Renewable Energy Plant Underperformance in Turkey: EPC Contractor Liability and Compensation Claims – 2026 Updated Guide

Is your solar, wind or storage plant underperforming in Turkey? Learn EPC contractor liability, performance guarantees, liquidated damages, lost generation claims, defect remedies and compensation rights under the 2026 Turkish legal framework.

Renewable energy projects are generally developed on detailed assumptions concerning installed capacity, annual electricity generation, availability, efficiency and long-term project revenues. When a solar, wind, hybrid or storage-integrated power plant fails to achieve the performance promised by its EPC contractor, the resulting losses can significantly affect the project’s profitability, financing arrangements and investment value.

For foreign energy investors in Turkey, determining responsibility for plant underperformance requires much more than comparing actual annual generation with the figures contained in the original financial model. The investor must determine whether reduced output results from defective engineering, equipment problems, improper installation, insufficient commissioning, poor workmanship, grid curtailment, weather conditions, owner-related circumstances, operational failures or another external cause.

Where underperformance is attributable to the EPC contractor and the contractual and statutory requirements for liability are satisfied, the project owner may potentially pursue remedies including repair, replacement, price reduction, performance liquidated damages, compensation and, in sufficiently serious circumstances, termination or other contractual remedies.

How Are EPC Contracts Treated Under Turkish Law?

Turkey does not have a single statute exclusively governing private-sector EPC agreements. Depending on their structure, EPC agreements can contain elements of construction, procurement, engineering, services and other contractual relationships. Provisions governing contracts for work under Articles 470 and following of the Turkish Code of Obligations can therefore become particularly important.

Under the Turkish Code of Obligations, the contractor undertakes to create the agreed work in return for the price payable by the owner. Turkish law also establishes remedies where the completed work is defective, including repair, price reduction and, subject to the statutory requirements, withdrawal from the contract and compensation.

In major renewable energy projects, however, the EPC agreement itself usually provides a much more detailed contractual liability structure. Performance guarantees, acceptance tests, performance liquidated damages, delay liquidated damages, warranty obligations, liability caps and exclusions can therefore determine the practical value of the investor’s claim.

What Does Renewable Energy Plant Underperformance Mean?

Underperformance does not necessarily mean that a power plant is defective merely because it generates less electricity than originally forecast.

A 100 MW solar plant, for example, does not continuously generate 100 MW. Electricity production depends on solar irradiation, temperature, equipment availability, degradation, grid availability, technical losses and other variables. Wind generation similarly depends on wind resource conditions, turbine availability, wake losses and curtailment.

The correct comparison is therefore usually between the performance contractually guaranteed by the EPC contractor and the plant’s measured performance under the testing methodology established in the EPC agreement.

Important contractual metrics may include guaranteed capacity, performance ratio, availability, efficiency, specific yield, auxiliary consumption, degradation assumptions and other technology-specific performance criteria.

When Can the EPC Contractor Be Liable?

EPC contractor liability may arise where the plant fails to satisfy contractual performance requirements because of engineering errors, defective construction, improper installation, defective equipment for which the contractor assumed responsibility, commissioning failures or another breach within the contractor’s contractual risk allocation.

For example, a solar project may underperform because of incorrect string design, inverter sizing problems, excessive electrical losses, defective modules, poor tracker installation or inadequate engineering. A wind project may suffer from turbine installation problems, electrical infrastructure defects, substation deficiencies or other EPC-related failures.

The critical issue is causation.

The project owner must establish that the relevant underperformance falls within the EPC contractor’s responsibility rather than being caused by circumstances contractually allocated to the owner or another party.

Performance Guarantees Are Critical

Performance guarantees are among the most important protections available to renewable energy investors.

A properly drafted EPC agreement should specify exactly what the contractor guarantees and how compliance will be measured. Simply stating that the contractor guarantees “expected production” can create substantial disputes.

The agreement should define testing conditions, correction factors, measurement equipment, test duration, applicable technical standards, permitted exclusions and the consequences of failure.

Performance liquidated damages are frequently used to support these guarantees. Turkish-law commentary on energy EPC agreements recognizes performance guarantees supported by performance liquidated damages as a significant mechanism for addressing facilities that fail to meet predetermined performance requirements.

For foreign investors, these provisions should be negotiated before construction begins rather than after underperformance becomes apparent.

Performance Liquidated Damages

Performance liquidated damages can provide the project owner with a predetermined financial remedy where specified performance guarantees are not achieved.

This mechanism can be particularly valuable because calculating the actual lifetime financial consequences of reduced plant efficiency may otherwise become extremely complex.

For example, if a solar facility consistently operates below its guaranteed performance ratio, the resulting revenue loss may continue for many years. The contract may instead establish a formula under which the contractor pays an agreed amount corresponding to the degree of performance deficiency.

However, the precise wording of the EPC agreement is critical. Investors should examine whether performance liquidated damages constitute the exclusive remedy, whether additional damages remain available, whether a liability cap applies and whether failure below a specified minimum performance threshold creates a termination right.

Can the Investor Claim Lost Electricity Revenue?

Potentially, but lost-generation claims are more complex than ordinary repair claims.

The investor must generally demonstrate the electricity the facility would reasonably have generated without the contractor’s breach and distinguish that amount from generation lost because of weather, curtailment, maintenance, owner-related events or other excluded causes.

For a solar project, evidence may include irradiation data, SCADA records, inverter data, module performance, historical output, plant availability and technical loss calculations. For wind projects, wind measurements, turbine power curves, availability records and technical performance data can become particularly important.

The financial component may also require evidence of applicable electricity prices, bilateral power purchase arrangements, support mechanisms or other revenue structures. Licensed renewable electricity generation in Turkey may be sold through the electricity market or bilateral agreements, while qualifying renewable facilities may also fall within the applicable renewable support framework.

Lost-profit claims therefore require careful technical and financial modelling.

Defective Work Remedies Under Turkish Law

The Turkish Code of Obligations provides an important statutory framework where an EPC contractor delivers defective work.

Following delivery, the owner must examine the work as soon as reasonably possible according to the ordinary course of business and notify the contractor of defects. Failure to comply with examination and notification requirements can affect the owner’s rights.

Depending on the circumstances and severity of the defect, remedies may include requesting repair at the contractor’s expense, reducing the contract price or withdrawing from the contract where the statutory conditions are satisfied. Additional compensation may also be available where the applicable liability requirements are established.

This makes defect notification particularly important in renewable energy disputes.

An investor that discovers repeated inverter failures, abnormal degradation, structural defects or substantial performance deficiencies should not simply continue informal negotiations for months without reviewing contractual and statutory notification requirements.

Acceptance Does Not Always End Contractor Liability

Provisional acceptance or final acceptance does not necessarily eliminate every potential EPC claim.

Under the Turkish Code of Obligations, acceptance can affect contractor liability, but liability may remain relevant for deliberately concealed defects and defects that could not properly have been identified during ordinary inspection. Later-discovered defects must also be notified without delay.

EPC agreements frequently contain additional contractual warranty regimes extending beyond acceptance.

Foreign investors acquiring an already operational renewable energy project should therefore review not only the acceptance certificate but also outstanding punch-list items, warranty notices, defect correspondence, historical performance tests and unresolved contractor claims.

Limitation Periods Require Immediate Attention

Time limits can become decisive in EPC disputes.

Under the Turkish Code of Obligations framework for defective works, different limitation periods may apply depending on the nature of the work and circumstances. Article 478 provides periods that may include two years for certain works, five years for immovable structures and potentially twenty years where serious contractor fault exists.

Contractual claim periods, warranty periods, notice requirements and dispute-resolution deadlines must also be reviewed separately.

Foreign investors should therefore avoid assuming that a long project life means that claims can also be brought at any time.

Contractor Defenses Against Underperformance Claims

An EPC contractor will often argue that reduced generation was caused by matters outside its contractual responsibility.

Common defenses may include lower-than-expected solar irradiation or wind resources, grid curtailment, force majeure, owner instructions, delayed grid connection, third-party interference, inadequate operation and maintenance, changes made after acceptance or equipment misuse.

The Turkish Code of Obligations also recognizes circumstances where defects attributable to instructions from the owner or otherwise attributable to the owner may restrict the owner’s ability to rely on defective-work remedies.

Causation therefore becomes the central battleground in many EPC performance disputes.

Grid Curtailment Must Be Separated From EPC Underperformance

One of the most important analytical mistakes is treating all lost electricity generation as EPC underperformance.

If the plant was technically capable of producing the guaranteed output but TEIAS or the relevant network operator restricted grid injection, the resulting lost generation may primarily involve a grid curtailment or system-use issue rather than an EPC defect.

Similarly, if the project experienced prolonged grid outages, those periods may need to be excluded from contractual performance calculations depending on the EPC agreement.

Technical experts should therefore separate plant-side performance losses from grid-side generation restrictions.

Without this distinction, an otherwise substantial EPC claim can fail because the claimed losses were incorrectly attributed to the contractor.

Storage-Integrated Projects Require Special Attention in 2026

Storage-integrated renewable energy projects require additional performance analysis because battery capacity, charging and discharging efficiency, degradation, availability and control-system performance can materially affect overall project economics.

In February 2026, TEIAS published revised final grid connection and compliance criteria for electricity storage facilities, replacing the previous version.

TEIAS also published updated technical criteria and testing procedures concerning the participation of electricity storage units and facilities in ancillary services on July 3, 2026, replacing the previous version.

For EPC contracts involving storage, investors should therefore ensure that guaranteed technical performance and acceptance tests remain aligned with the currently applicable technical and grid requirements.

Liability Caps and Exclusion Clauses

Major EPC contracts commonly contain limitations of liability.

The contractor may seek to cap aggregate liability at a percentage of the EPC contract price and impose separate sub-caps for delay or performance liquidated damages. The agreement may also exclude indirect or consequential losses and lost profits.

Under Turkish law, contractual limitation arrangements must be examined together with mandatory rules, including restrictions concerning advance exclusions of liability in circumstances involving serious fault.

The precise contractual wording therefore matters enormously.

Foreign investors should review whether lost generation is characterized as direct loss, lost profit, consequential loss or a specifically compensable category under the agreement.

Bank Guarantees and Performance Security

Performance security can determine whether winning a claim actually results in recovery.

Renewable energy EPC agreements may include advance payment guarantees, performance guarantees, warranty guarantees or retention mechanisms.

Investors should verify the expiry dates, extension requirements, governing law and demand conditions of these instruments.

A contractor experiencing financial difficulties may resist substantial defect claims. Preserving valid security can therefore be as important as proving liability.

EPC Underperformance Due Diligence in Renewable Energy Acquisitions

Foreign investors acquiring an operational solar, wind, hybrid or storage project should examine actual historical performance against the original EPC guarantees.

Due diligence should review acceptance certificates, performance test reports, SCADA records, availability data, defect notices, warranty claims, contractor correspondence, equipment replacement history, grid curtailment records and pending disputes.

The buyer should also determine whether existing EPC claims can legally and contractually pass to the purchaser.

A project company may possess a substantial compensation claim against the EPC contractor that increases transaction value. Conversely, expired warranties or waived claims can materially reduce the value of an underperforming asset.

Arbitration and Litigation in EPC Disputes

Large energy EPC agreements frequently contain detailed dispute-resolution clauses. Depending on the contract, disputes may be submitted to Turkish courts or arbitration.

Before commencing proceedings, investors should verify whether the agreement requires negotiation, expert determination, dispute adjudication or another preliminary procedure.

Technical expert evidence will often be fundamental. The dispute may require detailed analysis of engineering design, performance testing, equipment specifications, meteorological data and financial losses.

Preserving evidence before major repairs or equipment replacement is therefore critical.

Frequently Asked Questions

1. Can an EPC contractor be liable if a renewable energy plant produces less electricity than expected?

Yes, potentially. Liability depends on the EPC performance guarantees, cause of underperformance, contractual risk allocation and applicable Turkish law. Lower generation alone does not automatically prove contractor breach.

2. Can a solar investor claim compensation for a low performance ratio?

Potentially, yes. If the EPC agreement guarantees a specified performance ratio and the plant fails the contractual performance test for reasons attributable to the contractor, performance liquidated damages or other remedies may be available.

3. Can a power plant owner claim lost electricity sales?

Potentially. The owner must establish the contractual or statutory basis for the claim, causation and recoverable loss. Detailed technical and financial evidence is usually required.

4. What happens if defective equipment causes underperformance?

The investor may potentially pursue contractual warranties and defective-work remedies, depending on the EPC agreement, equipment warranties and applicable law.

5. Can the contractor blame grid curtailment for poor performance?

Where grid curtailment actually prevented electricity injection, it may need to be excluded from EPC performance calculations depending on the contract. Technical evidence should separate grid-related losses from plant-side deficiencies.

6. Does final acceptance eliminate all EPC contractor liability?

Not necessarily. Contractual warranties may survive acceptance, and Turkish law provides important rules concerning hidden and deliberately concealed defects. Notice requirements remain critical.

7. Can the investor terminate the EPC contract because of severe underperformance?

Potentially. Termination rights depend on the EPC agreement and applicable Turkish law. Serious failure to achieve minimum performance thresholds may trigger contractual remedies where properly drafted.

8. Are battery storage EPC contractors responsible for capacity degradation?

Responsibility depends on the contractual guarantees, degradation curve, operating conditions, warranty provisions and cause of the capacity loss. Storage EPC contracts should contain precise capacity and efficiency guarantees.

9. What should a foreign investor do immediately after discovering plant underperformance?

The investor should preserve SCADA and operational data, commission an independent technical assessment, review notice and warranty deadlines, issue appropriate contractual notices and avoid making major repairs that could destroy evidence before liability has been documented.

Legal Support for Renewable Energy EPC and Performance Claims in Turkey

Renewable energy underperformance can substantially reduce project revenues, financing value and long-term investment returns. Determining whether the EPC contractor is legally responsible requires coordinated analysis of the EPC agreement, performance guarantees, technical evidence, Turkish contract law and the actual cause of generation losses.

Fırat Fesih Kaya Law Office provides legal assistance to foreign investors, international energy companies, renewable energy developers, project owners and lenders in solar, wind, hybrid and electricity storage EPC disputes, contractor liability claims, performance guarantee disputes, liquidated damages claims, defective-work proceedings, project acquisitions and energy-sector arbitration and litigation.

If your renewable energy plant in Turkey is generating below its guaranteed performance, experiencing repeated equipment defects or failing contractual acceptance tests, you may contact our office for a project-specific legal assessment. Early involvement of experienced legal counsel and independent technical experts can help preserve evidence, protect warranty rights and maximize the possibility of recovering losses from the responsible contractor.

Phone: +90 312 434 22 22
Mobile Phone: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No: 221, Yildirim Tower No: 148, 06520 Balgat, Cankaya, Ankara, Turkey