Country report: Hungary
Ellis Davies takes a look at Hungary’s import-heavy energy system.
Being a landlocked country, Hungary faces challenges in domestic supply and transit. Surrounded by Slovenia, Slovakia, Romania, Serbia, Croatia, Ukraine and Austria in Central Europe, Hungary relies predominantly on oil and gas imports to meet its energy demands. Additionally, the country has a high share of nuclear energy that contributes a large amount of electricity.
In a recent review, the International Energy Agency (IEA) said that Hungary is making progress in the development of its energy sector, most notably in nuclear power. However, natural gas remains the largest primary energy source in the country, followed by oil. Hungary ranks low in regards to solar and wind, 21st and 23rd, respectively, among IEA countries, with renewables providing 12% of the energy supply.
Nuclear power is where Hungary’s strength, and expected future, lies. The country currently has four 500MW-capacity reactors at the state-owned Paks nuclear power plant, together producing 15.8 TWh – 52.2% of Hungary’s electricity generation. The Paks plant opened in the 1980s, and has been a major source of electricity since, helping to improve security of supply and reduce carbon emissions. Nuclear provides a third of total electricity consumption in Hungary, giving it the third highest share among all IEA member countries.
The Paks site has been updated over the years, receiving a power uprating in 2009 from 440MWe and a further upgrade in 2016 with the replacement of eight high-pressure turbines, increasing output by 5MWe. In 2008 a lifetime extension was submitted, and the final decision is expected later this year. The programme will extend the lifetime of units one, two and three, at an estimated cost of €50 million per unit.
Two new units have also been commissioned at the site, to ensure a timely replacement for the original reactors that will close in sequence between 2032 and 2037. An intergovernmental agreement was signed in 2014 between Hungary and Russia for the construction and technical support of 1,200MWe at the site, with the units expected to start operation in 2025 and 2026. Russia is providing a €10 billion credit line to cover 80% of the capital expenditure of the two units, while the Hungarian Government provides the remaining 20%. This loan will be repaid over 21 years of operation, and the cost of electricity upon completion will sit at €55/MWh.
Although Hungary’s nuclear programme is one of the most successful among IEA countries, it mostly serves domestic electricity use, amounting to 17.3% of total primary energy supply (TPES). Oil and gas still dominate in industry, transport and heating.
Topping up the oil
Oil demand in Hungary hit 138,700 barrels per day in 2014, and is expected to remain at this level until 2020. Transport and industry are the main consumers, accounting for a colossal 88% of demand in 2015. Mirroring a global shift, there has been a swing in heat and power generation from oil to gas over the last few years – oil use has decreased by 80% between 2000 and 2015. The most important oil product used is diesel, which accounts for 48% of total final consumption, followed by gasoline (19%) and naphtha (15%).
Hungary obtained 0.9 million tonnes (Mt) of its oil from domestic supply in 2015. The remaining 6.7Mt was sourced from external providers, mainly Russia, from which Hungary imported 78% of its crude oil in 2015, down from 95% in 2012. Although the country has no oil port, refined products are imported and exported by barge from Komárom and Százhalombatta, mostly via the Danube River. Product is also transported via pipeline systems originating in Russia and passing through Belarus and Ukraine with a capacity of 120kb per day, and domestic supply is transported via an internal pipeline between the source in Algyo and the Százhalombatta refinery.
The largest consumer of oil, the transport sector is seeing growing demand, following a decline in motor fuel consumption between 2009–2012, as economic activity increases. Higher levels of real income and a growing vehicle fleet have led the government to believe that the demand for gasoline will increase slightly in the near-to-mid-term. This has already begun, and in the first eight months of 2016 gasoline demand increased by 2.7%, and diesel by 4.2%.
At the end of 2015, the Hungarian transport fleet accounted for 3.8 million vehicles, the second-lowest number of cars per capita in the European Union. The fleet is fairly outdated, with over half of the cars around ten years old, leading the IEA to suggest that a renewal of the fleet would lead to an improvement in urban air quality, less energy use and an economic stimulus. It has also predicted that Hungary will meet a target of at least 10% of final consumption of energy in transport from renewable sources by 2020, mostly from the contribution of biofuels.
Hungary currently lacks any schemes to incentivise car owners to upgrade their vehicles to newer, more efficient models. The introduction of incentive mechanisms has been successful in other IEA countries, along with vehicle scrappage payment schemes. The government has, however, introduced the Jedlik Ányos Plan to encourage electro-mobility in the country, which would allow nuclear generated electricity to permeate the transport sector.
A changed sector
Being Hungary’s largest primary energy source, natural gas accounts for just less than one-third of total supply and final consumption of energy. The network reaches the majority of the residential sector, the country’s largest consumer, where it is mostly used for heating. Consumption has taken a downturn in recent years despite interventions that have greatly lowered the price of gas for households. Nine billion cubic metres (bcm) of natural gas were provided to the country’s energy supply in 2016, equalling a 31% share of the TPES – a decline from 39% in 2005. The government forecasts that consumption will stagnate or slightly decrease in the next decade.
Natural gas in Hungary has changed over the past ten years, going from a largely self-sufficient sector to one reliant on imports. Between 2005 and 2015, natural gas production decreased by 41%, and is projected to decrease further to just 1bcm by 2020. As with oil, the bulk of Hungary’s gas imports come from Russia, which provided 95% of the total imports in 2015, and is set to continue following an extension of a long-term contract until 2019. The Hungarian Office for Mining and Geology estimated in 2015 that the country possesses recoverable resources of natural gas of 1,639bcm. Several companies have shown interest in exploring unconventional gas resources, however due to current prices extraction is not economically viable.
Hungary has a wider role in natural gas, and is a key player in supporting the natural gas market integration in Central Europe. Its transit country status means that it is an important asset in the diversification of supply sources and routes in Europe. To expand this role, reverse flows on the Hungarian-Croatian border, effective reverse flows on the Hungarian-Romanian interconnector and future capacity upgrades for existing interconnectors are being developed and planned.
Solar and wind are yet to make any significant appearance in Hungary, but biofuels have seen some uptake in the fuelling of heat and power production. The country is still turning to oil and gas for the vast majority of its energy needs, despite the lack of a large domestic supply on both fronts. It’s in nuclear that the most promise appears to lie. With the planned extension of unit lifetime and plans for new units at the Paks site, as well as the upgrades made in the last decade, Hungary is set to continue and improve its nuclear system to ensure it has a stable, economic, and clean energy supply for the future.