Insights and Opportunities
Overview: The EU “20-20-20” Goals include binding targets to raise the share of renewable energy to 20% by 2020. The target for Hungary is 13% of total energy production. Currently, Hungary has the lowest renewable energy share in gross electricity consumption among the EU countries, thus there is an urgent need for the development of this sector. The government has made long-term commitments to increase alternative energy use in the coming decades. In addition to environmental concerns, renewable energy also contributes to the security of supply by increasing the share of domestically produced energy and reducing dependence on fossil fuels. Hungary still relies heavily on Russian oil and gas exports. Hungary imports 80 percent of its total oil consumption, and over 80 percent of this, 6.9 million tons/year, comes from Russia. Hungary is also unique in the EU in that it uses more natural gas than oil. In 2006 renewable energy accounted for 4.6% of total electricity production and 4.9% of energy used for heating.
Biomass: Biomass represents the largest source of renewable energy in Hungary, almost 90 percent. There are several units in operation in Hungary, most of them using biomass mixed with another fuel. Annually 110 million tons of raw material are produced and the strong agricultural background ensures sustainable production.
Biogas: The large-scale production of inputs provides excellent opportunities for development for bio-gas. Hungary plans to increase its biogas production four or fivefold in the next three to five years due to stricter EU regulations for agricultural waste handling. Since 2003, a number of biogas plants have been established in Hungary, with capacities ranging between 1.7 to 3.5 MW.
Geothermal Energy: Great potential due to the geological conditions of the country. Currently accounts for over 8% of the renewable energy production and the sector bears excellent possibilities for development.
Solar Power: Relatively undeveloped. A small number of residences and community buildings, like hospitals, use roof-mounted solar panels to supplement heating units.
Wind Energy: The total capacity of wind energy is limited to 330 MW by the Hungarian Energy Office. Hungary does not have any pumped storage power plant and the 80% reserve capacity required by wind energy generation has to be provided by gas-fueled plants. There are currently 30 wind farms (71 towers) operating, producing about 127 MW.
Hydropower: The capacity is 40MW from over twenty different power plants. Due to the geographical conditions, further large developments are unlikely. Small and micro sized plants are expected to be built.
Bio-fuel: Hungary has production capacity of around 180.000 tons of bio-fuel per year, mainly from two large facilities. Given the easy availability of raw materials, more than 30 manufacturing sites have been planned, but increasing crop prices combined with falling oil prices and the debate around the sustainability of bio-fuels, have slowed down developments. In accordance with the EU directive, the Hungarian Government set the objective of achieving a bio-fuel proportion of 4% in the fuel market by 2010. Differentiated taxation came in force, whereby fuels containing bio-components enjoy a more favorable tax situation. The bio-ethanol content of petrol was raised from 4.4 to 4.8% in 2009 and will be further increased to 5.7% in 2010. E85 fuel (bio-fuel, which contains about 85% bioethanol and 15 % petrol) has also been introduced to the market: by the end of 2008 there were 39 E85 filling stations in Hungary.
The Hungarian Renewable Energy Strategy forecasts growth mainly in biomass, wind and geothermal energy. The cost-effectiveness of renewable energy production is supported by competitive feed-in tariffs, guaranteed quotas and investment subsidies. In 2008, $380 million worth of incentives were paid for generating power using renewable resources. About 73 percent of the incentives went to combined-cycle power plants that send the heat created when generating electricity into district.
The EU is set to provide $30.7 billion to Hungary, from 2007-13, to finance infrastructure upgrades, as part of the New Hungary Development Plan. About $ 500 million is designated to support renewable energy-related investments in the framework of the Environment and Energy Operational Program. The Hungarian Energy Office is expected to invite tender applications for new capacities in wind energy production in 2009.