Hungary Power Report Q2 2016
BMI View: Hungary's power sector is well developed, with an extensive national supply grid, includingcross-border interconnections, and significant domestic generation and capacity. We expect consumption togrow only slowly over the forecast period and this, along with government measures to keep electricityprices well below the regional norm, is deterring investors from committing to new power projects. Withfew projects in the pipeline, we expect total generation to increase only incrementally between 2016 and2025. As such Hungary will remain heavily reliant on nuclear power and natural-gas fired power whichtogether account for almost 75% of domestic generation, with limited renewable capacity.
Latest Updates and Structural Trends
Hungary's government has reiterated its commitment to expanding nuclear power capacity via theconstruction of new reactors at Paks. The works have come under criticism from environmental actiongroups and neighbouring states such as Austria. The project has also been investigated by the EuropeanCommission.
Development of the South Stream gas pipeline may be delayed following news Gazprom has terminateda contract on the construction of a section of the pipeline. The EUR16bn (USD17.3bn) scheme, initiallyslated to be commissioned by end-2015, was expected to reach full capacity of 63bn cubic metres a yearby 2017. The European Commission noted the pipeline project runs counter to the EU law, followingwhich Bulgaria suspended construction of its land until the scheme conforms to the EU requirements.
The project pipeline remains restricted and as such we are maintaining our current forecasts for minimalgrowth of less than 1% annually in total generation throughout the forecast period, with small gains innuclear, natural gas and renewables power compensating for declines in oil and coal fired generation.
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