According to a recently published draft of the Ministry of Energy, significant fee reductions are possible for institutions treated separately – for example, schools, hospitals, municipal buildings. And in the announcement issued alongside the proposal submitted for social consultation, the ministry wrote that the government is also planning green investments and energy efficiency improvements in the field of district heating in the fall.
State Secretary for Energy and Climate Policy Attila Steiner put the new decree into context for Portfolio, who said that due to the diversification of district heating systems and the costs of maintaining the system, prices may differ in different places, which affects both residential consumers and institutional players. He explained that the difference depends on the heat production method used in each supply area, as well as the actors involved and how many people participate in it.
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The Secretary of State stated that several technologies work in district heat production in Hungary: the companies or enterprises serving the system combine energy production and service, but there are also cases when several different heat production units are connected to the same infrastructure.
“The big positive of district heat is that we produce the energy under controlled conditions and on a larger scale than if we did it individually, which results in efficiency gains,” said Attila Steiner.
Regarding the changes included in the draft decree submitted for social consultation, he highlighted that they mostly affect state and local government institutions – such as schools and hospitals. From October 2022, these actors are kept at the cost price level of district heating providers. Steiner said that “the increase in gas prices during the energy crisis was reflected in district heat production because two-thirds of the district heat’s heat production portfolio contains natural gas, which resulted in a significant increase in institutional heat prices as well.”
He indicated that this did not affect the population even during the most severe period of the energy crisis, as the prices were subject to utility reductions, so the district cooling rates remain low for households.
“Starting with the heating period starting in October this year, the heating fees for state and local government institutions will be reduced by a further 32%, after this item has already been halved twice compared to the period of the last quarter of 2022 due to the drop in gas prices,” added the state secretary.
This reduction is due to the reduction of natural gas prices and the more efficient operation of district heating systems. In addition to natural gas-based systems, Steiner emphasized that renewable energy sources, such as biomass and geothermal energy, are playing an increasingly important role in district heat production. An important benefit of their use is that “prices remain more stable and less prone to fluctuations than in the case of natural gas.”
Another main goal of the new regulation was to encourage an increase in the proportion of renewable energy sources in district heat production, which is followed by specific development applications. He explained that
the European Commission approved the 95 billion forint investment and development support plan of the Ministry of Energy, within the framework of which it is possible to build district heat generation technologies operating with new renewable energy sources and to further improve the energy efficiency of existing systems.
He announced that the applications can be financed from the framework of the EU Modernization Fund, in which the catch-up member states benefit from the ETS quota revenues in order to be able to modernize their energy systems and reduce their emissions. Hungary has already launched several projects from this source in the past, as an example, it mentioned that they are building large battery energy storage facilities for the sake of electricity system security.
The state secretary mentioned that “tenders are expected to be issued for district heating providers and district heat producers by the end of the year.”
In order to ensure long-term sustainability, the government is also working to increase the profit rate of district heating providers. Currently, the regulations only allow a 2% profit, which makes it difficult to implement investments, especially when obtaining bank financing.
Steiner added that in order to successfully draw the tender funds, “they want to increase the profit rate in the case of new investments after 2025, thus helping to realize even more renewable and energy efficiency investments.”
The professional politician also told Portfolio that “we see an important breaking point in geothermal energy, which can significantly contribute to the sustainability of Hungarian district heating systems.” The goal is to double the share of geothermal energy in district heat production by 2030, which would make it possible to replace hundreds of millions of cubic meters of natural gas, reducing the country’s energy dependence and costs.
“The modernization of district heating systems is of outstanding importance not only for economic reasons, but also for environmental protection”, he added, referring to the fact that Hungary is already in a good position in the field of the use of geothermal energy in the European context, but it is still important that through new investments and technological developments utilize this renewable energy source to an even greater extent.
According to Attila Steiner, an important element of this is that the government regulations changed at the end of 2022, so that today it is much easier to obtain permits: applications must be submitted to a single institution, the Supervisory Authority for Regulated Activities, if someone wants to drill deeper than 150 meters. Previously, separate water and other permits were also required, but now a “one-stop-shop” system has been introduced, which simplifies the procedure, he added.
In the licensing system valid since March 2023, individual geothermal research permit applications can be submitted for the areas selected by the applicant, if the research aims to utilize geothermal energy, such as geothermal district heating, district heating, industrial heat service, power generation (the licensing of balneological and agricultural projects has not changed ).
In the year and a half that has passed since then, more than 110 applications have been received, and more than 60 research permits have already been issued.
Cover image source: Portfolio
Source: www.portfolio.hu
