by Ilias Vougioukas, Investment Associate, aream Group
Hungary is becoming an increasingly interesting market for many solar players, with recent deals highlighting that fact. A few big names that have already invested in the Hungarian market or that are developing pipelines in the country include Iberdrola, Baywa and IB Vogt.
This even though the Renewable Energy Country Attractiveness Index compiled by Ernst & Young failed to place Hungary in the top 40 – Hungary’s target of 5 GW of solar, along with being 90 % carbon-free by 2030 signals a significant commitment to renewables and the opportunistic investors have caught on. Lying relatively in the geographical center of Europe, Hungary does not have the irradiation figures to compete with its southern neighbors. So, what is causing this boom in Solar?
Hungary introduced the so-called “KÁT” scheme in 2008 in order to support the development of renewables, with plants up to 0.5 MWp receiving a fixed off-take price for 25 years. This led to a build-out of several smaller plants, which under certain parameters, could be grouped into a larger portfolio. Plants up to 50 MWp could also participate in the KÁT scheme, if they could show technological innovation or evidence of a state subsidy for investment.
Due to the growing interest, Hungary then moved to an auction-based system called METÁR in 2017, where plants up to 20 MW could secure a 15-year green premium through auctions for the generated electricity. The average prices for the first and second auction held in 2020 were 78 EUR/MWh and 68 EUR/MWh respectively, and bids were dominated by solar.
This well organized and attractive scheme has therefore attracted investor interest. Combined with an average irradiation of 1,300 kWh/kWp, solar developers can extract very good investment returns from projects, even more so if tracking substructures are used, that follow the daily course of the sun. Due to the capacity limit of 20 MWp for single plants wanting to participate in the METÁR auction, Hungary is a very attractive market for small and medium-sized enterprises looking for market opportunities.