Solar energy in a country banking on nuclear power – latest developments in photovoltaics in Hungary

In a nutshell:

In the past years, Hungary was not really regarded as a model country for investors in the field of renewable energy. The underlying reasons are complex and, not least, are related to the energy policy pursued by the Orbán administration which evidently has deliberately refrained from establishing a reliable regulatory framework for renewable energies in recent years. Orbán continues to bank on nuclear energy; about 50% of the electricity needed to cover national demand is generated in a nuclear power plant in Paks in the south of Hungary; currently, this power plant is even being expanded and added two new units with an investment volume of about EUR 12 billion financed by Russia.

According to estimates of the European Commission, the share of renewable energy in electricity production in Hungary might still currently level at only about 10%. In order to be able to achieve the government's ambitious goal of generating at least 14.65% of the electricity production from renewable energy sources by 2020, the government relies mainly on biomass and solar energy.

At least in solar energy a significant increase was recorded in the last two years.

In December 2017, the Minister of State holding the office of the Prime Minister announced at a press conference that, in the future, the Orbán administration will create further incentives for installing photovoltaic power plants in Hungary. Thus, in particular farmers will be given the possibility to take out loans at favourable conditions from the state for installing ground-mounted solar power plants. This measure will be underpinned by an additional guarantee for the purchase of the generated solar power at a guaranteed fixed purchase price.

“The intension is to encourage installing as many PV power plants in Hungary as possible”, says the Minister. But the benefits apply only to comparably small power plants with a capacity of maximum 0.5 MW and installed on areas with a maximum size of 1 ha. Also potential investors will have facilitated access to agricultural land if they decide to install and operate power plants with the above-mentioned size parameters. It remains to be seen whether many PV developers will show interest in operating such micro-plants as part of a long-term investment. In the past year, PV projects >1 MW rather continued to be popular, with those projects having been planned and approved under the former incentive system (KÁT) which applied until the end of 2016. Currently, about half of the far over 2,500 permits granted until the end of 2016 are still attributable to such projects, which are still in the planning or building phase. In the meantime, i.e. at the turn of the years 2016/2017, the solar power funding system was overhauled and is now governed by new rules which to most of the – mainly foreign – investors are not as attractive anymore as the abovementioned “old” projects were (no purchase of electricity at a fixed price anymore but independent sale of the generated solar power by the producer on the market and payment of a “green premium” in the amount corresponding to the difference between the reference price determined by the grid operator MAVIR and the so-called “subsidised price” set by the energy regulatory authority HEA. In addition, the guaranteed terms of 20-25 years have been reduced to 13 years.) Therefore, from the aspects of planning certainty and sustainability, the most attractive PV projects in Hungary might still be new projects involving micro power plants with maximum capacity of 500 kW on an area of up to 1 ha. However, it should be taken into consideration that in cases where several investments are carried out by the same company involving the installation of PV power plants on adjacent areas, such investments might have to be considered as one aggregate (larger) investment.

It will be exciting to observe the further development of the renewable energy market in Hungary. Clearly visible activities are probably to be expected only in solar power plant construction and solar power will be the only green energy source that will notably contribute to the overall electricity production, apart from the overly powerful nuclear power.