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PV Demand Analysis of the Belt and Road Initiative: Hungary of Central Europe

Hungary Country Profile

Hungary has an estimated population of 9.7 million. In recent years, the country has received investment funds from the EU and witnessed positive economic growth, with a significant increase in domestic demand and exports. In 2018, Hungary’s GDP growth rate reached 4.94%, growing by 0.8% compared to 2017. Moody’s and S&P Global Rating assigned a credit rating of Baa3 and BBB for Hungary, respectively, indicating a stable outlook.

In terms of solar resources of Hungary, the average annual solar radiation ranges from 1,150 to 1,250/kWh per square meter.

Renewable energy development in Hungary

Under the Renewable Energy Action Plan for 2010-2020 stipulated by the EU, Hungary is committed to achieving 14.65% of share of energy from renewable sources by 2020. In 2018, Hungary has generated 12% of electricity from renewables.

Source: MEKH

Unlike many countries, which mainly develop solar and wind energy, Hungary focuses on developing bioenergy. The local bioenergy industry is thus more developed compared to other energy sectors. Currently, there are roughly 10 biomass plants operating in the country.

Hungary’s PV policy and development

Hungary’s first solar policy can be dated back to 2007, when the government passed the Decree No. 389/2007 to promote renewable energy through feed-in tariffs and net metering – KAT scheme.

The Hungarian government later terminated FIT scheme for solar projects and introduced the new support scheme METAR, which was approved by the European Commission in 2017.

Different from the previous KAT, the new scheme is designed for projects with a smaller range of power from 500 kW to 1 MW. For large-scale projects that exceed 1 MW, developers are required to participate in auction.

Although the new scheme has been taken into force in 2017, it was not well implemented. In 2018, the FIT payment for solar projects with capacity ranging from 50 to 500 kW was terminated abruptly. Until now, information related to the first round of auction are also still pending.

Under the previous KAT scheme, the combined capacity from solar projects approved by the government had amounted to 2 GW. With the introduction of new scheme, the commissioning deadline was extended to the end of 2020. However, it remains a question whether the local developers could complete constructing the 2 GW projects that are currently in pipeline. Moreover, the low FIT payment set a barrier for developers to attract investments. Therefore, projects that will be connected to the grid is forecast at 70% for the best-cast scenario and 40% for the worst case.

In terms of solar PV development, Hungary’s cumulative installed capacity has reached 665 MW in 2018, with 109 MW of which coming from projects installed in 2017 and 321 MW from 2018. Most of these projects are those that were auctioned off under KAT scheme before mid-2016 and some of them are the small projects applicable for net metering.


Source: IRENA

Hungary-China trade: Module imports and exports

According to PV InfoLink’s China customs database, China’s shipments of modules to Hungary started increasing after Europe ended the minimum import prices (MIP) in September 2018.

Hungary’s installed capacity reached 321 MW in 2018. As it’s evident that China’s exports of modules were unable to fulfil the total demand, Hungary’s demand might be also satisfied by modules exported from Turkey, which is excluded from MIP.

In Q1 2019, China’s shipped 64 MW of modules to Hungary. The modules imported are likely to be used for the remaining projects from KAT scheme.

Though the current shipment volume was not significantly high, module demand is expected to grow in the future given that projects from KAT scheme are required to be grid-connected by the end of 2020.

Conclusion

Hungary started pushing for solar energy through FIT mechanism, and so far, the government has approved projects with a combined capacity of 2 GW. However, as local developers’ execution of projects was poor, and the low FIT payment was unable to attract investments, the local market’s optimistic scenario for projects that can be connected to the grid is 70% and pessimistic scenario 40%.

The projects in pipeline are expected to start commercial operation by the end of 2020. With an estimated 400-1,000 MW of anticipated demand, the order volume of modules from Hungary is going to increase between 2019 and 2020, and an installation boom is expected before the end of 2020.

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