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Q&A with Csaba Lantos, Hungary’s Minister of Energy

Csaba Lantos will open the first edition of the Budapest Geothermal Energy Summit, to be held on 5 June.

In December 2022, the Hungarian government announced the establishment of a new independent Ministry of Energy under the leadership of Csaba Lantos. Only a few months after he took office, CEENERGYNEWS spoke with Minister Lantos about the challenges the new Ministry is facing, the role of gas and renewables like solar and wind in Hungary’s future energy mix and the potential of geothermal energy as a contributor to the country’s energy sovereignty.

Q: The new Ministry comes at a time that can be defined as unprecedented. How are you dealing with current emergencies (i.e. high energy prices, levels of energy storage, energy security….) in the short- and medium-term?

A: In the international energy crisis, our primary task is to guarantee safe supply and affordable prices for Hungarian consumers. The independent Ministry of Energy, operating since last December, was clearly successful in both areas. The heating season is coming to an end soon and our gas storage tanks are more than twice as full as last spring. The stocks that still exist could cover nearly three-quarters of the residential consumption of 2021. In a unique way in Europe, we protected Hungarian families up to average consumption from drastic energy price increases with utility price protection. Among the EU member states, Hungary has the cheapest gas and electricity for households. We have also improved the situation of local governments and public institutions with a number of measures, greatly reducing their energy expenditure. So we have jumped over the first hurdle, but there are still many more tasks ahead of us.

Q: What are the Ministry’s goals in the long term?

A: In order to create energy sovereignty and a successful energy transition, we need to establish and implement sectoral developments in an unprecedented amount. Compared to the previous period, we plan to implement energy upgrades by spending five times the amount of earlier resources. Our economic policy is based on job-creating investments and dynamic industrial development. In order to continue the results achieved so far, it is essential to have enough energy to meet the growing needs. In Eastern Hungary, we are building modern gas power plants, we are expanding domestic gas production, and in the field of renewables, in addition to the rapidly expanding solar energy, we are also opening up to wind, geothermal energy, and biogas. Until 2030, we will renew and strengthen the domestic networks, we will encourage the rise of the green economy and industry with targeted subsidies, sectoral digitization, and the improvement of the energy efficiency of companies, public institutions and residential buildings.

Q: After these first months in office, what do you consider the main successes?

A: The biggest achievement is that we managed to protect the utility price reduction despite the energy crisis covering the whole of Europe, which means savings of 181,000 Hungarian forints [approximately 480 euros] per month on average for Hungarian families. And according to the factual data, it helps many people indeed: according to the MVM’s summary, 65 per cent of residential electricity bills and 80 per cent of gas bills issued from August to the end of February contained only reduced utility price items. The level of projected energy utility prices will not rise this year either. We also greatly facilitated the situation of other consumer groups, for example, with fixed institutional electricity, gas and district heating prices for many months. Also, it is an important result that our energy development plans for the decade have been accepted by the government, as I hope a lot from the new state secretariat was created to settle the situation in the water utility sector.

Q: In the long term, Hungary plans to rely less on natural gas. However, three large combined cycle gas turbine plants will be built. When can we expect them to be operational? How will they contribute to the country’s energy mix in the long term?

A: The medium-term goal remains that electricity, primarily relying on nuclear and solar energy, will gradually catch up with natural gas and in the longer term take over the leading role in national energy consumption. With the continuous development of the Hungarian economy and industry and the expansion of the population’s needs, electricity consumption in Hungary may increase by one and a half times by 2030. Thus, the energy-generating capacities that lay the foundation for a job-creating industrial policy focusing on developments and investments must be created as soon as possible.

Combined cycle gas turbine power plants can be built relatively quickly, their efficiency is exceptionally high and their output can be scaled according to current consumption. The performance of the planned three new units will enable the integration of thousands of megawatts of renewable capacity into the system. To a certain extent, they will also be suitable for burning hydrogen. We are far from alone in this direction of development, according to a recent analysis, a kind of modest revival of gas power plants is taking place in Europe. The construction of capacities similar to those planned in Eastern Hungary has been decided in more than 40 cases in all parts of the continent and construction is already underway at seventeen locations.

Q: Considering the current levels of storage and the several agreements signed to ensure Hungary’s supply diversification, how do you see the next gas season? How can Hungary maintain its competitiveness compared to other neighbouring countries (i.e. those that can count on more renewable energy or that can build LNG terminals)?

A: As I have already mentioned, we are starting from a much more favourable position than last year. Our high-capacity gas storage tanks are still over 45 per cent full. Examining the supplies in proportion to consumption, we are in a leading position within the EU. The government has also decided to keep the special stocks acquired last year, so we are ready for the next storage period with one and a half times more protected reserves. We will not have an easy task, we can expect lively competition for the available resources.

Q: Regarding the diversification of gas supply, are there any plans for alternative sources? Any intention to secure gas by acquiring shares in infrastructure projects, like LNG terminals?

A: Despite the war that has been going on for more than a year, Russian gas deliveries are continuous and due to the conditions of the region, they cannot be replaced easily. But we are monitoring all other possibilities and as the already well-known cooperation with Azerbaijan shows, we are doing our part to find and exploit realistic alternatives. This work did not start recently: it is thanks to the tasks carried out during the last decade that all our neighbours, except for Slovenia, are now connected to Hungary by high-capacity gas pipelines. The central geographical position of our country also gives us opportunities, which we try to seize and make use of for the benefit of the Hungarian people and the Hungarian economy.

Q: In October, the Hungarian government made a decision to suspend the grid feed-in of energy generated from future solar installations which means no new connection requests can be accepted under the tender procedure. What was the background of this decision? How has Hungary’s solar capacity developed in the past years?

A: More than a quarter of all installed domestic solar energy capacity was built in 2022, the 1.1 gigawatts completed last year represents an extraordinary increase. The development of the electricity network could not keep up with this pace, which is why we had to put the brakes on temporarily in the autumn. The freeze of the feed-in was intended as a temporary measure from the first moment. According to the prepared schedule, the gradual lifting of the suspensions can begin in October. Based on the investment plans, even twice the 6 gigawatts total photovoltaic capacity set as a target for 2030 could be built by the beginning of the next decade. In the meantime, the government is spending nearly 300 billion Hungarian forints [approximately. 798.9 million euros] on the foundation of connecting as many weather-dependent renewables to the grid as possible by financing network developments and supporting the establishment of industrial battery storage facilities. In the medium term, the new gas turbine power plants will further increase the flexibility of the system in accordance with this aspiration.

Q: The decision has disappointed Hungarian solar power developers and investors, do you plan to review this decision and when can we expect to allow new connections again?

A: The Hungarian Energy and Public Utilities Regulatory Office will prepare a proposal by the end of August 2023, based on the data provided by the distributors, taking into account the position of the transmission system operator MAVIR. Based on this, the government will be able to decide at the beginning of autumn where it will maintain and where it will lift the restrictions. The entire process is then to be repeated every three months until the temporary suspension is completely lifted.

Q: Geothermal energy is regarded as a potential contributor to the country’s energy sovereignty. How is the government creating a predictable and supportive regulatory framework?

A: The Parliament adopted the amendment to the law establishing the increased utilization of geothermal energy at the end of last year. In Hungary, the thickness of the earth’s crust is less than a third of the European average. Our world-famous spa culture is also due to the numerous thermal water reservoirs. Building on these favourable conditions, thanks to the predictable and stimulating legislative framework, we can replace 1-1.5 billion cubic metres (bcm) of natural gas with geothermal heat by 2030. It is also worth increasing the role of geothermal energy in district heat supply, as there are already proven solutions for this in several towns in Hungary. Domestically available renewables are important tools for mitigating our external exposures and strengthening our self-sufficiency capabilities.

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