Successive tariffs for biogas and biomass plants (“Brown Premium”)

Updated: 07.01.2019

Author: John Szabo

The so-called “Brown Premium” is part of the premium tariff system, which comprises of the market referential price and a certain subsidy, the premium. The brown premium is considered as a successive rate for biogas and biomass plants which are not eligible for the feed-in or the green premium anymore, because the investment has already paid off (§2 (1) Decree 299/2017 in conjunction with §11 (2b) Act No. LXXXVI). For biomass plants >5 MW, the operator has to apply for the successive rate through tendering procedures (§14 (6) Decree 299/2017). Furthermore, all biogas and biomass plants or installations have to fulfil certain technical requirements (6. Annex to Decree 55/2016).

Eligible technologies

Biogas

Only biomass or biogas plants already in operation are eligible for the brown premium (§13 (4) Decree 299/2017). 

Biomass

Only biomass or biogas plants already in operation are eligible for the brown premium (§13 (4) Decree 299/2017).

Amount

The amount of the brown premium must not exceed the amount of the market retail price for electricity and a calculated amount necessary for the economic viability of the operation. This has to take into account the maintenance costs for long-term operation. The amount can also be assessed based on the opportunity costs which arise from the decision to avoid the use of fossil fuels (§14 (3-4) Decree 299/2017). The Hungarian Utility and Regulatory Authority (HEA) assesses the amount of the premium for five years which is published in the framework of a separate ordinance (§14 (5) Decree 299/2017).

Biogas

Under “general information “.

Biomass

Under “general information”.

Addressees

Entitled party: Operators of biomass or biogas plants which are not eligible for the feed-in or the green premium anymore due to the fact that the investment has already paid off (§2 (1) Decree 299/2017 in conjunction with §11 (2b) Act No. LXXXVI).

Obligated party: The operators are entitled against the Hungarian Energy and Utility Regulatory Authority for the assess-ment of the eligibility (§13 (4) Decree 299/2017).

Procedure

Process flow

Plant operators are entitled by law to payment for the electricity they generate (§ 13 (1) Act No. LXXXVI of 2007). § 6 Decree No. 17/2016 prescribes the following application process:

  • To enforce a claim for a premium tariff, a plant operator shall submit an application to the Hungarian Energy and Pub-lic Utility Regulatory Authority (§ 7 (1) Decree No. 13/2017).
  • Application deadlines, and the documents to be submitted together with an application are defined by decree (§ 7 (1-2) Decree No. 13/2017). Checklist and clarification is availa-ble on HEA’s website (for example here: mekh.hu/megujulo-tamogatasi-rendszer-metar-szerinti-tamogatassal-kapcsolatos-kerelem)
  • The Hungarian Energy and Public Utility Regulatory Authority sets the eligibility period for the premium tariff and the max-imum amount of electricity for which the tariff may be re-ceived in line with the supported amount of electricity de-fined (Annex 1 13/2017). 

Where a plant operator receives other subsidies or grants for his plant, the Hungarian Energy and Public Utility Regulatory Authority will take into account the total amount of grants received when cal-culating the eligibility period for the feed-in tariff (§ 3 (3) Decree No. 13/2017).

Degression

The amount of the feed-in tariff and the feed-in premium should be determined by the weighted average of: 

  • The amount granted in the previous year 
  • The development of the consumer price index, provided by the Central Statistical Office, whereby an efficiency im-provement factor of 1% is additionally deducted (Annex 2 Decree 299/2017). Therefore, a degression is possible.

Cap

The amount of the premium must not exceed the amount necessary for the plant to be economically viable (§13 (4) Decree 299/2017). However, plants are exempt from support if the annual planned budget of 10 billion HUF (approx. 31.06 million EUR) for the premium tariff scheme is exceeded (Annex 1 Decree 62/2016). 

Eligibility period

The eligibility period is assessed by the HEA for 5 years on an individual basis. The amount is reassessed annually (§13 (4) Decree 299/2017).

Distribution of costs

Consumers

Consumers not eligible for universal service (“egyetemes szolgál-tatás”) bear the costs of the premium tariff scheme (obliged balance group operators pass their costs on to businesses).  The “universal service system” guarantees regulated electricity prices for house-holds and small consumers (§§ 13 Act No. LXXXVI of 2007).

Distribution mechanism

  •  Transmission system operator – obligated balance group operators – final consumers: The transmission system operator (MAVIR Ltd.) determines and pays the premium tariff to the plant operators which is the referential market price and the administrative premi-um. In general, all electricity generated from RES is sold on the organised electricity market (Law No. CXCVI of 2015 as an amendment to the Electricity Law LXXXVI of 2007). The obliged balance group operators have to contribute to the financing of the FiT and Premium payments (‘KÁT és Prémium -pénzeszköz’) and allocate their costs to final con-sumers. The amount of the administrative premium to be paid by the balance group operators in accordance with § 13 (1) of the Electricity Law is determined by the TSO (§6 Decree 63/2016). In the end, the TSO is not allowed to make profit or loss. 
  • Plant operator – obliged balance group operators: Plant operators who participate in the premium system have to sell their electricity on the organised market (HUPX) or to the obliged balance group operator of choice (bilateral con-tract). The obliged balance group operators will only con-tribute to the financing of the Premium (§1 (4) Decree 63/2016 in conjunction with § 13 (1) Law LXXXVI). The transmission system operator is responsible for the func-tioning of the mechanism. 
  • Obliged balance group operators – final consumer: Obliged balance group operators have to pass through the extra costs to their consumers via bilateral agreements so in the end consumers not eligible for universal service bear the costs through the electricity price. All costs of the Premium financial means have to be declared on the bill of end con-sumers who are not eligible for universal service (§9 (3) De-cree 63/2016 in conjunction with §13 (3) Law No. LXXXVI).