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Energy Communities in Hungary – How to Make the Most of Them

Energy Communities in Hungary – How to Make the Most of Them

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EU energy policy ensures the efficient functioning of the EU energy market and promotes the interconnection of energy networks and the efficient use of energy. It covers all energy sources, from fossil fuels to nuclear and renewables (solar, wind, biomass, geothermal, hydro and tidal).

The European Commission finalised in 2019 the Clean Energy for all Europeans ("CEP") package, which sets out the blueprint for achieving carbon neutrality by 2050. In December 2018, Directive 2018/2001/EU on the promotion of the use of energy from renewable sources (Renewable Energy Directive - Recast to 2030, RED II) entered into force, defining the concept of Renewable Energy Communities (RECs). The concept of Citizen Energy Communities (CECs) is regulated in Directive 2019/944/EC of the European Parliament and of the Council of 24 October 2019 concerning common rules for the internal market in electricity and amending Directive 2012/27/EU (Internal Electricity Market Directive, IEMD).

The CEP has a clear objective to clarify the rights and obligations of individual or collective producer-consumers (prosumers) connected to the grid. As regards consumer rights, the two Directives provide a framework for the development of energy community regulation. Directive 2019/944/EU sets out a renewed market operating model, the main provisions of which will apply in Hungary from 1 January 2021.

What exactly we can call an energy community is difficult to define clearly, as there are many different forms of community and many different relationships between community and energy.

For example, we can talk about a condominium that installs solar panels on the roof, or an agricultural cooperative that installs wind turbines, or even a municipality that creates a jointly owned solar farm and energy storage unit. The activity does not necessarily have to be energy production, but can also be energy storage or distribution, for example.

The actors in such communities can also be very diverse; in addition to natural persons, they include municipalities, non-profit organisations and small businesses. Different practices have developed in the EU Member States to categorise and regulate these communities, and EU law has sought to standardise this.

The IEMD includes a definition of energy communities, according to which local energy communities are shareholder/member-led organisations that

• is based on voluntary and open participation and is effectively controlled by members or shareholders who are natural persons, small businesses, municipalities or other local authorities;
• the primary objective is not to make a financial profit, but to provide social, environmental and economic benefits;
• may be involved in the following activities: energy production, energy distribution, energy supply, energy consumption, aggregation, energy storage, provision of energy efficiency services, charging of electric vehicles and other energy services to members/shareholders;
• can connect to distribution networks and enjoy non-discriminatory treatment in access to the electricity market;
• share their own electricity production with their members;
• own a distribution system (if the rules of the Member State allow it.)
Under current Hungarian national legislation, energy communities have the right to establish a power plant, to generate, trade and store electricity, to establish a private transmission line and to operate a public lighting system. In the field of electricity, the rights of energy communities do not cover transmission system management, distribution, universal services and the operation of organised markets.

Energy communities are subject to registration, and the registration is carried out by the Hungarian Energy and Public Utility Regulatory Office (hereinafter: “MEKH”), and the energy community is established by a decision on registration. MEKH also keeps records of the activities (production, storage, etc.) carried out by the energy communities for which a licence is required.

By Robert Szuchy, Partner, BSLaw

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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