CMS CEE Expert Guide to Solar Panel Installation in Hungary

In Hungary the regulatory regime applicable to solar power plants depends on the installed capacity of the power plant, and different rules apply to power plants with an installed capacity: (i) up to 50 kVA (household power plants); (ii) below 0.5 MW; (iii) from 0.5 MW but below 50 MW (small power plants); and (iv) equal or above 50 MW. For the purposes of this guide, the rules applicable to small power plants (i.e. 0.5-50 MW capacity) are specified, as these are the most commonly installed on commercial building rooftops.

In Hungary until the present day rooftop solar power plants have typically been installed to generate electricity to cover part of the electricity needs of the building itself (e.g. the manufacturing facility or offices or commercial units located within the building) and the generated electricity was not sold to third parties.

Rooftop PV power plants have typically been developed in one of the following two models: self-consumption or on-site PPA (or merchant). Below we provide the specifics of these two models, and also highlight the changes in the regulatory regime as of 1 January 2024, which will likely facilitate the appearance of new structures as well.   

In the self-consumption model, the building owner (or the lessee of the building) obtains the necessary permit for electricity generation and becomes the generator of the electricity. In this model, the entire volume of the generated electricity is consumed by the building owner (or lessee of the building), and the electricity is not transferred to the public grid. The building owner (or the lessee of the building) will need to agree with the local DSO to amend its existing grid connection agreement, assuming that the building is already connected to the public grid and consumes electricity, to include the new solar power plant. Typically, the PV power plant is financed and constructed by a third-party developer, which leases the rooftop area from the building owner (or sub-leases from the lessee of the building, if the main lease agreement allows) to install the PV plant, and when construction is complete, the developer leases the physical power plant asset to the building owner (or lessee of the building) for the purpose of electricity generation. Thus, the building owner (or lessee of the building) does not own the power plant. In this model, the PV plant lease agreement is a long-term lease, typically lasting for the entire life-span of the PV plant, and generally includes operation and maintenance services provided by the developer. The developer also guarantees a certain availability ratio of the PV plant. The rent payable by the building owner (or lessee of the building) to the developer for the PV plant asset guarantees a return to the developer on its investment. In this model, the building owner (or lessee of the building) may decide to finance and construct the PV plant itself, in which case the PV plant will be owned by the building owner (or lessee of the building), no third-party developer is involved, therefore no rooftop lease agreement or PV plant lease agreement is necessary. In this model, the generator and the consumer of the electricity is the same entity, no sale of electricity occurs, therefore “Robin Hood tax” is not payable.

In the on-site PPA (or merchant) model, the third-party developer will construct the power plant on the rooftop of the commercial building and provide the financing necessary for the construction. The power plant will be owned by the third-party developer. The building owner (or lessee of the building) and the third-party developer will need to conclude an agreement, most typically a long-term lease agreement, whereby the third-party developer acquires legal title to use the rooftop to develop the power plant there. The third-party developer will need to obtain all necessary permits for the establishment and operation of the power plant and will need to secure grid connection for the power plant. Since obtaining grid connection with a right to transfer electricity to the public grid is a very complex and lengthy procedure, on-site PPA projects prefer to have the power plant connected to a private line established by the building owner (or lessee of the building) and not transfer electricity to the public grid. The third-party developer will conclude a power purchase agreement (PPA) with the building owner (or lessee of the building) whereby the third-party developer will sell the entire generated electricity to the building owner (or lessee of the building). The sale of electricity will be subject to the Robin Hood tax, unless the power plant is participating in any of the state support schemes granted for renewable generation.

Robin Hood tax is payable at a rate of 31% (temporarily 41% in 2024) on the adjusted accounting profits earned from energy production and trade by oil and gas companies, as well as by the electricity sector including electricity producers from renewable resources. However, power plants with a capacity up to 50 MW are not subject to this tax, provided that the electricity is sold in either one of the KÁT or METÁR-KÁT (i.e. mandatory offtake) or METÁR premium support schemes. Only power plants with an installed capacity up to 0.5 MW are fully exempt from this surtax.

It is important to note that as of 1 January 2024, a new type of power plant, the self-supply generating unit (önellátó termelőegység), has been introduced, which is not only a separate category in terms of its capacity, but is specifically designed for on-site power plant projects. The self-supply generating unit is a generating unit with (i) a connection capacity exceeding 5 MW, (ii) connected to the public grid at the existing connection point of a user without capacity for injection into the public grid, and (iii) which shares the electricity produced by its generating equipment with a user connected at the same connection point or with another user or buyer in the same group of companies as the user. The “sharing” of electricity is also a new possibility, which can be either with or without consideration, and may serve to supply other entities located within the same premises. It remains to be seen how much actual demand there will be for such new type, as no practice has yet evolved.

According to another amendment effective from 1 January 2024, it is possible to connect a power plant, developed and operated by a third party, to an existing user's private line, as well as to connect a power plant through a producer's cable to a private line installed on a property directly adjacent to the property where the power plant is located, or even on a property not directly adjacent to the place of use, provided that the installed capacity is 5 MW. In these cases, the electricity generated by the power plant may be consumed both at the place of use where the power plant is located and at the place of use where the private line to which this power plant is connected is located. Therefore, it is possible that the electricity generated by a rooftop PV system could be consumed by the user of the property where the rooftop PV system is located and by the user of an adjacent / nearby property.

A building permit is required to commence construction of the power plant and an occupancy permit must be obtained following the completion of construction. Both are issued by the special building authority competent in the permitting of power plants. The building permit is a document that must be submitted to the regulatory authority (HEPURA) along with the application for the combined small power plant permit, therefore obtaining a building permit needs to be a preliminary step to the permitting procedure. 

In the case of a power plant with an installed capacity not exceeding 0.5 MW (even though a power plant with a capacity equal to 0.5 MW falls within the category of small power plant) that does not transfer electricity to the public grid, a building permit (and consequently an occupancy permit) is not required. 

The power plant may be subject to the limitation set out in the relevant local zoning law as local building regulations may contain restrictions in this regard. If a building permit is required, the authority will examine if the planned development is in line with local zoning regulations. If no building permit is needed, it will be checked by the developer if the construction complies with the local building regulation. If there is a restriction, it is possible to start negotiations with the relevant municipality and to reach an agreement to modify the local building regulation.

The regulatory authority competent in electricity generation is the Hungarian Energy and Public Utility Regulatory Authority (HEPURA). The HEPURA is the competent authority in permitting activities on the electricity market, including power plant development and electricity generation. 

The competent distribution system operator (DSO) and the Hungarian transmission system operator (TSO) also specify the rules (operating and business codes, network codes) with which the power plant must comply.

Various regulatory requirements need to be met to set up rooftop PV systems. The most important from the energy regulatory perspective include obtaining a state authorisation to construct a new energy source (required for projects above 1MW) and a licence to produce electricity issued by the Energy Regulatory Office at the commissioning stage of project development.

Pursuant to the Electricity Act, priority is given to renewable energy producers when obtaining a grid connection right. However, under a law in effect during the period of the state of emergency imposed due to the war in Ukraine, this priority right does not apply to connection applications submitted under the previously applicable and now suspended connection procedure, the so-called "Grid Capacity Tender " and the related joint application assessment procedure. According to a new regulation, the government will develop a new connection regime by 31 December 2024, and no new connection requests for entry capacity can be submitted until that date.

In order to develop a small power plant, a connection to the public grid is required (irrespective of whether the power plant will transfer electricity to the public grid). For this purpose, the power plant developer must enter into a grid connection agreement with the competent distribution system operator (DSO). The grid connection agreement is a document that must be submitted to the HEPURA along with the application for the combined small power plant permit, therefore obtaining a grid connection needs to be a preliminary step to the permitting procedure. 

If the building owner (or lessee of the building), regarding its facility operating in the building, already has an existing grid connection agreement with the competent DSO and the power plant does not intend to transfer electricity to the public grid, the existing grid connection agreement can in some cases be amended to grant a connection right to the power plant at the existing connection point. Such amendment must be agreed with the DSO, with the terms and conditions offered by the DSO based on the technical specifications of the grid. 

In the case of an existing connection point, if the power plant will transfer electricity to the public grid, new and net yet existing rules of the grid connection procedure will apply. 

However, as mentioned above the new rules specify that a small power plant developed by a third-party entity (i.e. other than the user, who is the owner of the existing connection point) can connect to a private line of an existing user (i.e. behind the meter) and can be developed without establishing a new connection point, provided it will not transfer electricity into the public grid, and so is entitled to request connection right before the introduction of the new connection regime.

The construction decree applicable to permitting power plant construction provides that the authority has a deadline of 35 days (if expert bodies need also to be involved, which is generally the case) from the receipt of full application documentation to issue the construction permit. Generally, the preparation of the permitting documentation takes several months.

Apart from the conclusion of a long-term lease agreement, according to a recent modification to the Hungarian Civil Code, it is possible to establish a building right over real estate that must be registered in the land registry for a definite period of time. The beneficiary of a building right is entitled to establish, on or under the land, a building or a structure. The building right can be transferred and encumbered by pledge. The difficulty of concluding a lease or establishing a building right depends on the parties' commercial negotiations. Leases cannot be registered in the Hungarian land registry, hence the written agreement of the parties constitutes the lease. The building right must be registered in the land registry. After submitting the request and necessary documents to the land registry, registration takes place within 60 days. It is notable that a building right agreement cannot be validly concluded with a private individual who qualifies as a consumer (not acting within his/her profession or business enterprise).

According to the Hungarian Civil Code, if the lessor of real estate transfers its ownership following the conclusion of a lease agreement, the new owner steps into the place of the lessor regarding the rights and obligations of the lessor under the lease agreement. The lessor and the new owner are jointly and severally liable to the lessee for the lessor’s obligations under the lease agreement.

This is for the parties to decide. It is typical to stipulate in the lease agreement that: (i) the third-party developer has a put option right and can sell the PV plant to the building owner on its unilateral declaration (especially in the event of early termination due to the lessor's default or termination of the PPA), the purchase price depending on the time of termination (whether there is early termination or termination is due to expiry of the term); or (ii) the developer has the obligation to remove the PV plant at the end of the lease term; or (iii) the building owner is entitled to purchase the PV plant if it so decides at the end of the lease term.

There are no specific regulatory requirements in this respect. Any sharing of costs or benefits depends on the mutual agreement of the parties. Recent lease agreements with green clauses tend to include such regulation, especially that the electricity produced by the landlord is accounted for and paid by the tenant in the service charge.

There is currently no such obligation in Hungary.

The most common obstacle to the development of rooftop or other PV systems is related to securing sufficient grid connection capacity from the relevant DSO or, if the rooftop PV system is only installed to supply electricity to the building (off-grid system), securing the long-term PPA and the obligation of the tenant to purchase the PV system on termination of the lease.

There is no specific support or subsidy for rooftop PV plants. The Electricity Act declares that its aim is to support and promote energy generation from renewable sources. The currently effective renewable energy support scheme was introduced by Government Decree No. 299/2017. (X. 17.) on the Mandatory Offtake and Premium Subsidising for Electricity Produced from Renewable Energy Sources (METÁR Decree). Under the METÁR Decree, the only support that can still be granted is a green premium subsidy entitlement, which is granted in a tender procedure launched by the HEPURA. Currently, there is no open tender. The last tender was launched in March 2022. Support in such tenders can be granted only regarding electricity sold, i.e. not for electricity generated in the self-consumption model.