The entire electricity market (and the renewables market in particular) is in a major transition marked by constant regulatory changes and dynamically evolving market conditions. In this alert we provide insight into the regulatory response to the increasing difficulties surrounding the integration of renewable generation capacities, termed ‘gradual integration’.

Effective 1 April 2021, new capacity allocation principles have been introduced for the distribution of available network connection capacities among generating facilities. The detailed execution rules of the new capacity allocation procedure are expected to be published in the technical and distribution supply codes of the Hungarian electricity system before the end of this year. For further information, we recommend that you regularly check the website of MAVIR, the Hungarian transmission system operator (draft proposals of the new generation capacity allocation rules are available on MAVIR’s website).

MAVIR published the interim rules applicable for pending network connection procedures on 2 September 2021.¹ We provide a brief summary, below, of key interim provisions applicable to selected pending network connection procedures. Similar interim rules are expected to be published by the DSOs in September 2021.

1. Projects affected by the interim rules

The interim rules concern requests by power plants to be connected to MAVIR’s transmission grid that were in a pending network connection procedure as of 1 July 2021 (i.e. the relevant network connection agreement had not been concluded by such date) and 

1. either a network connection plan or a feasibility study was submitted to MAVIR by 3 August 2021; or
2. or MAVIR issued its offer for the technical and financial terms of network connection development (“MGT”) by 31 July 2021 and the relevant project took part with such MGT in the METÁR tender launched by the Hungarian Energy and Public Utility Regulatory Authority on 30 April 2021.

Accordingly, any other pending and future power plant network connection requests not falling under either of the above categories will be subject to the new capacity allocation procedure, the very first of which is due to launch before the end of 2021.

2. Main obligations in relation to projects affected by the interim rules

Projects affected by the interim rules must comply, among others, with the following obligations:

1. they must submit to MAVIR a binding capacity booking declaration (in Hungarian: kapacitáslekötési nyilatkozat) by 8 October 2021;²
2. they must provide MAVIR with a network connection request security (in Hungarian: igénybejelentési biztosíték) of HUF 900,000/MVA (based on the nominal capacity of the power plant included in the capacity booking declaration) in the form of a cash deposit by 8 October 2021;
3. they must provide MAVIR with a capacity booking security (in Hungarian: kapacitáslekötési biztosíték) of HUF 3,600,000/MVA (based on the nominal capacity of the power plant included in the capacity booking declaration) in the form of a cash deposit by 31 January 2022.

Regardless of the status of their connection procedure, developers must pay the above-mentioned cash deposits, which will be credited toward the connection fee.

Failure to comply with the above obligations will lead to termination of the pending network connection procedure and loss of the right to the requested network connection capacity. Further, failure to duly provide the capacity booking security will lead to loss of the network connection request security.

3. Other rules for the capacity booking declaration

The developers of projects falling under the interim rules have to decide whether to issue their respective capacity booking declaration unconditionally or make it conditional upon being partially or fully awarded at a METÁR tender held before the end of 2022. In the case of the latter, the developer will secure the network connection capacity of the project concerned only on and subject to the condition that it will be (in part or in whole) awarded with a METÁR premium subsidy at any METÁR tender held before the end of 2022.

Developers that only had an MGT issued by 31 July 2021 (but did not submit the connection plan by 3 August 2021) and participated with such MGT at the last METÁR tender, are only permitted to make a capacity booking declaration conditional upon being awarded at the METÁR tender closed on 31 July 2021.

In both instances (i.e., an unconditional or a conditional capacity booking declaration), the developer must meet a firm time schedule in order not lose its secured connection capacity right and cash deposits totaling HUF 4,500,000.

We are continuously monitoring regulatory changes affecting the electricity market and the renewables in particular, so if you have any questions, please feel free to contact us.

1. The amendment of the Technical Code (in Hungarian: Üzemi Szabályzat) of MAVIR is available here, the relevant provisions can be found in Section 5.1.10 of the Technical Code.
2. Its sample form will be published by MAVIR in the next few days and it will be available on its website.

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