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Electricity supply ahead of massive turnaround – Hungarian record to fall
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Electricity supply ahead of massive turnaround – Hungarian record to fall

January 18, 2018
The construction of Dunai Solar Park, which will be one of Hungary’s largest solar power plants, is set to begin soon in Százhalombatta. However, MET Group will not stop there, it plans further investments into renewables in Hungary and the neighbouring countries as well. What is the significance of these projects and how can they change electricity production in Hungary? The company answered these questions and more.

The EUR 25mn (about HUF 7.75bn) Dunai Solar Park is scheduled to start operating in the third quarter of 2018. The project will be implemented on a 40-hectare plot located on an unused, peripheral area on the site of the Dunamenti Erőmű power plant and the area of a former fish farm.

The facility with a 17.6 megawatt (MW) installed capacity will be Hungary’s largest solar power plant, followed by MVM’s 10 MW plant in Pécs and Mátrai Erőmű’s 16MW plant near Visonta.

Although Dunai Solar Park will slightly exceed these capacities, it is unlikely to hold the record for long, as a construction wave of solar power plants has already begun in Hungary. A number of investments with similar or even larger capacities are being developed or authorised in Hungary at the moment. MET Group is also working on a project with a larger installed capacity, however, it is in an early stage, MET Power’s Director of Business Development Péter Horváth explained.

According to industry standards, the facility in Százhalombatta will be a small-scale power plant, because its installed capacity will be below 50 MW. The 17.6 MW is, in fact, looks small compared to the 400 MW capacity of one of the blocks of MET Group’s Dunamenti Erőmű, and the world’s largest solar power plants have capacities of over 2,000 MW.

Gives security on a small scale, helps the planet on a large scale

The new solar power plant will supply power to around nine thousand households. While the power needs of an average household could be met by around 8-10 solar panels, the solar power plant near Százhalombatta will comprise more than 76,000 solar panels.

Environmental protection is another important aspect to consider. Hungary’s energy policy goals include the involvement of power plants with a low or - like Dunai Solar Park - zero carbon dioxide emission into the country’s energy mix.

The plant will supply power to the national power transmission grid operated by MAVIR, to be transmitted to any part of the country via the national grid. However, due to the physics of electricity, it will mostly be used locally and in the vicinity of Százhalombatta. Whether electricity is distributed to households or large industrial consumers will depend on actual network conditions.

There is business opportunity in renewable energy production. When it comes to energy supply, a country needs an appropriately diversified portfolio of power plants, in which renewable energy production can be an effective, yet environmentally friendly supplement to nuclear and gas-fired power plants, Péter HORVÁTH underlined.

MET Dunai Solar Park - which is only the first sign of the imminent wave of solar power plant constructions - will only improve the security of supply in Hungary by a wee bit. But an overall solar power plant capacity of at least 500 MW is expected to be built across the country in the next two to three years. That, however, will be a significant volume compared to the current, nearly 7,000 MW combined capacity of the existing power plants in Hungary. These - the Paks Nuclear Power Plant, the Mátrai Power Plant and the gas-fired power plants - produce about 70% of Hungary’s annual electricity consumption. The remaining 30% of the national demand is covered by imports, while 90% of the natural gas the power plants run on is imported as well.

Built for our children

On the one hand, solar power plants enhance security of supply because they are not reliant on foreign resources, their primary energy resource is the Sun. On the other hand, Hungary’s power plant infrastructure is ageing and the older fossil-fueled power plants are gradually shut down.

The average lifespan of a solar power plant is 25 years, so what we build today will actually be used by the next generations. Since only very few new investments in conventional power plants were delivered in the past five to ten years, in the light of the ageing infrastructure, the soon-to-be available 500 megawatt installed solar power plant capacity is likely to have great significance, Péter Horváth highlighted.

How can ‘old’ power plant technologies be replaced?

Hybrid cars, which use batteries to complement internal combustion engines, are vivid examples of the cooperation between conventional and renewable energy production.

The expansion of ‘clean’ energy sources in Germany allows the country to cover its national electricity demand on a Sunday morning entirely from renewable energy, although, demand on a Monday dawn would exceed the available capacities. The higher the share of renewables in the complete energy mix is, the more intense imbalances arise in the system, since demand cannot be aligned with the presence of sunshine or wind. This is why we need conventional power plants as well, to maintain balance between production and consumption.

For the energy balance, this means in the long run that fossil power plants will be ousted from the ‘mainstream’ of power generation and replaced by renewable power plants, while their significance will be shifted to balancing. In the meantime, their abilities like being fast, flexible, easy to fire up and able to react relatively well to the imbalances and volatility of renewable power plants will become more important.

At the current level of technological development, storing electricity is very expensive, especially on an industrial or national scale. Until - probably in the next ten to twenty years - energy storage becomes cost-effective, handling variances and imbalances remains crucial. This is how fossil power production will transform into a complement to renewable energy generation, Péter Horváth concluded.

Quality in focus

The project was launched in May 2016, the process of authorisation and preparation lasted 18 months, while construction will take seven months, counting from January 2018. MET Dunai Solar Park Kft. plans to rely on market-based project finance provided by commercial banks to implement the project. Construction works will not be carried out by the company but a general contractor, Péter Horváth said.

In case of the main components of solar power plants, like solar panels, investors need to make sure that each of their suppliers for all of the applied technologies is ‘top tier’ and has the best possible quality rating. Manufacturers are globally ranked by independent rating institutes and categorised based on aspects like financial stability, the quality of manufactured products and the extra warranties they provide.

There is no point in risking quality, because low-quality components may cause production loss or curtail production volumes, jeopardising profitability. By engaging with top tier manufacturers, this risk can be minimised.

This is how risk can be minimised

A number of industry experts forecast a recession in energy prices for the next decade exactly because of the rapid development of the renewable energy industry.

According to MET Power’s Director of Business Development, not a single power plant would be built in Europe based on market prices. All over the world, returns on renewable power production investments could only be guaranteed by electricity prices well above market prices. The fact that renewable technologies became mature enough and competitive in price during the past ten to fifteen years was a result of the national energy policy goals promoting the spread of renewable technologies, irrespective of market prices. As a part of this strategy, long-term electricity supply contracts with fixed prices were signed with energy producers.

The Hungarian version of this is the KÁT mandatory feed-in tariff scheme. Under this scheme, the Hungarian state guarantees a fixed feed-in tariff, independent from market prices. Although the deadline for submitting applications within the KÁT system expired in December 2016, the majority of the ongoing projects was authorised under the this scheme.

Aiming for a regional role

This is an important time of expansion for MET Group, which has set a strategic goal to grow in the renewable energy sector as well, because this is the future, Péter Horváth said.

The construction of the solar power plant in this strategic year is, in fact, a greenfield pilot project. But we are planning another greenfield investment in Hungary as well, which would be similar in size. We are also analysing some investment opportunities, which already have the necessary authorisation but their developers decided to realise profit instead of proceeding with the project, Péter Horváth added.

Central Eastern Europe is a good market for expansion, Péter Horváth believes that the pool of experts currently available in the neighbouring countries will allow the company to win projects. The difficulty is that while Hungary applied a follower attitude with regards to renewable energy production and the implementation of the 2020 EU energy policy goals, the power plant construction wave (involving either solar or wind energy) is almost over in the neighbouring countries. As a result, the number of available greenfield investments is low, therefore we are ready to examine the possibility of taking over existing power plants when they are put on the market, Péter Horváth pointed out.

This article was sponsored by MET Power.