Let's start with the fundamentals: Hungary will need significant additional power plant and battery capacities, and it will need them soon. This necessity persists despite the gross amount of solar power capacity reaching 7.5 GW by the end of 2024, a target initially set for the 2030s. The drive for electrification, the goal to reduce energy imports, the high average age of the existing generator portfolio and the previous focus on solar energy necessitate at least 10 GW of new generation capacities, with a preference for baseload generation and/or storage solutions. The state-owned incumbent MVM is already developing 3x500 MW new combined cycle gas turbine (CCGT) installations and 2x1000 MW new nuclear blocks, but significant private investment is still required.
Challenges and legislative response
The rapid increase in photovoltaic (PV) penetration has nearly saturated the grid, prompting lawmakers to suspend the two most recent application regimes in 2021 and 2024 and to annul the last round of calls for applications a year ago. With no practical possibility for new power plants to obtain feed-in connection capacities in recent years, the Hungarian government has decided to develop a new grid capacity allocation regime. While the framework rules of the new system were enacted at the end of last year, the proposal on the detailed rules (the "Proposal") have only recently been published by the Ministry of Energy.
Key features of the proposal
Any available capacities will be allocated through competitive tenders conducted at the national level at least every two years. These tenders will be evaluated by a five-member committee, which will assess bids based on a scoring system outlined in the Proposal and the tender notice.
Preference will be given to undertakings who commit to installing battery or other balancing capacities exceeding the minimum requirements, integrating hybrid technologies to enhance performance utilisation, and offering financial guarantees above the specified minimum. Additionally, projects with lower environmental impact will be favoured. A notable addition to the Hungarian regulatory framework is the prioritisation of developers who undertake a recultivation obligation in the event of the power plant's decommissioning.
The chairman of the evaluation committee will be the president of the Hungarian Energy and Public Utility Regulatory Authority (HEA), with one additional member delegated by the Minister of Energy, while the remaining members are appointed by the chairman. The tender procedure will be carried out by the HEA at the request of the Minister of Energy, based on data provided by the TSO and DSOs. The tender notice will determine the available feed-in capacities for each connection node and technology, the earliest possible connection dates, the amount of connection fees payable, and any obligation to install storage capacities. The HEA will publish the notification on the tender notice on its website, while the tender documentation will be available for purchase for a fee. The first tender notice is expected to be published this summer, with awards potentially announced by the end of 2025.
Financial guarantees and application rules
Applicants must provide a bid guarantee and, if awarded, a performance guarantee. Detailed rules on the financial guarantee, including the method for determining its minimum amount and the conditions for its fulfilment and release, will be specified in the tender notice. Applicants may also opt to provide a higher financial guarantee beyond the minimum requirement. Additional important rules include restrictions on multiple applications and requirements for declarations regarding partial awards. Specifically, applicants from the same corporate group may submit only one application for a given network node. Furthermore, applicants must declare in their tender bids whether they accept partial awards.
Remaining uncertainties and future steps
Several uncertainties remain, and some key details will only be clarified in the tender notice. These include the amount and form of the required financial guarantees, the detailed scoring criteria, the potential connection dates, and the possible appeal process regarding the HEA's resolution on the tender outcome. The HEA will hold a consultation at the time, place and in the manner specified in the tender notice to provide additional information on the tender procedure. This consultation may assist applicants in preparing proper tender bids that meet the requirements of the Proposal and the respective tender notice. In the meantime, we look forward to providing updates to our existing clients and any other prospective developers.
By Viktoria Hiesz and Gergely Horvath, Attorneys at Law, Schoenherr
