News
Energy Community Insights: Hungary
Tour of Central & Eastern Europe: 3rd stop with Hungary's Energy Communities
The Life COMET project aims to transform the community energy landscape in Central and Eastern Europe through assessment, experience sharing, and coalition building. Our series of blog posts “Energy Community Insights: A Tour of Central & Eastern Europe” summarizes national assessments and action plans for enhancing energy community maturity* in Croatia, Estonia, Greece, Hungary, Poland, Romania, and Slovenia.
This third blog post examines Hungary’s current state of energy community development, the key challenges they face, and the policy recommendations necessary for advancing their maturity and sustainability.
Current State of maturity of Energy Communities in Hungary
In Hungary, the European directives related to Energy Communities were transposed as a tick-box exercise, but the government has yet to establish a supportive environment. While the sole legal definition of Energy Community has been introduced, hidden regulatory obstacles and a lack of clear incentives prevent their development. The current policies do not encourage the formation of energy communities, leaving potential participants with no tangible benefits for joining such initiatives.
One of the main barriers is Hungary’s heavily centralized energy policy, which prioritizes individual consumers over collective efforts. The Universal Service Provider (USP) supplies household consumers with electricity at a subsidized rate of 10 EUR/MWh, creating a low-cost, risk-free alternative that discourages participation in community energy initiatives, such as renewable energy investments for collective self-consumption and electricity sharing.
Other regulatory hurdles include Hungary’s billing and compensation mechanisms for small-scale power plants (under 50 kWp). These rules are designed for individuals rather than group-based energy use, making it difficult for local energy production to benefit energy-sharing initiatives within energy communities.
Additionally, after a decade of operation, the billing system will undergo a significant shift to a quarter-hourly settlement model, where production and consumption will be tracked in 15-minute intervals instead of annually. This transition will bring notable changes to self-consumption and energy sharing dynamics, requiring adjustments in real-time balancing and potentially affecting the financial returns for small-scale producers.
Hungary’s centralization strategy further limits local energy cooperation. Public institutions, such as schools and hospitals – previously under municipal control – are now centrally managed. This prevents local communities from forming partnerships with these institutions to supply affordable, locally sourced energy. Instead, all public institutions must now participate in government-led energy tenders, eliminating opportunities for municipalities to take part or support local energy communities. Despite these obstacles, municipalities – though with diminishing influence – are increasingly interested in fostering local cooperation, as central government policies are often counterproductive to local initiatives. More municipalities are now considering establishing energy communities and involving their remaining institutions in these energy procurement efforts.
Path Forward to enable the development of energy communities
To overcome these barriers and facilitate the growth of energy communities in Hungary, several key actions must be taken across regulatory, financial, and stakeholder engagement dimensions:
Regulatory Adjustments
- Reduce bureaucracy and simplify procedures: Streamline the process of establishing energy communities by achieving clear legal definitions aligned with EU directives, reducing reporting and registration requirements imposed by the energy authority, and implementing stronger safeguards to curb corporate interference.
- Amend settlement rules to enable collective self-consumption models, allowing small-scale renewable energy producers to supply energy to local communities rather than just individual consumers.
- Remove restrictions on sharing surplus energy, allowing households and local institutions to take part in community energy projects.
Financial and Business Model Reforms
- Reform pricing mechanisms to allow energy communities to compete with the heavily subsidized USP model, ensuring a level playing field for decentralized energy initiatives.
- Position energy efficiency investments as integral tools within energy community operations, providing professional support for such projects and promoting the use of heat pumps in condominiums to enhance collective energy solutions.
- Establish a dedicated financial support scheme for energy communities by integrating them into existing grant programs and evaluating funding opportunities through an energy community lens.
Strengthening Local Engagement and Awareness
- Empower municipalities to integrate energy communities into local energy planning and support their role in advising on energy procurement processes to improve energy autonomy.
- Promote education and training programs that equip local actors with the knowledge and skills needed to navigate Hungary’s complex energy landscape.
- Encourage knowledge-sharing initiatives, such as those led by Solidarity Economy Center (SEC) and its energy working group Transzformátor Community Energy Center, to facilitate collaboration among municipalities and stakeholders.
- Form and strengthen a national coalition of energy community stakeholders to contribute to the elaboration of better policies, build partnerships, and ensure that energy communities have a seat at the decision-making table.
Hungary’s highly centralized and heavily subsidized energy system poses significant challenges for energy community development. However, municipalities remain eager to explore local energy solutions, despite their limited opportunities. Some small enterprises and social institutions also show interest in forming energy communities, but the existing regulatory and financial barriers make practical implementation difficult.
A shift in national policy towards a decentralized, community-oriented energy system is necessary for energy communities to become a reality in Hungary. Stay tuned for our upcoming blog post, where we will explore coalition-building efforts that could help overcome these obstacles.
* To measure maturity, a tailor-made assessment tool was created, incorporating weighted criteria and scoring countries' performance across 11 areas: political will, transposition process, local, regional and national strategies, regulatory framework, business models, financing, collective self-consumption, networking, knowledge, awareness and stakeholder engagement. Read the full assessment for all 7 countries studied here.
