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					 Renewable energy


       5 key arguments to invest in the Hungarian renewable energy sector

                   Large unused potentials
                   Competitive feed-in tariffs
                   Supportive legal and macro-environment
                   Access to financial incentives
                   Dedication to environmental reservation and reduction of CO2
                   emission


    Large unused potentials

Hungary boasts large potentials in biofuels, biomass, biogas, geothermal, wind and
solar energy. Even though the share of renewables in the energy matrix is relatively
moderate at the moment, the government has made long term commitments to
increase the share of alternative energy in the coming decades. As shown by the
following chart, Hungary has large potentials in renewable energy use, especially in
the area of biomass and geothermal energy production.


   Competitive feed-in tariffs


In 2005 the government abolished the minimum quantity limit of 100 kw on the
compulsory green energy take-over. At present, electricity companies have to buy the
produced green energy at a HUF 23/kWh compulsory price. The government spends
about 100 million €/year on supporting the compulsory take-over.


    Supportive legal and macro-environment


In March 2006 the Ministry of Economy and Transport issued new guidelines
concerning Hungary’s energy policy for the period 2005-2030. The guidelines define
the goals of the government related to the restructuring of the energy consumption
and the objectives of central subsidies in the sector. These objectives include the
general support of renewable energy production, however new specific goals will be
set by the new Energy Policy Strategy under preparation at the moment.


   Access to financial incentives


From 2007, significant resources are earmarked for supporting the renewable energy
sector in the new National Development Plan (2007-2013). The particular operative
programs of the Development Plan are being worked out at the moment.
   Dedication to environmental reservation and reduction of CO2 emissions

In the Kyoto Protocol Hungary agreed to decrease its annual CO2 emission with 6%
between 2008-2012, as compared to the reference period 1985-1987. The new
National Allocation Plan for 2008-2012 has just been submitted to the European
Union. The New Plan sets the average annual CO2 emission at 30.8 million tonnes
for the period 2008-2012.
 Hungary’s targets for renewable energy production (based on 2001/77/EU directive)


                        Share of renewable     Share of renewable         Share of biofuels
                          energy in total      energy in electricity      in transportation
                            production              production                   (%)
                               (%)                      (%)
 Hungary 2006                 Cca. 4.3                   4.6                     2.2
 Hungary targets,               7.2           3.6% (being revised and             4
 2010                                         planned to increase
                                              above 5%)
 EU 2006 average                Cca. 9                   14                    Cca. 3
 EU target, 2010          12 (by 2015 15%)              22.1                    5.75




                    Comparison of the 2004 situation with the 2010 targets


                                             Total energy      Electricity       Motor fuels
                                             consumption
 Units                                         PJ/year         GWh/year           thousand
                                                                                    t/year,
                                                                                   PJ/year
  Hungary’s total energy consumption in         1,089            41,615              4,441
  2004
  Hungary’s expected total energy               1,157            45,862          4,928 / 207
  consumption in 2010
  Targeted share of renewables (%)                 7               3.6                   2
  Targeted volume of renewables                   83              1,651                98 / 4
  Current volume of renewables *                 42.7             1,032                  0
  Extra volume of renewables needed              40.3              619                  98
  to meet the targets
* Without waste-firing

                                                                          Source: Dr. Bai, 2004


                           Renewable energy sector at a glance


Biomass accounts for almost 90% of all renewable production with the over 10 large
biomass plants in the country and a yearly 110 million tonnes of raw material
production. Large potentials stem from the strong agricultural background and the
favourable supply chain supported by well-developed transportation networks.
Besides the numerous energy crops produced in Hungary, the energy grass of
Szarvas provides excellent opportunities for heat production.

The role of biogas is expected to strengthen the most in the coming years. While in
2005 only 10% of potentials were used, large scale production of inputs such as
liquid manure, sewage sludge and slaughterhouse waste provide excellent
opportunities for further development.
Due to the relative thinness of the earth’s crust, Hungary boasts favourable potentials
in geothermal energy. Heat stemming from underground is twice as high as the
continental average. There are over 3,000 thermal springs of different quality, over
200 of them are used by spas and baths.

Demand for solar thermal and photovoltaic energy is expected to grow in the
coming years. Today, it is overwhelmingly hotels and spas that utilise the most of the
solar radiation, however newly introduced subsidies are expected to encourage
households to install solar equipment. Japanese SANYO has been producing PV
panels in Dorog since 2004 and expects to double production until 2008.

The efficiency of wind energy production is supported by competitive feed-in tariffs
(currently 23 HUF/kWh) and guaranteed quotas. Break-even time has shortened to 7
years, which provides producers stabile business opportunities in Hungary.

After developing a national biofuels strategy, harmonizing national laws with EU
directives, and amending excise tax code, the stage is now set for biofuels to be
produced and sold in Hungary. Sales of biofuels receive a tax benefit, what’s more, to
avoid a tax gap, sales of petroleum fuel that contain no biofuel will carry a tax
penalty. These measures were taken to bring Hungary in line with EU directive that
0.4 % of all vehicle fuel consumed in the country should be of biological origin in
2006, increasing to 4 % by 2010.

A market of biofuels is emerging in Hungary, as evidenced by recent investment
moves but there are still huge potentials in biofuel production supported by
agricultural products, intergrators, well developed infrastructure, inland waterway
ports, such as the Rhine-Main-Danube Canal.

                       Domestic Renewable Energy Production

                    Electricity production (GWh)                   Heat utilization ** (TJ)
                       2004              2005*                    2004                2005*
Geothermal                 -                                       3600
Sun collector              -                                        76
Pellet                                                            23900
Forest wastes                                                     15029
                       793                   1500
Other biomass
Biogas                  23                     16                  229
Water energy           210                    160                  756
Wood energy             5,5                     7                   20
Photovoltaic            0,1                                         0,36
TOTAL                 1031,6                 1683                 42,7 PJ                62 PJ
Waste burning           54                    60                  1373                  1450
Altogether            1089,6                 1743                 44,1 PJ               63,5 PJ
Ratio (%)               2,6                    4,1                   4,2                   5,8
                        Note:    * estimated data ** with the quantity used for electricity production
                                Source: Szajbert (2005), Bohoczky (2005), Bai (2005), Tóth (2005).
If you want to learn more about the Hungarian renewable energy sector, please send
us a query by clicking here.

We are happy to provide you with further information on:

      The situation of renewable energy production and consumption in Hungary –
      analysis
      Investment projects in renewable energy – basic data
      Biomass production in Hungary – analysis
      Photovoltaic manufacturing in Hungary – summary
      Government regulations concerning renewable energy
      Ideal locations in Hungary where you can make your own success story.
      Etc.


Last updated: January 15, 2007

				
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