Energy Policy, Legislative Background
Energy policy
The National Energy Policy
The current National Energy Policy was adopted by the Government on 17 April 2008 for the period of 2007-2020. The main principles of the new Hungarian energy policy are security of the energy supply, competitiveness and sustainability. These principles underline the need for saving energy and to increase energy efficiency and therefore reducing import energy dependency. The savings will also help achieve the objectives of climate protection.
Enforcement of the energy framework requires active involvement of the public, business organisations, public bodies and the parliament. Therefore the aim of the policy is designed to lead and encourage the Hungarian society in order to meet energy requirements.
[Ministry of National Development]
The New Energy Strategy
By the end of December 2010, The Ministry of National Economy and the Ministry of National Development – with the involvement of experts – have been elaborating Hungary’s new, long-term national energy strategy until 2030. The document will be made available for public consultation by the Government in the first half of 2011.
The Government is willing to establish a sustainable energy economy in all aspects, where beside environmental and social sustainability, cost-effectiveness also prevails. In order to reach long-term security of supply and to serve national interest the following areas have to be reached:
- reduction of import dependency
- increase the role of state regulation
- strenghten consumer protection
- reduce energy poverty
- development of related industries
The main objectives of the strategy are:
- increase renewable energy utilisation
- enhance the role of nuclear energy
- development of regional energy infrastructure
- development of new energy institutional framework
- increase energy efficiency and energy saving.
[Ministry of National Development]
Renewable Energy Strategy: Strategy for the Increased Utilization of Renewable Energy in Hungary 2007-2020
The strategy was approved by the Government on 3rd September 2008.
The objective of the renewable energy strategy is to ensure that Hungary fulfils the requirements the EU set for its member states and to achieve (taking into account the Hungarian renewable potential) the economic benefits resulting from the use of renewable energy sources (reducing Hungary’s dependence on imports, improving the environment, increasing the employment rate).
The document seeks to set a realistic target for Hungary’s renewable energy use (in accordance with the European Union’s package of January 2007 on climate protection and energy) for the period of 2007- 2020. Based on this document Hungary is expected to reach 13% share of renewable resourses by 2020. Therefore the key strategic aim is to increase the use of renewable energy sources in Hungary from 55 PJ in 2006 to 186,4 PJ by 2020.
The strategy to reach this is as follows:
- 9470 GWh (79.6 PJ) green electricity production by 2020 compared to the 1630 GWh in 2006
- renewable based heat production will be 87.1 PJ by 2020 compared to 36PJ in 2006
- within fuel consumption biofuel energy content should reach 19.6 PJ by 2020 compared to 1 PJ in 2006
National Climate Change Strategy
The National Climate Change Strategy was developed pursuant to section of Act LX/2007 (V. 28.) on the implementation of the UN Framework Convention on Climate Change and the Kyoto Protocol.
The mission of the National Climate Change Strategy is to provide a policy framework for a chain of actions which, when implemented, can efficiently and effectively put Hungary in a position in terms of society and economy to reduce gas emissions responsible for climate change and to adapt to the inevitable changes. The National Climate Change Strategy complies with and adopts the targets established by the Renewable Energy Strategy of Hungary.
Renewable Energy Action Plan (REAP)
After a long stakeholder consultation process, the Hungarian Government approved the Hungarian Renewable Energy Consumption Action Plan on 22nd of December 2010 and has submitted it to the European Commission.
The approved 2009/28/EC directive on renewable energy sets binding targets on the share of renewable energy in gross final energy consumption. In the EU the target is 20% by 2020 and Hungary has to reach 13%. However the Government set an even more ambitious target to reach 14.65% (120.56PJ).
With this value Hungary has stepped into the lower middle range of commitments among Member States. In addition to promoting the realisation of energy and climate change policy objectives, the measures specified in the Action Plan serve the Hungarian economic development, improvement in its competitiveness, job creation and sustainable rural development. This is done by boosting green economy and also by applying and spreading of renewable energy sources, which consequently may become a breakthrough point for the Hungarian economy.
The document states that the key areas of Hungary’s renewable energy policy are the following:
- security of supply
- environmental sustainability, climate protection
- agriculture and rural development
- green economy development
- contribution to EU targets.
Based on these considerations the measures and actions are based around four pillars:
- Support measures, programs (governmental, EU co-financing, direct EU funds)
- Other financial mechanisms (green economy development financing, R&D, transforming feed-in of green electricity, biofuel support, tariffs, taxes)
- Regulatory and comprehensive program development incentives (law on sustainable energy management, renewable energy act, simplification of licensing procedures, regional energy programs, etc)
- Social measures (employment, national and regional education, energy adviser network, awareness building, etc)
The National Energy Efficiency Action Plan (NEEAP)
The energy efficiency plan, as part of the Hungarian National Energy Policy, is in favor of supporting energy efficient and environmentally-friendly buildings, equipments, technologies and modes of transport for the public, policy makers as well as for market actors.
The aim of the action plan is to set targets on efficient energy use in Hungary for the 2008-2016 period. It determines the detailed national targets regarding reduction of final energy consumption by 1% per year (Directive 2006/32/EC of the European Parliament and the European Council), and - according to calculations - reduction of 57.4 PJ/year (15970 GWh/year) by 2016, in those sectors and industries which are not covered by the EU emission trading scheme. These actions are in line with the national objectives of climate protection. On 13 Feb 2008 the first version of the Action Plan was adopted by the Parliament 2019/2008 (II.23) Gov.Decree. Since then the Action Plan has been revised and the modified National Energy Efficiency Action Plan was approved by 1076/2010. (III. 31.) Gov. Decree. [NEEAP 2010]
The objectives of the Action Plan is part of the energy policy for the period 2008-2020, adopted by the Parliament, and are directly linked to the National Climate Change Strategy (NCCS) for the period 2008-2025, adopted by the Government. The NEEAP as well as the NCCS states that 75% of greenhouse emissions are related to the energy sector. The most effective methods for reducing emissions is to improve energy conversion, distribution and to introduce end-user specific saving measures in order to reduce the end-users’ energy consumption.
In order to achieve the objectives, NEEAP has identified the following major areas and sub-areas of intervention:
- building requirements of newly buildings
- buildings in the residential sector
- buildings in the public sector (state and municipal buildings)
- traffic, transportation
- typical energy-consuming product groups that can significantly influence the extent of energy demands
- awareness raising, education
The New Szechenyi Plan (NSzP)
The NSzP demonstrates the main objectives, principles and directions of the economic policies in Hungary. Its funding application scheme started on 15th January 2011.
The four strategic objectives are the following:
• renewal of the application systems
• simplification of application procedures
• renewal of the institutional structure
• significant reduction of the numbers of inviting applications.
Renewal of the application system and institutional structure:
1. Targeted use:
• Simplification of the institutional framework for applications
• Applications only which meet the requirements of the NSzP’s strategy.
2. Strengthening competetiveness:
• stable and transparent regulatory environment
• effective and user-friendly funding scheme, reducing operational costs.
3. Reducing bureaucracy:
• simplified procedure for small and medium sized enterprises
• electronic administration.
4. Speeding up payments:
• standardized monitoring and information system
• good management of the projects’ resource allocations & monitoring
In terms of energy sector, the NSzP has seven priorities:
• Boosting economic growth and employment
• Increasing supply security and diversifying resources
• Decreasing dependence on energy imports
• Promoting the production and utilization of renewable energies
• Climate change protection
• Nuclear energy
• Setting up a stable and business-friendly governmental institution network responsible for energy policy.
The NSzP includes energy-savings-programmes, such as the National Energy Saving Program (NEP).
Legislative Background
Electricity Act (2007)
The Electricity Act which entered into force in December 2007 sets the conditions for support mechanisms for Electricity from Renewable Energy Sources. Act LXXXVI of 2007 on Electric Energy was adopted by the Parliament with a view to setting up an efficiently functioning internal electricity market, to promote energy efficiency and energy conservation within the framework of sustainable development, to provide consumers with a secure and reliable supply of electricity of a specified quality at transparent prices, to integrate the Hungarian electricity market into the converging electricity markets of the European Communities, compliance with the legislation of the European Communities, and to develop an objective and transparent regulatory regime in compliance with the principle of equal treatment. In addition, the Act seeks to encourage the development of renewable sources of energy as well as cogeneration, by establishing purchasing obligations and introducing the possibility of feed-in tariffs.
Gas Act (2008)
Hungary undertook the obligation to the European Union to comply with Directive 98/30/EC by opening up its internal natural gas market as of January 1st, 2004. Act XLII/2003 on natural gas supply (old gas act) and Act XL/2008 ( new gas act) provide a definition for biogas. Also, both the old and the new GA authorize the relevant Minister and the Government to specify in a decree the criteria for introducing biogas and other gases of natural gas quality as well as natural gas extracted by mining into the existing gas system, the quality regulations for gas feed-ins and the rules for takeover and measurement. The new GA says that the biogas can be fed into the system (with or without mixing with NG) if it meets the quality requirements specified in the natural gas standard. These detailed rules on quality requirements are still missing and should be drawn up. Till the adoption of the implementing regulation the quality standard has to be agreed between the biogas provider and the gas network operator. The first Hungarian feed-in is planned by 2011 in the sugar factory of Kaposvar.
Act on District Heat Supply (2005)
The Parliament approved at its session the new act on district heat supply, The XVIII./2005. Act on District Heat Supply, on 11 April 2005. The Hungarian Energy Office authorises the establishment of installations that are generating district heat by co-generating electricity and also issues the licence for them for district heat generation. The rest of the other establishments and operational licences for district heat generating installations, as well as the district heat supply operational licences are issued by the notaries of the local governments. n case of products (steam and heated water) the law provides the reserve of the administrative price only if it serves the district heat supply of the residents and only in case of larger district heat generators with a heat capacity of at least 50 MW. The municipal corporations of the local governments will henceforward be in charge of pricing and price implementation issues relative to district heat supply.
A special tax (crises tax) was imposed on the energy supply companies (also on retail and telecommunication companies) over a period of 3 years starting in 2010, which is set in the Act CLXXXI (23. December 2010). Energy firms will have to pay a tax of 1.05 percent on their net annual revenues. Based on the calculations, approximately EUR256 million revenue can be expected from the energy sector in each year. The aim of the crisis tax is to stabilize the budget, lower public debt and the budget deficit relative to GDP.
[HEO]
Energy related Funds and Programmes
Green Investment Scheme
As a party to the United Nations Framework Convention on Climate Change and as a state having ratified the Kyoto Protocol, Hungary had sold part of its emission quotas in 2008-2009 as made possible under the Protocol. Income from such sales is used under the Green Investment Scheme (GIS), resulting in further measurable reductions in carbon dioxide emissions, and supporting investments yielding other environmental and social benefits.
The GIS replaced the previously running National Energy Saving Programme
In 2009, under the GIS program the following sub-programs were launched: the Climate-friendly Home Panel Sub-programme and the Energy Efficiency Sub-programme. Both are managed by Energy Centre.
• On 4 August 2009 the Panel Sub-programme was opened first. The deadline to submit applications was on 31 December 2009. Under this programme it was possible to apply for the renovation of residential buildings built with industrialized technology resulting in the reduction of carbon dioxide emissions as well as in energy savings. Under this application the following activities were eligible for subsidy: renovation or replacement of doors and windows resulting in energy savings; heat insulation of frontals and roofs; modernization and renovation of building engineering systems; increasing renewable energy use and replacement of conventional energy carriers with renewable ones; enhancing summer heat protection of buildings; and glass planning of loggias. Subsidy was available for housing cooperatives, condominiums, and tenement houses in the ownership of local governments.
• The Energy Efficiency Sub-programme (hereinafter referred to as the EE programme) was launched on 15 December 2009, the deadline to submit applications was 30 October 2010 or until the depletion of available funds. The aim of this programme is to provide grants for the reconstruction of real estates built with conventional and industrialized technology as well as for the construction of new, energy efficient residential buildings and detached houses. The scope of eligible activities is focused on the same energy efficiency activities as mentioned under the Panel Sub-programme, but greater emphasis is given to technologies utilizing renewable energy, and a major difference is that newly built buildings are eligible too. The scope of beneficiaries includes private homes, housing cooperatives and condominiums.
Main features of the system:
- Complex projects are supported: complex building renovations & energy efficient new buildings.
- Evaluation of the projects based on EPBD. Calculations are performed according to EPBD (7/2006 (V.24.) TNM Ministerial decree)
- Target energy label: C, B, A, A+
- Support depends on the target energy label in % of investment costs (30-60%)
- Any combination of measures acceptable if target label reached
- Market (energy expert) will select the most efficient measures
- The whole building must reach the target, but not all the occupants need to participate
- Independent energy experts guarantee the technical quality on the applicant & evaluation side
- Energy bills need to be preserved for occasional control
EEOP-Environment and Energy Operational Programme
The Environment and Energy Operational Programme (EEOP) of the New Hungary Development Plan has a total budget of EUR 4916 M to support Hungarian energy projects falling into two priorities in the period of 2007-2013.
Within the scope of the priority axis „Increasing the Use of Renewable Energy Sources” 5,15% of the total budget can be allocated while the priority axis „Efficient Energy Use” to promote energy conservation has 1,58% of the total budget. EEOP is funded by the European Union (85%) and the Hungarian government (15%).
Within the framework of “Increase of the use of renewable energy sources” priority axis developments are supported by the European Regional Development Fund in order to achieve the “Convergence” objective. The following NUTS II regions are eligible for support: West Pannonia, Central Transdanubia, South Transdanubia, North Hungary, North Great Plain, and South Great Plain.
Projects implemented in the framework of "Efficient energy use" priority axis are supported by the Cohesion Fund. For this support all the regions of the country are eligible.
Details of EEOP and information on actual support can be found on the web-site of the Managing Authority, the National Development Agency, or at the Intermediate Body, the Energy Centre.
[Energy Centre, National Development Agency]
Revolving Soft Loan – Energy Saving Credit Fund
The credit with preferential interest supporting energy saving, increase of energy efficiency and the utilization of renewable energy sources can be requested from the Energy Saving Credit Fund (German coal grant). This credit scheme is operating continuously from 1991 and is available for building societies as well as economic enterprises.
Soft Loan – Residential Energy Saving Credit programme
Since 2007 the „For A Successful Hungary” Residential Energy Saving Credit Programme has been offering preferential loans to implement residential projects aimed at improving energy efficiency and the use of renewable energy sources. The preferential loan can be used together with a subsidy from the Energy Saving Program (NEP) or independently and can provide up to 100% of the project costs to eligible applicants.
