Publications / Hungarian Energy Market Report
REKK Hungarian Energy Market Report 2015 Q4Published: 8 of March, 2016
Domestic renewable energy generation: 2020 targets and perspectives | Future ofnuclear energy | Rethinking LNG markets – the effect of LNG supply surge in Europe | Nord Stream 2: Downgrading Europe’s Security ofSupply Where it Matters

Table of contents

Domestic renewable energy generation: 2020 targets and perspectives

According to Directive 2009/28/EC (hereafter: Directive), the share of energy generated from renewable sources in Hungary has to increase from what is currently about 10% of the total gross energy consumption of year 2020 to at least 13%. At the same time the National Renewable Energy Action Plan of Hungary (NREAP) boosted this target to 14.65%. However, it is the obligatory 13% target of the Directive that is important. If the renewable ratio exceeds this level, then Hungary can sell the difference to another EU member state through a statistical transfer. If, however, Hungary fails to reach the targeted renewable ratio, it will have to purchase the deficit from a country in surplus, which could cost more than domestic renewable production.On top of the 13% renewable ratio, the Directive requires that by 2020 each member state should secure at least 10% of the energy consumption of its transport sector from renewable sources (biofuels and renewable based electricity). No additional sector specific obligatory target is set by the Directive, meaning the separate heat and electricity targets of the NREAP should only be viewed as guidance.

Future of nuclear energy

Nuclear power production is one of the most contradictory segments of Europe’s energy policy. On the one hand, it is regarded as the solution to security of supply concerns as one of the most efficient tools of climate protection, while it is also seen as the bearer of unforecastable environmental and financial risks, on the other. There are countries that support nuclear power plant construction with extensive regulatory reforms and financing, while others impose special taxes on nuclear power plants, moratoria on new investments or force their closure. These contradictory effects may equally lead to a renaissance of nuclear power plant construction or to the total disqualification of the technology. Although we cannot predict the future trends, we can take into account the previous years’ experience and analyse possible scenarios as to the direction of European nuclear power plant production.

Rethinking LNG markets – the effect of LNG supply surge in Europe

In 2015, a number of global market developments indicated that the typical dynamics of LNG markets observed in the 2011-2014 period are about to experience profound and lasting changes. The age of high Asian prices and the nearly insatiable demand of far eastern markets is in its decline. Typically, the lion’s share of LNG cargoes were delivered to the Pacific basin, more specifically to Japan, South Korea, and in a lesser extent to China and Taiwan. Following the Fukushima disaster, Japan replaced its missing nuclear generation with fossil fuels, and paid an extremely high premium for gas obtained on the spot market. However, 2015 brought the winds of change: two units of the Sendai NPP came back online and more nuclear capacities are to follow. Besides this phenomenon, Japanese companies have contracted the future Australian natural gas production to allow favourable prices compared to their existing oil-indexed long-term contracts and spot deliveries. Slowing economic development in the East-Asian region coupled with the LNG supply surge of 2015 resulted in depressed price levels in Asia. Demand became tighter in the previously lucrative markets, and the surplus gas volumes started to trickle down to Europe.

Author: Péter Kotek
Nord Stream 2: Downgrading Europe’s Security of Supply Where it Matters

Nord Stream 2 is the latest Russian incarnation intended to bypass Ukraine and bring Russian gas directly to Europe’s borders. It would double the existing Nord Stream capacity to 110 bcm/year with two additional strings between Russia and Germany under the Baltic Sea. In spite of a recently signed shareholders agreement between Russian gas giant Gazprom and five European firms and unflinching German support, Nord Stream 2 remains subject to considerable legal and regulatory oversight at the discretion of the European Commission.

Author: Nolan Theisen