Overview of the latest developments of the Hungarian energy market

Mr. György Hatvani Deputy State Secretary of energy and industry Ministry of Economy and Transport HUNGARY Black Sea Energy Conference 3-5 April, Bucharest

Primary energy sources balance in 2005

electricity 13% other 4% coal 10% oil 33% natural gas 40% 2

General characteristics of the Hungarian electricity industry in 2005

• Gross electricity consumption: • Import demand:

6,2

TWh • Built-in power plant capacity: • Peak load:

6439

MW

8700

• Yearly consumption increase years 2005-2020

41.2

TWh MW

1,5- 2%

in the 3

Primary energy sources of power plants in 2005

nuclear; 37,53% coal; 21,46% oil; 1,45% renewable energies; 6,57% natural gas; 32,99% 4

The Hungarian electricity market liberalization in data Legal market opening (%) Size of the active market (%) Licensed traders (piece) Registered eligible customer (piece) Domestic power plant capacities feeding the free market (MW) Dec 2003

35 19 11 50

Dec 2004

70 22 22 550

Dec 2005

70 35 30 1740 110 350 450 5

Generators Cross-border transmission

Modell of the electricity market

Public utility wholesaler Public utility supplier Public utility customers

Transmission licensee Transmission network Distribution licensee Distribution network

Electricity traders Eligible customers Electricity flow Public utility relations Market relations Controlling relations System operator 6

Key questions of the electricity market 1.

•

Establishment of the TSO

• the TSO is a subsidiary of the MVM Holding company • • control, governance and budgetary mechanisms as well as legal regulations for unbundling of different activities was created

Amendment of the dual market model

• single (free) market model simultaneously introducing the universal service supply for the households and S&Ms 7

Key questions of the electricity market 2.

•

DG-COMP investigation regarding the Hungarian PPA System

• the most urgent objectives in the mid of the ’90s was to ensure the security power generators?

of system adapting to the Treaty supply of the power plants system in Hungary at least costs, the prevailing standards of environmental protection the modernisation of the infrastructure with particular regard to • the PPA system fulfilled its role regarding the modernisation • do the PPAs themselves constitute forbidden State aid to the • the Hungarian Government is ready to cooperate with DGCOMP to find an acceptable solution by amending the 8

Key questions of the electricity market 3.

• Latest EU targets regarding the renewable energies and energy efficiency • The new indicative target regarding the share of renewable energies by 2015 is 15% • Hungary has already fullfild its former undertaking by 2005 • The current share of the renewable energies in the total and in the electricity consumption is 5,2 and 4,5 respectively.

• The indicative target of energy saving potential is 20% by 2020 • The EU shall pay more attention to the CEE countries substantial need of economic growth 9

General characteristics of the Hungarian natural gas industry in 2005

• The gas consumption of Hungary is 13 billion m 3 annually, which is about 40% of the country’s energy consumption • 80% of the consumed gas comes from import, the import dependency is steadily growing • Hungary has two import intake routes, but the source of the import is exclusively the Russian Federation 10

The Hungarian natural gas market liberalization in data Legal market opening (%) Size of the active market (%) Licensed traders (piece) Registered eligible customer (piece) Dec 2004

70 6 10 23

Dec 2005

70 7,5 14 63 11

Conditions of natural gas market extension 1.

 Demand side – (The consumers are interested in the opening of the gas market, there is a real need, they are able to raise demand.)  Supply side – (Apart from MOL Ltd, only 1 gas trader could come up, who is selling also Eastern gas, and it is not expected, that a new actor will enter the market.)  Infrastructure The development of the Hungarian gas system is reasonable, it is also justified by the security of supply, besides the commercial and market widening expectations.

The capacity of the Hungarian gas system is 96 Mm day the consumption was 91,65 Mm 3 (-7,3 o C).

3 /day. On 9 February 2005, every former demand record was broken: on that 12

Conditions of natural gas market extension 2.

•

Eliminating the infrastructural barriers taking into also consideration the recent regional gas supply problem at the beginning of 2006

- construction of new cross-border capacities: MOL Ltd. is analyzing the interconnection of the Hungarian Slovakian, and the Hungarian-Romanian gas networks. The Nabucco project is currently under preparation - for security of supply reasons it is also essential to connect the national systems - extension of the underground gas storages, emergency underground gas storage facilities building - diversification of gas import supply: the competition could only be boosted substantially, when new gas supply sources will be available for the Central European Region: Nabucco or new Mediterranean or north Adriatic LNG terminals 13

Thank you very much for your kind attention!

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