The Hungarian Energy Policy and the Renewable Energy Situation The Hungarian Energy Policy and the Renewable Energy Situation Dr. Poós Miklós director Ministry of Economy and Transport, Energy Department Institute of Italian Culture, Budapest 29 November 2007

The Hungarian Energy Policy

Sustainable Transportation Strategy MoET Strategy ( ) Climate Change Strategy The energy policy connections with other strategies Sustainable Development Strategy Energy policy Renewable Strategy Energy Efficiency Strategy And Action Plan Biofuels Strategy Others Like liberalisation Hungarian Energy Policy

The main pillars of the energy policy CompetitivenessSustainabilitySecurity of Supply

Energy policy as a framework strategy „The Hungarian Energy Policy ” document yesterday was approved by the Government! Next step: Parliamentary discussion and approval. The document is a framework strategy. The detailed policies and measures in other sub-strategic like the follows: Hungarian Renewable Energy Strategy National Strategy on Energy Efficiency and Energy Efficiency Action Plan

Security of Supply To maintain and improve the continuity and security of energy supply. Energy mix Energy import diversification Strategic energy stocks Infrastructure developments Supply for the people, social responsibility ObjectiveSections

Competitiveness Contribution of the energy sector to increase the economic competitiveness of Hungary. Liberalized energy markets, integration to the EU internal energy market Energy prices Technological development and R+D ObjectiveSections

Sustainability To enforce the principles of sustainable development. Energy efficiency, energy saving Renewable energy sources Climate change: connections between energy and climate policies Connections between energy- and transport policies ObjectiveSections

Renewable Energy Situation in Hungary

Renewable energy situation The EU-25 average is about 50 % higher than in Hungary.

Green electricity developments in Hungary In relevant EU Directive the Hungarian indicative target is 3,6% by A We have reached already (in 2005) this target, mainly with fuel change from coal to biomasse in some power stations.

The renewable source structure in green electricity Biomass (crop) Biogas Hydro Wind Biomass (from forest) Turn out new energy plantation „energy crops”

Shares of different renewable sources The dominant fuel is biomass, accounting to almost 90% of total RES contribution Biomass is followed by geothermal energy and communal waste. It is expected that wind energy will increase in importance in the future when 330 MW of wind farms licensed in March 2006 are commissioned. Data in 2005

Significance of various RES I. Biomass Hungary has a significant potential for sustainable production of biomass, with 5 M hectares of productive farmland and 3 M hectares of forest. Since 2000 rapid utilisation of solid biomass in electricity generation: round-wood is co-fired in old coal-fired power stations, but with very low efficiency. Solid biomass is almost fully utilised, demand for wood used in electricity generation increased prices in market for wood. Further increase in supply is only possible by increased use of waste wood, or the introduction of ‘energy crops’.

Biomass for Transport Share is still low, but increasing (by %) Reflecting the structure of agriculture, focus is on bio-ethanol from cereal plant, and on bio-diesel from sunflower seeds and rapeseed. Hungary has surplus production of about 3 M tonnes of cereal (in a normal year), which can not be exported due to WTO and EU CAP Reform restrictions. Government expects that decreasing contributions of agriculture to food supply and exports will be compensated for by switching agricultural production to energy crops, by saving farmers’ jobs and preserving social and economic structures in rural areas. A number of new investments in bio-ethanol production are under way, the sector has a strong appeal to foreign investors. A large part of biofuel production is expected to be exported. Significance of various RES II.

Significance of various RES III. Geothermal energy Hungary has abundant resources of geothermal low-temperature energy in the form of warm/hot water. Due to high salt content of water the brine must be reinjected to avoid environmental damage. This limits its potential. Wind So far a minor contributor to RES based production, but the support regime has generated a strong investment interest in the last few years. Due to grid safety concern the regulator limited capacity and access for new wind installations to a total of 330 MW in the next few years. New licences will be permitted as the integration of weather–dependent RES into the grid is secured. Hydro Hungary is a flat country, with low available hydro resources.

Support of RES based electricity generation A generous feed-in tariff has been in place since the Electricity Act 2001, with priority access to the grid. Feed-in tariffs are valid until A licence from the HEO is required to receive the feed-in tariff. The volume of supported electricity and the duration of the feed-in tariff in the licence is limited by the HEO, to avoid subsidy after the investment has been fully recovered. The feed-in tariff was set by Parliament at 8,21 euro cent, subject to be indexed yearly by CPI. Today it is 9,5 cent/kWh which is 80% higher than the average electricity wholesale price.

Support of biofuel for transport through taxation From 1 July 2007 a tax reduction to 0% excise tax applied for biofuels blended up to 4.4% of the volume of gasoline. From 1 January 2008 same tax exemption will apply to 4,4% of biodiesel blended into diesel. Fuel distribution companies not complying with the 4,4% requirement pay extra tax of HUF 8 per litre at the wholesale level.

Investment support for RES Direct investment support for RES is available through EEOP, financed from EU Structural Funds. Between Meuro is available for supporting RES projects. Under the II. National Development Plan sustainable solid biomass production forms will be supported, such as pellets and wood chips.

Renewable energy: target numbers In Total Primary Energy Supply by 2020: 14-16% Biofuels: 2010: 5,75% 2013: 8% 2020: 10%

Thank you very much for your attention La ringrazio molto per la vostra attenzione