Renewable energy policy database and support: single

Green Premium II (Tender)

Updated: 07.01.2019

Author: John Szabo

As of 1 January 2017, plants with a higher installed capacity than 1 MW (incl. wind power plants regardless of their capaci-ty) are subject to tendering procedures (§13 (3) and §17 Decree 299/2017). If the tender is won, plants will be part of the premium tariff system which is available to installations/plants up to 1 MW without the obligation to participate in tendering procedures. Projects planned to be erected on foreign territory are also eligible to the extent defined by the European Commission under Decision SA 44076 (§1 (2) Decree 299/2017). After having successfully tendered, plants will be eligible for the premium tariff for a maximum of 20 years (§17 (2) Decree 299/2017). The predominant criterion for successful tendering is the price (§2 (2) Decree 62/2016. The maximum subsidy allocated within tendering procedures is HUF 1 bil-lion/p.a. (approx. € 3.11 million) between 2017-2021 (Annex 1 (4) Decree 62/2016). Within the premium model, the plant operator has to sell his electricity directly, i.e. to a third party by a supply agreement or on the stock market, and claim the so-called market premium from the grid operator. The grid operator is nonetheless obliged to physically take the electricity produced.

Eligible technologies and support requirements

The tender is open to all technologies with a higher capacity than 1 MW and wind power plants of all capacities (§13 (3) Decree 299/2017). New projects and also refurbished installations are eligi-ble to participate, if the investment costs are equal to at least 50% of the initial costs (§3 Decree 62/2016). However, plants have to fulfil technology-specific requirements set out in Decree 55/2016.

Wind energy	The additional capacity for wind power plants to be tendered is de-termined by a special Government Decree (Decree 454/2016). Cur-rently, the available amount is set to 0 MW until 2018. Therefore, wind power plants are not eligible for the time being.
Solar energy	Eligible, if technical and efficiency requirements are met (Annex 4 Decree 55/2016). The minimum efficiency factor is 15% (crystalline solar cells) and 7% (thin-film solar cells).
Geothermal energy	Eligible, if technical and efficiency requirements are met (Annex 8, Decree 55/2016)
Biogas	Eligible, if technical and efficiency requirements are met (Annex 7, Decree 55/2016)
Hydro-power	Eligible, if technical and efficiency requirements are met (Annex 6, Decree 55/2016)
Biomass	Eligible, if technical and efficiency requirements are met (Annex 7, Decree 55/2016)

Tender characteristics

Pre-qualification criteria	The plant has to be a new investment or subject to refurbishment amounting to at least 50% of the initial costs (§ 3 (1) a-b) Decree 62/2016). The participant has to be registered or established in Hun-gary. Participation of foreign entities or local autonomies is possible to 5% of the total tendered capacity in case of (§1 i) Decree 62/2016): a bilateral agreement with the Hungarian government guaranteed physical connection to Hungarian territory
Bidding procedure	The bid format will be defined within the individual tender which has to be published at least three months before the initiation of the bidding procedure in Hungarian and English language (§5 Decree 62/2016). It shall include the following (§6 Decree 62/2016): the payment entitlements which can be allocated in the framework of a specific tendering procedure the restricting conditions the basic rules of the tendering procedure (in particular the terms and conditions of the application, the deadlines for submitting the application, the conditions for successful or unsuccessful tender procedures, the criteria for the evalua-tion of the tender, the methods for modifying the tender dossier) a detailed description and conditions of the eligibility and the related obligations (in particular the duration of promo-tion, deadline for implementation) description of the performance guarantee utilisation of benchmark indicators for eligible technologies samples of the documents to be submitted and the method of disclosure of results In the power plant unit uses biogas, the definition of power plant unit shall include the relevant biogas generation units, unless the applicant receives biogas from the natural gas dis-tribution or transmission grid In the case of mixed combustion, the amount of electricity produced from biomass shall be taken into account in pro-portion to the amount of heat induced by the amount of bi-omass which is expected to be used
Tender constraints	In the bidding process, producers are competing for the support on the basis of their initial offers for subsidized tariffs. The premium shall be calculated as the difference between the currently applicable subsidized tariff and the reference market price defined in §15 (1-3). If this value is negative, the premised producer pays the difference to the recipient. (§14 (1-2) Decree 299/2017).
Pricing rules	Price caps are defined by the Ministry responsible for energy issues (Ministry of Innovation and Technology) and might be technology-specific, dependent of the capacity to be tendered per annum (§4 Decree 62/2016). The initial bidding amount must not exceed the maximum set in Decree 299/2017 which is 31.77 HUF/kWh (approx. € 0.0989) (Annex 1, 3.)) but is subject to indexation (§18 (1) Decree 62/2016). The budget for renewable electricity tenders must not exceed 1 billion HUF/p.a. (approx. 3.11 million Euro) between 2017-2026 (Annex 1 (4) Decree 62/2016).
Lead time	HEA establishes an Assessment Committee, which determines the date when operations must begin based on the submitted proposal (§ 4 (1) e) Decree 62/2016.
Frequency of tenders	The subsidy is granted for maximum 20 years but is defined individually within the tender and might be reduced in accordance with other investment subsidies (§13 (3) Decree 62/2016).

Addressees

Procedure

Process flow and deadlines	Process flow of the bidding procedure Initiation of calls for tenders. Calls for tenders are initiated by the Hungarian Energy and Public Utility Authority (HEA) who is commissioned by the Ministry responsible for Energy (Ministry of Innovation and Technology) (§4 (1) Decree 62/2016). The bid format will be defined within the individual tender, which has to be published at least three months before the initiation of the bidding procedure in Hungarian and English language (§5 Decree 62/2016). Furthermore, the Ministry responsible inter alia defines (§6 Decree 62/2016): The capacity to be tendered and restrictions on the budget for tenders per annum Restrictions on the lowest and highest capacity to be tendered for Special restrictions on capacities for weather-dependent technologies in a certain distribution region Technology-specific restrictions for the highest and lowest capacity available The highest amount of the bid price which can be technology-specific (restriction on the bidding price) (Technology-specific) deadlines for the start of operation Assessment of the projects Projects are assessed by an Assessment Committee (AC) made up of five members designated by the Hungarian Energy and Utility Regulatory Authority (HEA). The President of the assessment committee is the president of the HEA. Further members are three representatives of the HEA and one person nominated by the Minister for Innovation and Technology (§9 Decree 62/2016). The AC must evaluate applications within 60 days (§12 (3) Decree 62/2016) and in-line with the provisions of the Decree. After the successful bidding procedure, the project planner has to enter into contract with the Recipient (i.e. Transmission Grid Operator) (§16 (1) Decree 299/2017).
Competent authority	The Hungarian Energy and Utility Regulatory Authority, on behalf of the Ministry for Innovation and Technology (“the Ministry responsible for energy issues”). The Authority may act as a supervising body and inflict penalties in cases of violations of the law (§ 19 Decree No. 299/2017).

Process flow and deadlines

Process flow of the bidding procedure

Initiation of calls for tenders. Calls for tenders are initiated by the Hungarian Energy and Public Utility Authority (HEA) who is commissioned by the Ministry responsible for Energy (Ministry of Innovation and Technology) (§4 (1) Decree 62/2016). The bid format will be defined within the individual tender, which has to be published at least three months before the initiation of the bidding procedure in Hungarian and English language (§5 Decree 62/2016). Furthermore, the Ministry responsible inter alia defines (§6 Decree 62/2016):
- The capacity to be tendered and restrictions on the budget for tenders per annum
- Restrictions on the lowest and highest capacity to be tendered for
- Special restrictions on capacities for weather-dependent technologies in a certain distribution region
- Technology-specific restrictions for the highest and lowest capacity available
- The highest amount of the bid price which can be technology-specific (restriction on the bidding price)
- (Technology-specific) deadlines for the start of operation
Assessment of the projects
- Projects are assessed by an Assessment Committee (AC) made up of five members designated by the Hungarian Energy and Utility Regulatory Authority (HEA). The President of the assessment committee is the president of the HEA. Further members are three representatives of the HEA and one person nominated by the Minister for Innovation and Technology (§9 Decree 62/2016).
- The AC must evaluate applications within 60 days (§12 (3) Decree 62/2016) and in-line with the provisions of the Decree.
- After the successful bidding procedure, the project planner has to enter into contract with the Recipient (i.e. Transmission Grid Operator) (§16 (1) Decree 299/2017).

Competent authority

The Hungarian Energy and Utility Regulatory Authority, on behalf of the Ministry for Innovation and Technology (“the Ministry responsible for energy issues”). The Authority may act as a supervising body and inflict penalties in cases of violations of the law (§ 19 Decree No. 299/2017).

Penalties

Amount of the fee	The amount of the penalties that have to be paid if the winning bid is not realised is specified within the individual tender. The legal term is ‘performance guarantee’ (teljesítési biztosíték) (§1 (1) k) Decree 62/2016). If the successful bidder applies for modifications concern-ing site selection, the tariff agreed on will be reduced by 1 HUF/kWh (approx. €ct 0.32) (§17 (7) Decree 62/2016).
Mechanism in place to ensure the payment of the fee	Bidders have to provide for a performance guarantee in case of a winning bid (§1 (1) k) Decree 62/2016). The criteria for (e.g. the amount of) the performance guarantee are specified within the call for tender (§6 (1) d) Decree 62/2016). The successful bidder has to prove the ability to provide for the performance guarantee 30 days after having won the tender at the latest (§17 (4) Decree 62/2016). The successful bidder might loose the amount provided for the per-formance guarantee in case the project construction has not started within the given timeframe specified in the tender. If the deadline has been exceeded by more than one year, the successful bidder looses the entitlement and will be excluded from bidding procedures for three years (§17 (6) a-b) Decree 62/2016). If the successful bid-der informs the competent authority less than 6 months after having won the bid that he is not able to carry out the project, he looses 85% of the deposited amount for the performance guarantee (§17 (8) Decree 62/2016).

Amount of the fee

The amount of the penalties that have to be paid if the winning bid is not realised is specified within the individual tender. The legal term is ‘performance guarantee’ (teljesítési biztosíték) (§1 (1) k) Decree 62/2016). If the successful bidder applies for modifications concern-ing site selection, the tariff agreed on will be reduced by 1 HUF/kWh (approx. €ct 0.32) (§17 (7) Decree 62/2016).

Mechanism in place to ensure the payment of the fee

Bidders have to provide for a performance guarantee in case of a winning bid (§1 (1) k) Decree 62/2016). The criteria for (e.g. the amount of) the performance guarantee are specified within the call for tender (§6 (1) d) Decree 62/2016). The successful bidder has to prove the ability to provide for the performance guarantee 30 days after having won the tender at the latest (§17 (4) Decree 62/2016). The successful bidder might loose the amount provided for the per-formance guarantee in case the project construction has not started within the given timeframe specified in the tender. If the deadline has been exceeded by more than one year, the successful bidder looses the entitlement and will be excluded from bidding procedures for three years (§17 (6) a-b) Decree 62/2016). If the successful bid-der informs the competent authority less than 6 months after having won the bid that he is not able to carry out the project, he looses 85% of the deposited amount for the performance guarantee (§17 (8) Decree 62/2016).

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 Prémi-um -pénzeszköz’) and allocate their costs to final consum-ers. 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. CXXXVI).

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 Prémi-um -pénzeszköz’) and allocate their costs to final consum-ers. 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. CXXXVI).

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