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METAR Auction Opening in September

METAR Auction Opening in September

Hungary
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After the successful first METAR tender last year, on July 15, 2020 the Hungarian Energy and Public Utility Regulatory Authority launched the second METAR tender to support renewable electricity producers under the green premium scheme.

This auction will take place between September 15, 2020 and October 15, 2020, with a yearly maximum support budget of HUF 800 million and a maximum subsidized volume of 390 GWh/year.

As in the first tender, in the second round the renewable premium support is earmarked for new investment projects and existing plant units that undergo major refitting or development at a cost exceeding 50% of the initial investment cost.

As before, applicants can be companies with a registered office in the EU, the EEA or the Energy Community, Hungarian branch offices of foreign companies and Hungarian business entities or municipalities. However, the METAR tender is only available to producers producing electricity at a site in Hungary. For various considerations, bidders are generally Hungarian entities, i.e. a new entrant needs to set up an SPV.

In the upcoming METAR tender there will be two tender categories based on the nominal capacity of bidding projects:

  • units with a nominal capacity of 0.3 to 1 MW (“Small Category”), where the maximum subsidy budget for allocation is HUF 200 million/year and the subsidized electricity volume available for allocation is 40 GWh/year;

  • units with a nominal capacity of 1 to 49.99 MW (“Big Category”), where the maximum subsidy budget for allocation is HUF 600 million and the subsidized electricity volume available for allocation is 350 GWh/year.

The tender rules set separate limitations with respect to bidders belonging to the same ultimate beneficial owner (“UBO”):

  • Small Category: the maximum volume of subsidized electricity that may be awarded to bidders belonging to the same UBO is 15 GWh/year;
  • Big Category: the maximum volume of subsidized electricity that may be awarded to bidders belonging to the same UBO is 175 GWh/year.

Applicants are to make a proposal for the initial subsidized price that may not be higher than HUF 26.70/kWh. Commercial operations of the winning projects must start within 3 years and the maximum term of the subsidy is 15 years again (possibly reduced by other support). 

Tender participation is conditional upon providing tender security, while winning bidders must provide and maintain performance security for implementation of the project. The amount of the tender security is 1.5%, while the amount of the performance security is 5% of the benchmark investment value defined in the tender documentation.

The tender rules have not changed significantly, but the increased upper threshold of the Big Category may be more attractive to potential developers. While the tendered volumes increased, the subsidy budget decreased, which is not surprising based on the result of the first tender, when almost the entire tendered subsidized volume of electricity (96.5%) could have been distributed with only 22.9% of the total available subsidy budget.

We are continuously monitoring the developments concerning METAR so, if you have any questions, please feel free to contact us.

By Anita Horvath, Partner, and Eszter Zadori, Partner, Dentons

Hungary Knowledge Partner

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