As of 1 January 2025, the Act LXXXVI of 2007 on electricity (“Electricity Act”) has been amended in a number of aspects. The overarching aim of the amendment is to make the operation of the electricity system more transparent and efficient by making the DSO’s certain mandatory tasks easier and the capacities connecting to the medium and high voltage grids more predictable. The amendments will also ensure the transparency of procedures for the investors as well as the compliance with EU law, in addition to the policy objectives. In addition, the Mandatory Feed-in Tariff (KÁT
Main changes related to the Mandatory Feed-in Tariff (KÁT) scheme
The Government Decree No. 7/2025 (I. 31.) established different provisions in respect of the Government Decree No. 389/2007 (XII. 23.) (“KÁT Decree”) with the effect of 31 January 2025, by which the indexation rules (Annex No. 5 of the KÁT Decree) shall not apply with the effect of 1 January 2025 until the end of the state of emergency, but not later than 31 December 2029. This means that the KÁT tariffs will remain at the level set for the year preceding the year in question. However, if the annual inflation rate reaches 6%, this provision shall not apply.
The energy office was obliged to publish on its website, by 31 January 2025, the applicable KÁT tariffs for 2025 and the average of these tariffs, assuming uniform production over time.
Based on the communication of the Ministry of Energy, the investors insisting on price indexation can switch to the so-called METÁR scheme under the rules being in force. The Ministry is also planning further amendments which will soon be issued to public consultation. According to these amendments, the KÁT producers will be able to gain new additional revenues by entering MAVIR’s regulated market. The planned amendments will create a number of other possibilities for the concerned entities: they will be able to enter the market without having to pay the so-called Robin Hood tax. Furthermore, they will be able to earn more revenue than is available under the KÁT scheme by concluding trading options and long-term green power purchase agreements (PPAs).
Main changes related to the implementation of EU directives
The amendment to the Electricity Act has introduced a number of new definitions, mostly in order to ensure Hungary’s compliance with its EU obligations. These include the implementation of the definitions of “renewable energy purchase agreement” and the “sales between renewable energy market players” based on RED II Directive on the promotion of the use of energy from renewable energy sources and the "flexible grid connection agreement” based on the EMD Directive on the common rules for the internal market for electricity. In addition, amendments relating to energy communities have justified the introduction of the concept and definition of “sub-balancing group”. Accordingly, an electricity producer, an electricity trader, a universal service provider, a consumer, an aggregator, an energy community and a distributor may, unless otherwise provided by law, connect not only to any balancing group but also to any sub-balancing group.
The “fixed-term, fixed-price power purchase agreement” has appeared as a new definition according to the above EMD Directive. The related new provisions oblige electricity traders supplying more than 200,000 consumers to provide the possibility of such fixed-price agreements with a fixed term of at least one year to the consumers, determining the mandatory elements of these agreements and specifying the elements of the information obligation towards the consumer, as well.
Guarantees of origin
One of the most important changes regarding the issuance of guarantees of origin is that guarantees of origin can be issued not only for electricity fed into the public grid but for electricity generated and consumed behind the connection point, as well. In this context, Government Decree No 420/2024 (XII. 23.) on the guarantee of origin of electricity replaced the previous regulation, containing a number of new provisions.
Grid connection
An important new rule of the Electricity Act is that the tender for the connection of electricity producers to the high and medium voltage grids shall be published in every twenty-four months at most. Under the new rules of grid access for feeding-in, the Minister of Energy will determine the parameters, based on policy criteria and the National Energy and Climate Plan, according to which the energy office can publish the tender for available capacities on the grid.
Co-location agreements
There are also amendments concerning the joint use of the production lines and the connection points (the so-called co-location cooperation) in order to promote the spread of such cooperation and to make the use of the booked capacities more efficient. Under the former regulation, power plants and electricity storage facilities that were not owned by the same natural or legal person had to conclude an agreement on the joint use of the production line. The amendment has not affected this, but has introduced a new rule according to which only power plants with a nominal capacity of at least 0.5 MW are obliged to conclude such co-location agreements. New requirements are that the minimum content elements of such agreements are defined in the Executive Decree of Electricity Act and the parties shall inform the energy office about the agreement to be concluded: this requirement is intended to ensure that the parties seek a legal and enforceable agreement and the party with control over the connection point does not use a contractual term falling outside the scope of good faith.
Another important modification is that the installed capacity limit of power plants and battery parks for connection to a shared production line is decreased from 5 MW to 0.5 MW. Its reason is to increase the share of domestic renewable energy production and to foster the spread of the so-called Corporate Power Purchase Agreements (cPPA).
Unused capacities
The cases and detailed rules re: the transfer of the right of disposal over the capacity available for feeding-in to a grid licensee due to under-utilisation following the termination of electricity generation have been amended. The transitional period during which consumers and/or electricity producers can comply with their respective obligations (use of the capacity specified in the grid connection agreement, conclusion of a new grid usage agreement for a given connection point, payment of the system usage fee) has been decreased from 5 years to 2 years. After that period, the consumer and/or electricity producer shall lose the right of disposal over the unused capacity.
Production under test runs
The consolidated small power licensee is entitled to produce electricity during its test runs, in accordance with the terms of the grid usage agreement concluded with the regionally competent DSO and the license issued by the energy office.
Facilitated areas
The Minister of Energy can now designate a so-called “facilitated area” for the construction of new grid infrastructure and electricity storage. For such a facilitated area, the administrative deadline in the environmental, nature protection and construction authorisation proceedings is 50 days in order to accelerate the investments.
REMIT, REMIT II
In order to execute the REMIT and REMIT II Regulations, powers relating to the integrity and transparency of the wholesale energy markets have been determined for the energy office. Among the rules on the promotion of competition in the electricity market, the following legal instruments have also been introduced: the market integrity procedure, the compliance procedure, the rules on cooperation with ACER or the national regulatory authority of another Member State and the provisions relating to algorithmic trading and direct electronic access.
Summary
As of 1 and 31 January 2025, significant changes to the electricity system regulation came into effect. Among these, the amendment to the KÁT scheme, due to its role in the renewable energy sector, should be highlighted: KÁT tariffs have been frozen at the level determined for 2024 until the end of 2029 at the latest. Another important change is that the Minister of Energy can designate a so-called “facilitated area” in order to foster the construction of new grid infrastructure and electricity storage, decreasing the administrative deadline in authorisation proceedings to 50 days. The rules for guarantees of origin allow guarantees of origin to be issued not only for power plants that feed electricity into the public grid, but also (i) for power plants that are not connected to the public grid, or that are connected thereto without feed-in capacity, and (ii) for power plants that are connected to the public grid but the electricity generated thereby is consumed behind the connection point.