As an EU Member State, Hungary must meet a target of 13% of energy from RES by 2020. In its December 2010 Renewable Energy Action Plan (REAP) though, it set an even more ambitious target of 14.65%. Its 2010 target of 3.6% was actually achieved in 2007, mainly due to biomass, which accounts for around 80% of its renewable energy. It is still very dependent on Russian energy imports though, with natural gas and nuclear representing >90% of its energy.
To achieve its EU target, and help RES development through the purchase of electricity at higher than market rates, Hungary has changed its FIT scheme. The rates for different technologies, guaranteed until 2020 and adjusted annually in line with inflation, are below.
Around 70% of funding goes to combined heat and power plants, with most of the rest going to biomass and wind. The Government is reforming the scheme to ease electricity prices and better focus financial support on “real” renewable electricity.
A draft plan published on its website suggests it is thinking about replacing the current mandatory purchase system with premium subsidies under a FIT mechanism. The new scheme sets upper and lower capacity limits for eligible generators, guarantees 15-year subsidies, and awards premiums for heat and power offtake or projects in under developed regions.
Grid connection and permitting
Despite these incentives, insufficient grid capacity, high connection costs and a very difficult permitting process represent barriers. Grid connection takes an average of 45 months and an estimated 10.6% of total project costs. Installation capacities for wind power are currently capped at 330MW to reflect grid availability, severely hindering wind power development.
40 different authorities are involved in the permission process and most applications are currently denied. The EU average is five authorities and a 30% rejection rate. All these issues will need to be looked at if Hungary's RES market is to meet its potential.
Hungary's potential for wind is relatively low. Conditions in the northwest are good though, and it is hoped the attractive FIT will support development.
The REAP sets a modest target of 750MW by 2020, half the 1.2GW EWEA believes can be easily achieved. MAKE forecasts additional capacity of 80-100MW a year over the next five years.
Hungary has a relatively strong solar resource, with an estimated potential of several tens of thousands of MW. Current installed capacity was only 1.6MW at end 2010, but a number of large projects are in planning.
Hungary possesses excellent agro-ecological conditions for generating energy from biomass, and to date this has been the main driver of the its RES performance. Bio energy potential could exceed 20% of its estimated energy demand for 2020. Installed capacity at end 2010 totaled 378MW and it is estimated that only 10% of the resource is currently being utilized. There are at least seven new projects in the pipeline.
Hungary boasts one of the largest geothermal energy reserves in Eastern Europe, but low-to-medium temperatures make it more suitable for heating than electricity generation. Hungary is also one of the less mountainous countries in central Europe so its hydroelectric potential is limited.