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Regulation slowing investment in renewable energy

Analysis

The government has enacted two decrees intended to slow down investments on the state-supported renewable energy market, department head of the Hungarian Energy Office Péter Grabner said yesterday. The first decree, enacted in the summer, lowers the price at which the Hungarian Electricity Works (MVM) must purchase electricity from co-generation power plants, which produce both heat and electricity to achieve maximum efficiency, by 10% from 2007. The second decree, enacted in September, freezes the amount of electricity produced using renewable resources that MVM must purchase at the current level. MVM pays significantly more for the electricity generated using renewable resources and passes this cost onto consumers. Of the Ft 27.30/kWh MVM charges for electricity on the regulated electricity market, Ft 2.07 goes toward subsidizing the purchase of electricity generated using renewable resources. Some of this electricity is sold to MVM for nearly twice the average wholesale price. In 2005, MVM purchased 51.5% more electricity generated at co-generation or biofuel-powered plants than a year earlier. Electricity generated in Hungary using renewable resources accounted for 4.5% of total consumption at the end of 2005, well over Hungary's pledge of 3.6% for 2010. (Econews)

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