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Hungarian power market forecast: not much light in the future

The Hungarian energy market is stagnant and unlikely to grow, says a new report by Companiesandmarkets.com. Hungary is now ranked seventh, ahead only of Slovakia and the Czech Republic, in the updated Power Business Environment ratings, thanks to its limited market size, modest growth prospects, high level of energy import dependence, and limited progress towards the use of renewables.

Hungarian power generation will account for 1.46% of Central and Eastern European (CEE) regional output by 2014, with the country remaining a net importer of electricity from neighbouring states during this time, says a new report by Companiesandmarkets.com. CEE power generation in 2009 was an estimated 2,534 terawatt hours (TWh), representing a decline of 2.9% from the previous year's level. The analysts are forecasting a rise in regional generation to 2,969TWh by 2014, a 2010-2014 increase of 14.4%.

Regional thermal power generation in 2009 was around 1,284TWh, accounting for 50.7% of the total electricity supplied in the CEE. Their forecast for 2014 is 1,455TWh, implying 11.6% 2010-2014 growth that reduces only slightly the market share of thermal generation to 49.0% - in spite of environmental concerns promoting renewables, hydro-electricity and nuclear generation. Hungary's thermal generation in 2009 was an estimated 21.0TWh, or 1.64% of the regional total. By 2014, the country is expected to account for 1.68% of thermal generation.

Gas is the dominant fuel in Hungary, accounting for an estimated 42.6% of 2009 primary energy demand (PED). It is followed by oil at 30.9%, nuclear at 13.5% and coal with a 10.7% share of PED. Regional energy demand is forecast to reach 1,546mn toe by 2014, representing 13.8% growth over the period 2010-2014. Hungary's estimated 2009 market share of 1.84% is set to ease to 1.78% by 2014. Hungary's estimated 14.5TWh of nuclear demand in 2009 is forecast to reach 15.8TWh by 2014, with its share of the CEE nuclear market falling from 4.27% to 3.43%.

Hungary is now ranked seventh, ahead only of Slovakia and the Czech Republic, in the updated Power Business Environment ratings, thanks to its limited market size, modest growth prospects, high level of energy import dependence, and limited progress towards the use of renewables. Country risk factors offset some of the industry weakness, but Hungary seems destined to jockey for position near the bottom of the table for the foreseeable future.

Companiesandmarkets.com analysts forecast Hungarian real GDP growth averaging 2.8% a year between 2010 and 2014, following an assumed decline of 6.3% in 2009. The country's population is expected to contract from 10.0mn to 9.9mn over the period, but GDP per capita and electricity consumption per capita are forecast to increase by 29% and 12% respectively. Hungary's power consumption is expected to increase from an estimated 36.2TWh in 2009 to 40.6TWh by the end of the forecast period. Distribution losses in excess of 4.0TWh require continuing net imports, even assuming 2.7% annual growth in power generation between 2010 and 2014.

Between 2010 and 2019, they are forecasting an increase in Hungarian electricity generation of 28.6%, which is one of the slowest projected growth rates for the CEE region. This equates to 13.1% in the 2014- 2019 period, down from 13.7% in 2010-2014. PED growth is set to rise from 12.3% in 2010-2014 to 13.9%, representing 27.9% for the entire forecast period. An increase of 200% in hydro-power use (from a low base) during 2010-2019 is one key element of generation growth, with nuclear usage up by 24%. Thermal power generation is forecast to rise by 13.1% between 2010 and 2019.

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