Energy 22 August 2023, 9:50am

Government would boost domestic solar panel production

Major András

The government would support the construction and development of green industrial production capacity in Hungary through a new HUF 200 billion investment tender to be launched soon, according to the REPowerEU chapter of Hungary's Recovery and Resilience Plan, which was published by the cabinet for public consultation and also supports the transition away from Russian fossil fuels. Production capacity development and service expansion that results in a product or service that contributes to the green transition, such as heat pumps, solar panels or "alternative vehicles" and their components, including batteries, can be supported.

As Portfolio reported, the REPowerEU chapter outlines how the government intends to use the total EU funding of around HUF 2,600 billion, once it is available, through 14 reforms and 14 investments. The plans include allowing all residential electricity consumers to buy electricity at dynamic (variable) pricing above the annual consumption of 2523 kWh per year, the annual price protected price; a new residential energy efficiency tender scheme; the removal of regulatory barriers to the creation of energy communities; and a standardised grid connection procedure for renewable power plants, typically solar or wind.

One of the government investment plans set out in the document aims to build up domestic green economy manufacturing capacity, i.e. the construction and development of manufacturing and service capacities essential for renewable energy investments in Hungary, with non-reimbursable aid in the form of a grant application, with a maximum aid intensity of 50%.

According to preliminary data from the International Energy Agency (IEA), 58% of global energy investments in 2022 were clean energy investments, and these investments will account for three quarters of the annual growth rate of energy investments. The back-end industry needs to match this and become capable of producing the right investment goods, the government stresses in the document, in line with EU targets.

The investment is directly linked to the REPowerEU Objective 4, i.e. to support the value chains of critical technologies related to the green transition, and follows the intervention logic of the European Commission's Net Zero Industrial Initiative, which also has as one of its objectives to build European economic capacity as a basis for the deployment of renewable technologies.

The intention behind this objective, also at EU level, is that Europe, learning from the experience of over-dependence on Russian energy, should reduce its vulnerability to China, which is globally dominant in the production of clean energy technologies such as solar cells and batteries.

In Hungary, certain technologies are still essentially only present on the user side, for example, the solar panel manufacturing segment is currently only represented by EcoSolifer's Csorna solar panel factory in Hungary. However, there is potential for Hungarian companies to produce and even develop various renewable technologies - the government would help to exploit this potential in practice by investing in the production of solar panels, which would enable more and more companies to produce the advanced technologies needed for the green economy and to provide related services (e.g. maintenance, servicing).

Manufacturing capacity development and service expansion (e.g. switching from gas appliance installation to heat pump installation and maintenance) that results in a product or service that contributes to the green transition may be eligible. For example, the following are potentially eligible for a grant:

the production of technologies that enable the production of renewable energy devices for the energy transition (e.g. heat pumps, solar panels, solar collectors, electrolysers, alternative vehicle and refuelling infrastructure and their components (i.e. even batteries - ed.), or the production of renewable fuels (e.g. biogas) and related services (e.g. IT developments related to the technology transition),
the development of back-office services related to the green transition (e.g. maintenance and servicing of equipment).

Aid may only be granted for the production of equipment, materials and products or the provision of related services in the following areas:

the use of renewable energy in electricity and heat production,
increasing energy efficiency (excluding gas appliances),
development of the electricity network,
demand side management applications,
residual heat recovery and heat pump production,
CCUS technologies and related infrastructure,
energy storage,
production and use of biogas and biomethane,
use of biomass,
production and use of hydrogen and its derivatives,
activities related to alternative green mobility (e.g. vehicle production, production of charging equipment), and
the installation of IT applications necessary to operate all these functions.

The aid is therefore not for listed activities, but for the production of tools, equipment and IT applications necessary to carry out those activities, including the provision of related services.

As well as creating manufacturing capacity to produce new renewable energy equipment, components and other green technologies, the development will also have the potential to upgrade and increase the capacity of existing manufacturing capacity through the necessary technology change.

Eligible activities:

acquisition of new (production) equipment, machinery, development or expansion of new or existing technological systems and capacities, including the development of automated production systems,
investment in infrastructure and real estate (in the case of the development of existing production capacity, only expansion, conversion, modernisation),
pilot development, or
the use of renewable energy technologies only in a complementary manner (if directly serving the activity under the first point above), to meet the economic production processes and on-farm energy needs of the plant by generating renewable energy.

The aim of the investment is to increase the number of companies with the capacity to produce or provide green technology or services to 5 by the third quarter of 2025 and to 35 by the second quarter of 2026.

The call for proposals is expected to be launched in the third quarter of 2023; grant contracts are expected to be signed in the second quarter of 2024 and supplier contracts in the second to third quarter of 2024; the deadline for closing the investments is the end of the second quarter of 2026.

Beneficiaries of investments supported by the Economic Development and Innovation Operational Programme EDOP Plus 1.3 and the Fair Transition Fund under the Enterprise Development measure and implemented under the HET IPAR component are not eligible to apply for support under this investment.