$8.7 billion support pledged for domestic coal until 2030

Since 2018, the costs of domestic coal power plants have been covered at a certain rate under the capacity mechanism. Although the costs of these plants are in Turkish lira, it has been announced that a purchase guarantee in US dollars will be provided until 2030. Power plants whose costs continue to be covered under the existing capacity mechanism will, with the new incentive, sell the electricity they generate at a price 12% higher than the average electricity sales price over the past year.

The government announced  that power plants generating electricity from domestic coal, whose costs such as fuel, personnel, system usage, and transportation are in Turkish lira, will receive a purchase guarantee of $75 USD/MWh for 60% of their electricity generation until 2030. If the announced purchase guarantee begins in 2026, there will be a four-year implementation period until 2030.

Without the incentive, domestic coal power plants sell the electricity at Market Clearing Price (MCP). Following the Ukraine–Russia war, the prices of fuels used in electricity generation, such as imported coal and gas, increased sharply, causing the MCP to rise by 1.65 times in 2022 compared to the previous year. 

Due to the impact of the crisis, electricity sales prices were capped for all sources during the period from April 2022 to September 2023.

Excluding the period when sales prices were capped, the average MCP between 2018 and 2025 period was $56 USD/MWh, while it was $67 USD/MWh over the past year. With the purchase guarantee set at $75 USD/MWh, the electricity sales price of domestic coal power plants will increase by 34% compared to the 2018–2025 period average and by 12% compared to the average over the past year. The $75 USD/MWh purchase guarantee to be applied to power plants for four years is estimated to cost $8.7 billion.

The statement also noted that power plants using a mix of domestic and imported coal would be eligible for the incentive. Even if power plants using imported coal source just 10% of their annual generation from domestic coal, the total support amount will increase by $1.2 billion, reaching $9.8 billion.

Domestic coal power plants have also received payments under the capacity mechanism since 2018 to ensure long-term system and supply security. The total budget determined each year is distributed according to the installed capacity and capacity factor rates of the power plants. For each energy source covered by the capacity mechanism, fixed costs –unrelated to electricity generation– and variable costs –tied to electricity generation– are determined. The determined costs are updated monthly based on changes in the exchange rate, inflation, and transmission fees. The fixed costs of power plants are compensated when the MCP is below or equal to their variable costs. When the MCP exceeds the variable cost but remains below the total cost, they are compensated for the difference between the total cost and the MCP, even if they are not generating electricity. 

Over the past year, a total of 7 billion TL ($188 million) has been paid to power plants under the capacity mechanism. When the costs in Turkish lira published by Turkish Electricity Transmission Corporation (TEİAŞ) in August 2025 are converted using the dollar exchange rate for the same month, the total cost determined for domestic coal power plants is approximately $59 USD/MWh. The purchase guarantee of $75 USD/MWh set to be applied to power plants until 2030 is 27% higher than the total cost determined by TEİAŞ.

The National Energy Plan published in 2022 projects that the capacity mechanism will continue until 2035. Although the details of the incentives to be provided until 2030 have not yet been announced, if the current support conditions continue, domestic coal power plants will sell 60% of their electricity generation at $75 USD/MWh, and their fixed and variable costs will be covered regardless of whether they generate electricity or not.