As part of a new national energy programme that is aimed at paving the way for the country’s eventual integration into the European Union’s (EU’s) competitive electricity market, the Hungarian government has recently said that it has decided that it will enter into no more power purchase agreements.

The move is expected to affect the construction of new coal-fired facilities and it will boost the use of natural gas, many observers believe. More immediately, it will affect the viability of a number of planned private sector coal-fired projects including the Bukkabrany plant which was to have been constructed by a RWE-led German consortium.

When Hungary joins the EU, it will be expected to liberalize at least 28 per cent of its electricity market. However, if its accession is delayed until 2003, this amount will increase to 32 per cent. Liberalization will also involve equal access for generators to the transmission and distribution networks. This may eventually enable companies to build merchant plants which sell power without a firm power purchase agreement, but the economic climate is still too unsettled in the short-term.

Without new power purchase agreements, virtually all of Hungary’s coal-fired power plants are expected to close by 2004. With coal currently supplying around 25 per cent of the country’s electricity, the expected shortfall will be taken up by imports, according to the Hungarian Electrical Works. It has been estimated that imports may account for as much as 15 per cent of the total power consumption by 2010.