The entire European energy landscape has been undergoing rapid change in the last 10 years, with the European Commission eager to expand green energy sources and reduce CO2 emissions and the spread of distributed, if weather-dependent, power sources.
In Hungary, this is best illustrated by the rapid development of solar photo-voltaic (pv) generation in what Artúr Böröcz, KPMG’s director of energy and utilities, terms the “democratization” of power generation.
As Böröcz told a joint British Chamber of Commerce in Hungary-KPMG business forum in September: “If you think about the fact that, some time ago, you needed multi-billions of euros to build a large-scale power plant. Then, as renewables came into play, it was already enough to have some hundreds of millions of euros for solar PV and wind energy parks. Nowadays, as a private person, you can take EUR 10,000 and have your own power plant on your rooftop. I’ve simplified it a bit, but this is the direction.”
Indeed, solar capacity expanded by 673 MW, or 11%, in the first half of this year to a little over 6,700 MW, a figure that includes some 275,000 households and small PV plants, Hungarian media reported in July
These figures have pushed Hungary up among the EU leaders in terms of renewable energy production, Böröcz noted.
“This year, we have reached already, in certain [summer day] time periods, the case that, more or less, solar PV generation has been able to cover the entire country’s demand,” he said.
Meanwhile, driven by the need to replace existing generation capacity, along with increased demand envisaged by the rapid expansion of both electric vehicles and battery manufacturing plants (which have significant power demands), the government has been working to radically expand and enhance the country’s generation capacity in what could mostly be termed “traditional” generation facilities,
Böröcz highlighted four major ongoing projects, the most important of which is the expansion of the Paks nuclear plant.
Designated Paks II, the two new Russian-designed reactor blocks will add 2,400 MW to state energy company MVM’s base-load capacity, creating Hungary’s largest single power facility in an investment which KPMG puts at EUR 10 billion-15 bln.
Almost in parallel with this, MVM is planning to extend the life of the four smaller reactors which comprise the Paks I station at an estimated cost of EUR 1 bln-2 bln. Assuming this goes ahead, and according to Böröcz, MVM specialists have indicated they are optimistic in this regard, Paks I’s 2,000 MW capacity will remain online into the 2050s.
(The Paks I reactors, first commissioned in the 1980s, have already had their original 30-year design life-span prolonged by 20 years in a first extension project.)
In addition to the two nuclear projects, the government is also actively planning to build three new gas-fired combined cycle gas turbine (CCGT) generation facilities with a combined capacity of 1,500 MW, representing a total investment estimated at between EUR 2 bln-3 bln.
The fourth project identified by Böröcz is less traditional, at least in Hungary. As he put it: “Hydro power has been a very disputed topic in Hungary since the end of the ’80s.” This was a period when public antipathy focused on the partially built, joint Czechoslovak-Hungary Gabčíkovo-Nagymaros Danube hydro-electric scheme. (Hungary unilaterally pulled out of the project in 1990, leading to an international dispute with Slovakia, which was then in the process of becoming an independent state.)
However, the new project involves two, far less ambitious, “pumped-storage” hydro-power schemes with a total capacity of 600 MW, both planned to be located in northeast Hungary representing a total investment of between EUR 1 bln-2 bln. (See “Pumped-storage Explained.”)
Naturally, at least on paper, all these developments bode well for Hungary to be able to reduce its dependency on electricity imports, indeed, to potentially become a net power exporter, while simultaneously cutting its greenhouse gas emissions.
But there are complications, not least from the increase in solar generation capacity going offline at night, as well as the massive number of small PV producers.
“The entire system has been getting incredibly complex in the last years, the decentralized systems generate immense amounts of data […] and conventional methods are not sufficient to steer and control the entire system,” Böröcz told the forum.
Moreover, the system has to maintain capacity to back up the intermittent, weather-dependent generators, in Hungary’s case, most particularly the heavy use of solar generation.
According to KPMG’s estimates, by 2035, the average daytime solar capacity will be in excess of 3,000 MW, “around half of the generation of the country, and this generation is half of the usual consumption, and this will all disappear at night […] so you will have a huge dispute [over] who will take responsibility for the system balance,” Böröcz said.
The “obvious” solution is that the distributed systems will have to take a much more important role in system balancing but, in parallel, the infrastructure, the grid, the “backbone of the entire system, also needs to change,” he argued.
“Grid infrastructure is a very capital intensive and we can say a bit old-fashioned business, which moves very slowly, like a giant elephant, but nevertheless the environment is forcing this elephant to move and respond faster,” he said.
While a solution will surely be hammered out, Böröcz said industry players are already having difficulties planning for the future.
“We can already see this in our practice. Recently, I had a chat with one of the relevant power companies which has certain challenges in some modeling processes, and they have so many data with such high complexity that, most obviously, the way to sort it out [is that] they will have to deploy solutions involving large models and AI and so on. Otherwise, with conventional tools, it will not be possible to sort it out,” he concluded.
Pumped-storage hydro stations use power which is surplus to normal demand requirements (typically in the early morning hours) to pump water from a lower reservoir to a second located at a higher elevation. This stored water is later released to drive the system’s turbines as and when required to meet periods of peak electricity demand and to help balance the available generating capacity with demand fluctuations.
Because nuclear stations work most efficiently under constant, full power conditions, pumped-storage capacity is ideal to absorb the excess power generated by nuclear stations at times of low electricity demand, typically during summer nights.
As KPMG’s Böröcz puts it, given the massive increase of nuclear capacity created by the building Paks II and extending the life of Paks I, “the need is there to construct these [schemes] […] already two preliminary drillings have been performed, so the site selection is already under process, and these will be the backbone of the system.”
This article was first published in the Budapest Business Journal print issue of October 4, 2024.
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