Government decision freezes feed-in tariff for solar power plants in Hungary until 2029
# Critical Situation for Solar Power Plants Due to New Regulation
Government Decision Freezes Feed-in Tariff Until 2029
A newly introduced government regulation significantly affects the operation of industrial solar power plants. According to the decision, the mandatory feed-in tariff (KÁT) price will be frozen at 47.04 HUF/kWh until December 31, 2029, citing the current emergency regulations. Industry professionals question the rationale, arguing that solar energy has no direct link to the ongoing war and questioning whether emergency measures justify such a long-term decision.
Financial Losses and Contractual Uncertainty
Solar plant owners are concerned about the return on their investments. Most of them based their financial plans on long-term business calculations. One investor, who signed a contract in 2017 and 2018 for a 500 kVA solar plant, expected a stable purchase price guaranteed for 22.5 years with inflation tracking. This project involved nearly 200 million HUF in investment, partly financed by a bank loan. With the price freeze, the return on investment has become unpredictable.
Calculations indicate that the investor could suffer at least 12 million HUF in losses in the coming years, equivalent to an entire year’s loan repayment. Additionally, increasing operational costs, such as self-consumption fees and scheduling costs, may further reduce profitability.
Delayed Developments and Reduced State Revenues
The regulation has adverse consequences not only for producers but also for the state. Many investors may postpone future developments. For example, one company planned to install a 100–150 kWh energy storage system, but due to the uncertain market conditions, they had to delay their project. This results in reduced renewable energy storage capacity, affecting the overall flexibility of the energy grid.
Additionally, the government may collect less tax revenue. Companies facing financial difficulties will pay lower corporate taxes, local business taxes, and VAT. Thus, the decision negatively impacts not only businesses but also the broader economy.
Potential Constitutional Complaint
Solar power plant owners are not staying silent. One option they are considering is filing a constitutional complaint with the involvement of professional organizations. Many believe that unilaterally modifying contracts creates legal uncertainty and may violate the rule of law. A similar situation occurred with household-sized solar power systems (HMKE), where the government retroactively changed the net metering rules. However, the Constitutional Court has yet to issue a decision on that case.
Investors hope that industry-wide cooperation will lead to a repeal or amendment of the regulation. Creating a more predictable economic environment is crucial for the future of renewable energy in Hungary. The coming months will be critical in determining the direction of the country’s energy strategy and investor confidence.
Market Impact and Government Justification
The Ministry of Energy argues that the decision aims to stabilize energy costs for households and businesses while maintaining grid balance. They claim that solar plant operators have enjoyed significant extra profits due to high energy prices in recent years. However, industry experts disagree, as over 2,700 industrial solar projects could be negatively affected, accounting for more than half of Hungary’s solar electricity production.
Exit Options from the KÁT System
The regulation allows solar plant owners to exit the KÁT system and sell energy on the open market. The government promises tax incentives and long-term green power purchase agreements (PPA) to facilitate market-based operations. However, the 42% special tax (Robin Hood tax) on market-based electricity producers remains a significant barrier, making this option less attractive.
Energy Independence vs. Import Dependence
Hungary’s electricity market faces challenges in achieving energy independence. Currently, over 40% of the country’s electricity supply is imported, creating exposure to external market fluctuations. Sustainable energy policies should promote renewable energy expansion and encourage competition through tax incentives.
The full impact of these measures on the energy sector and investment appetite remains uncertain. However, industry players argue that revising the regulation and introducing a more sustainable pricing mechanism are essential for the continued growth of renewable energy in Hungary.
Conclusion
The freeze on solar feed-in tariffs raises serious concerns for investors, energy producers, and the state. The uncertain financial environment could hinder future renewable energy investments, affecting Hungary’s long-term energy strategy. Market participants urge policymakers to reconsider the regulation and create a more stable and predictable framework for the solar industry.
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