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Wind Power Plants – The Hungarian Market Perspective

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Renewable energy, especially wind energy, is becoming more and more popular all over the world. It was expected that the declining demand for oil and other traditional sources, which led to lower prices, would be mirrored in renewables. Surprisingly enough, the opposite happened: in 2015 a record global investment was achieved in the sector, resulting in a 4% expansion in the sector compared to 2014.

Notwithstanding this global expansion, it seems that Hungary is still not particularly interested in windfarms or wind power-plants. In spite of some positive reports from local investors who established their wind energy businesses long ago, the current economic environment is still unfavorable as a result of complicated licensing procedures required to establish wind power-plants or wind farms in Hungary. These power plants or wind farms can only be installed once an investor wins a capacity tender initiated by the Hungarian Energy and Public Utility Regulatory Authority (the “Authority”). Making a business decision to be involved in a wind power plant project requires reliable information as to whether or not a tender will published, and if it is, additional reliable information is required about the details of the tender. In addition, the difficulty is not only in getting the appropriate information regarding the tender. Prior even to applying for the tender, environmental and building permits, as well as a simplified small power-plant license, have to be obtained and must be attached in support of the application. In light of this time-consuming and complex procedure, it is difficult to imagine that anyone would want to invest time and money into this process before it is even ascertained whether a tender invitation will in fact be published or not.

As a precondition to the tender publication, the Authority has to analyze the following on a yearly basis: (i) whether it is possible to establish new wind power-plant capacities, and, if it is; (ii) how large the capacity will be. The Authority should publish the outcome of such analysis on its website every year by March 31. On the day of writing this article (on April 1, 2016, one day after that deadline), however, the analysis was still unavailable. If the Authority decides that it is possible to establish new wind power-plants, it initiates the tender procedure by publishing an invitation to the public. 

In the absence of a tender, it is impossible to establish wind turbines in Hungary. The last wind energy capacity tender was published in 2009, but it was withdrawn in 2010 by the Authority itself due to some legal amendments at the time, and thus none of the applicants were successful. Since then, no tenders have been published, so it seems fair to deduce that there is no current political intention to establish wind power plant capacities. The opinion of energy professionals is that priority has been given to nuclear energy as a result of the deal with the Russian State to build a new nuclear power plant, scheduled to be put into operation in 2025-26, and what is more, many energy professionals believe that the government is simply not interested in renewable technology at all. The official argument against wind power plants is that they can be a burden on an electricity system – too much power is generated in windy circumstances, and not enough energy is generated to sustain the grid when there is a dead calm – which makes it impossible to predict the exact energy flow.”

However, Hungary is required to meet energy-production standards set by the EU, which stipulate that renewable energy sources reach approximately 15% of all energy production in Hungary by 2020. The ratio is below 5% now. To achieve this target, new technology – a storage system based on lithium batteries – may help. Using storage means that the continuous stream of power can be ensured, and if this technology spreads, the official argument regarding limited technical possibilities will become outdated. Ths may be the solution which will lead to a fundamental change in the Hungarian licensing regime for the better.

By Peter Gullai, Attorney at Law, Schoenherr Hungary 

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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