POWER-GEN Europe brings spotlight to the Hungarianelectric power sector

Privatization is under way as Hungary works to join the European system

By Ann Chambers, Associate Editor

The power generators of Europe converged on Budapest for several days during POWER-GEN Europe `96 in June, and the Hungarian electric system came under close scrutiny. In the keynote session of the technical conference, György Hatvani, member of the board of MVM Rt., gave a sketch of the system.

Eight power station companies, six power distribution companies and the Magyqar Villamos Muvek Rt. (MVM Rt.) supply Hungary`s power. Total installed capacity of the Hungarian power system was around 7,500 MW in 1995, of which the public power stations represented about 7,300 MW and industrial power stations the remainder. Oil- and gas-fired power stations have a capacity of 3,500 MW, of which the 10 biggest were built in the 1970s at Dunamenti and Tisza Power Stations. These account for approximately 28 percent of the installed capacity. The others are smaller, heat supply, district heating power stations. The first 150 MW combined-cycle gas turbine unit was commissioned in 1994 at the Dunamenti Power Station. Two additional combined-cycle gas turbine units were installed at the Dunamenti Power Station and at Budapest Power Station. Hungary also has approximately 2,000 MW of coal-fired capacity. The largest coal-fired power plant is Matra Power Station with 800 MW, burning domestic lignite. The others burn mainly brown coal.

Hungary`s only nuclear power station is Paks, beside the Danube. At Paks, four VVR 440-type units are in operation with 460 MW capacity each. Availability of the plant is high, and Paks is regularly inspected by the International Atomic Energy Agency, helping to ensure its safe operation. Hungary has only small hydroelectric power stations, totaling 48 MW. In 1995 the country`s electricity demand was 36 TWh, less than 1989`s record-setting peak load of 5,731 MW. The nuclear station, at highest utilization of 14 TWh annually, accounts for approximately 40 percent of the domestic demand. Import power exceeded 11 TWh (or 27 percent) in 1989 but has fallen back to only 6 to 7 percent. Electrical energy consumption in Hungary decreased by approximately 15 percent between 1989 and 1992, then after a two- year stagnation period, increased by about 2.5 percent in 1995. Consumption grew by 5.8 percent in the first quarter of 1996, due partially to a colder winter.

A new era

“By the new Electricity Act and the connected regulation coming into force, as well as by the establishment of the Hungarian Energy Office, the development of the new regulating system could be started,” Hatvani said. “Development of this regulating system was considered as a basic condition of the privatization of the electricity industry that is destined to guarantee the clear-sightedness of investors in the long-term assessment of business opportunities.” The new regulating system includes the Hungarian Energy Office`s responsibility for issuing operational licenses to utilities and subsidiaries, regulations and requirements guaranteeing the cooperation of the electricity system and the operational cost, and stipulation for standard business operation, including purchasing, limits on consumption, billing and rate paying, consolidation of price regulation and consumer protection (including least-cost planning) and a review of the heat supply and heat price regulation.

Privatization is under way. The invited property shares of the six power distribution companies as well as the Matra and Dunamenti Power Station companies have been sold, on average at about 130 percent of the face values. The new owners are European power companies and consortiums. To date, five power stations and the MVM Rt. have not been sold, due to low offers or offers not meeting the conditions for sale. A new invitation for bids on these items is expected by the end of the year.

Development strategy

The long-term power plant development strategy in Hungary, as developed by MVM Rt. has the following goals: improve the economy of the power plants to let the transmitter and the suppliers obtain electricity at the lowest price; diversify primary energy sources to an extent so that on long term, fuel supply will have acceptable risk; form a system with operation to meet the flexibility and reserve requirements of the Western European electric power system (UCPTE); meet current environmental protection norms; consider only those power generating units which can be installed and operated safely, and which can be licensed and accepted on long term by the public; and develop capacity to fulfill the quantitative and qualitative requirements of electricity demand and the national economy.

The mean projected capacity increase for Hungary through 2010 is 100 to 160 MW. “A major problem is the replacement of power units to be discarded due to physical obsolescence, environmental protection reasons or inefficient operation. According to our examinations, about 3,000 MW of capacity replacement has to be carried out until 2010, of which 1,600 to 1,800 MW is probable in the first five years of the next century,” Hatvani said. When considering unit retirements and increasing demand, 4 to 5.5 GW of new power plant capacity will be needed in Hungary in the next 15 years (Figure 1).

Dr. Szabolcs Fazakas, secretary of state, Hungary Ministry of Industry and Trade, said, “Hungary is a country poorly endowed with energy resources, and even our scarce sources are coming close to exhaustion. The greater portion of our energy needs–some 65 percent if account is taken of the fuel elements of the nuclear power station–is covered by import.”

Hungary is working to achieve the level of fuel diversification, plus several other stipulations, to integrate into UCPTE (Figure 2). The nation took the first steps in 1990, agreeing to join with the Czech, Slovak and Polish electric power systems.

In the fall of 1992, Centrel was established as an association of the electric power companies of the four countries wanting to join; UCPTE formulated the conditions of accession; in November 1993, Centrel separated itself from the Eastern European system and has been operating independently; on Sept. 13, 1995, the former East German electric power system joined UCPTE, weakening the western orientation of Centrel; and following technical tests which proved Centrel was mature for the joining, the system entered parallel operation with UCPTE on Oct. 18, 1995.

The ultimate joining of the systems is subject to meeting the UCPTE requirement calling for the creation of a secondary regulation reserve of an appropriate size. “Under our energy strategy, the greatest task is to bring in harmony the necessary development of the power station network and the process of privatization currently proceeding in Hungary,” Fazakas said during his POWER-GEN keynote address. “The development of the electric power system must be realized, in the spirit of the regulatory system, so that the necessary electric power could be produced or procured at the lowest possible cost and the functioning of the system should be in accordance with the ever-stricter environmental regulations and the expectations attached to our link-up with the Western European electric power system.” END

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The Chain Bridge over the Danube in Budapest, Hungary

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More than 5,000 attendees from more than 60 countries visited POWER-GEN Europe in Budapest for the technical conference, exhibition, plant tours and interactive panels.