance payout should be used to rebuild and EPC timeline extended accordingly).
• Stabilization Clauses and Change-in-Law: Regulatory risk – that laws or tariffs may change adversely – is a real concern for investors in emerging markets. To mitigate this, project agreements often include change-in-law clauses: if a new law or regulation significantly impacts project costs or revenues, the parties renegotiate economics or the host government compensates the project. In Turkey’s renewable sector, the government has generally honored commitments (e.g. grandfathering existing plants into the old USD-indexed feed-in tariff up to 2021). The recent law extending YEKDEM support to 2030 is a pro-investor move. Nonetheless, investors may seek explicit stabilization language in implementation agreements or in investment contracts with the state (when applicable, such as for YEKA projects). For example, a YEKA contract or license might state that if Turkey exits the Energy Charter Treaty or amends the Renewable Energy Law in a way that cuts the established tariff or term, the investor is entitled to a specified remedy. Some projects have Treasury guarantee provisions, particularly if backed by the Ministry of Energy, ensuring payment obligations are sovereign-backed. It’s also advisable for foreign investors to structure through jurisdictions or treaties that give extra legal protection – which leads to the next point.
• Investor Protection and Dispute Resolution: Despite best efforts at risk allocation, disputes or adverse government actions can occur. International investors in Turkey’s energy sector typically benefit from protections under bilateral investment treaties (BITs) or the Energy Charter Treaty (ECT). Turkey is a contracting party to the ECT, which requires it to create stable, equitable conditions for foreign energy investors and not to expropriate or discriminate. This means that if a drastic action (e.g. revocation of a license without cause or a new law nullifying the PPA) were to occur, the investor could seek arbitration and compensation under international law. Many project agreements themselves include international arbitration clauses, often under ICC or LCIA rules, with a neutral venue (e.g. Paris or Geneva) to resolve disputes with contractors or even with state off-takers. For example, a foreign-led project might have an arbitration clause with the state-owned off-taker, ensuring any PPA dispute can be settled by an impartial tribunal rather than local courts. Turkey is a signatory of the New York Convention, so arbitral awards are generally enforceable. In recent years, Istanbul has also promoted its own arbitration center (ISTAC), but international lenders may prefer tried-and-true venues. Choice of law is another consideration: while Turkish law will govern licenses and real property, contracts like EPC and O&M can be under English law or Swiss law if parties choose, which some foreign investors find more familiar. One must ensure, however, that any foreign-law contract is enforceable in Turkey (for instance, Turkish public policy and mandatory rules – like certain contractor rights under Turkish Code of Obligations – can’t be contracted out via foreign law).

Additionally, the project company can bolster protection by obtaining political risk insurance from MIGA or private insurers, covering risks such as expropriation, currency convertibility, breach of contract by state entities, or political violence. This acts as a backstop; in case of government interference, the insurer pays out and may subrogate the claim (possibly invoking Turkey’s international obligations). Lastly, investor protection is reinforced by the continued modernization of Turkish energy law – the government’s recent moves to centralize and streamline permits actually reduce arbitrariness and the need for disputes, by creating clearer rules. The new ETS draft law even anticipates appeals and conflict resolution in the carbon market context, indicating a more comprehensive legal regime for the green economy.

Conclusion

Türkiye’s green energy financing landscape in 2025 is characterized by dynamic growth, supportive reforms, and increasing sophistication. The regulatory environment – driven by updated laws, extended incentives, and EU-aligned policies – provides a strong foundation for renewables, while a variety of financing instruments (from green bonds to blended loans) offer the capital needed to meet ambitious capacity targets. International investors who stay abreast of Türkiye’s ESG requirements and geopolitical context will be well-positioned to structure successful projects.

HERDEM Attorneys at Law recommends approaching Turkish renewable investments with a holistic strategy: secure favorable regulatory commitments (YEKDEM/YEKA contracts, incentives), assemble an optimal financing mix (leveraging DFIs and capital markets), implement gold-standard ESG practices, and craft resilient legal agreements with built-in protections. With this approach, investors can confidently navigate the opportunities of Türkiye’s green transition – contributing to global climate goals while achieving sustainable business growth in one of the world’s most promising renewable energy markets.