“Trading volumes reached a peak at HUPX this July,” Krisztina Iványi, communication manager of the Hungarian power exchange announced. As opposed to 10,500 MWh, the typical trade volume of an average day in June, on July 4, 15,500 MWH of electricity was traded. In the unanimous opinion of energy experts, the reason behind the increased turnover is the small plants’ entry into the market.

This was stimulated by the modification of the Electrical Energy Act in June, which brought about enormous changes in the lives of Hungarian companies which co-generate heat and electricity (CHP). Since the beginning of July, state subsidies were abolished as well as the state’s obligation to buy the energy. Meanwhile small power plants receive state help in marketing their co-generated electricity through HUPX, and 92 of 162 companies concerned have taken the opportunity.

However, Gábor Bercsi, president of Hungarian society for co-generated energy (MKET) doubts whether the smaller plants trying their luck at HUPX will be able to reach a profit through trade. As far as spot prices are concerned, the first data are not too promising.

“Electricity commodity prices had already dropped before the entry of small CHP producers, and they may plummet further if new suppliers appear on the scene. The most profitable, HUF 18-20 per MWh price that can be achieved during peak time (between 6 AM and 10 PM) is barely covers production costs,” Gábor Bercsi said.

Furthermore, several producers are forced to sell their electricity even cheaper than this, as they have to start heat production before 6 AM in order to supply hot water to households, he added.

For large CHP plants, legislative changes have had a negative effect. Their earlier subsidies have disappeared, and they received nothing in return.

For Nicolas Katcharov, CEO of Budapest power plant company BERT, the largest district heat producer, the discrimination of 50 MW CHP producers and their customers is problematic. “In Budapest, BERT provides district heating to large communities, so its power generating capacity is necessarily larger, too. This, however, should not serve as pretext for negative discrimination,” he argues.

Since the Hungarian Energy Office is still working on the new regulations concerning CHP, such firms currently cannot predict what kind of financial environment they will have to operate in.

At BERT, the price cap regulation on district heating has already produced a total loss of approximately HUF 600 million, which could rise to HUF 2.8 billion if it stays in place until the end of the year.

This, Nicolas Katcharov warns, could jeopardize the steady supply of district heat for Budapest residents.