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Viewing report
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Hungary Power Report Q4 2011
Business Monitor International, Sep 2011, Pages: 50
BMI View: Hungary is faced with modest power demand growth, relatively high electricity pricing and some tough decisions over the timing and type of supply expansion. It harbours long-term ambitions to export surplus power to Germany, but this probably requires an early decision on nuclear capacity investment. Meanwhile, there is a concerted effort to enlarge the country’s renewables capability, but progress is slower than for a number of European peers.
Unlike many countries in the wake of the Japanese earthquake and tsunami in February 2011, Hungary appears to have no reservations regarding its reliance on nuclear power generation. In fact, by the end of September 2011, it is likely that a decision will have been made to expand the country’s Paks Nuclear Power Plant with a view to overcoming potential future power shortages – and to provide an export capability that could be used to supply Germany in its post-nuclear guise.
While renewables are also a core part of power supply growth, Hungary accepts that expansion of wind and solar cannot alone meet rising demand, with nuclear the only realistic low-carbon option available to state generator MVM. It has been estimated by the government that 9GW of installed capacity will need to be added by 2025, and that nuclear will account for the single biggest addition.
The likely average annual growth rate for Hungarian power consumption is just 1.5% between 2011 and 2015, accelerating slightly beyond 2015. This represents approximately half the BMI-forecast real GDP growth rate and reflects the relative maturity of the energy market. Growth in power generation over the next five years exceeds 2.6% per annum, allowing for a gradual reduction in import dependency.
Continuing expansion of supply above the rate of demand growth could ultimately deliver the country’s desired export potential.
The time taken to connect wind farms to the grid, and the high costs of doing so, are the main barriers to wind energy development in Hungary, it has been revealed by the European Wind Energy Association (EWEA) and the Hungarian Wind Energy Association (HuWEA). EWEA and HuWEA would like to see at least 1.2GW installed in the country by 2020, which would provide about 5% of its electricity demand.
Hungary needs to reach 13% renewable energy by 2020 and the government is looking into how to exceed this target. However, Hungary's July 2010 decision to put on hold a planned tender for 410MWworth of new wind power licenses due to a lack of bids was a setback for the country's nascent wind power industry.
Power prices are relatively high when compared with European peers. In 2010, for example, household customers were paying around 11% more than the EU-27 average for their electricity – and 20% more than equivalent users in the Czech Republic. Hungarian prices are slightly below those of Germany, providing support for long-term plans for exports.
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