The Hungarian Electricity Transmission System Operator Ltd. (MAVIR or TSO) held a public consultation on 24 February 2022 on the long-awaited, high profile final rules for the connection of power plants to the transmission grid. Contact online >>
The Hungarian Electricity Transmission System Operator Ltd. (MAVIR or TSO) held a public consultation on 24 February 2022 on the long-awaited, high profile final rules for the connection of power plants to the transmission grid.
As we reported earlier this year, with effect from 1 April 2021, new, competitive capacity allocation principles were introduced in the Hungarian Electricity Act, bringing conceptual changes to the previous system. This was motivated by the emergence of a large number of new weather-dependent power plants connected to the grid, on the one hand, and by the harmonisation of practices between MAVIR and the relevant distribution system operators (DSOs) on the other hand. In view of this, MAVIR, in cooperation with the DSOs, decided to modify the grid connection rules in two steps: the so-called “transitional” rules would be replaced by the so-called “final” system, once the necessary legislative mandates and detailed rules have been adopted.
Based on the consultations between industrial and governmental stakeholders, the final capacity allocation system of the transmission system is expected to be established on 30 April 2022, when the amendment to Government Decree No. 273/2007 (X. 19.) on the implementation of Act LXXXVI of 2007 on Electricity (Implementing Decree) will be published, which, in addition to the amendment of the MAVIR rules, would also serve as a basis for the adoption of the “final” system under the unified Distribution Code.
The new unified procedure for connection to the transmission grid is expected to be cyclical, with a six-monthly frequency, with two ways to access free capacity: a “publication procedure” or an “individual procedure”. The first publication procedure is expected to be launched on 2 May 2022. From that date, the majority of stakeholders will therefore have the possibility to apply for the free capacities by filling in and submitting the form published by MAVIR and by paying the relevant cash deposit of HUF 900,000/MVA (ca. EUR 2,500/MVA) as security for their application.
For participants in the so-called individual procedure, slightly different rules will apply. A power plant whose connection demand exceeds the published available capacity at the relevant grid node may switch to the individual procedure by submitting the appropriate form within the deadline for the application of the publication procedure. In addition, a stakeholder whose connection demand is likely to require the construction of a new grid node may apply for an individual connection procedure without a time limit. It is expected that the processing of individual applications will be aligned with the timing of the publication procedure that will expire closest to the date of submission.
For successful applicants in the first capacity allocation round, MAVIR will issue a “technical economic information sheet” (MGT) by 6 June 2022 at the latest, after which, depending on whether the power plant is involved in a subsidy regime or not, there will be a period of approximately 10 to 30 days for the applicant concerned to make the necessary declarations and pay the second cash deposit of HUF 3,600,000/MVA (ca. EUR 10,000/MVA). It is essential that in the event of an unsuccessful capacity request, the applicant would not automatically be deprived of the available capacity: they can switch to the individual procedure, provided that they fulfil the necessary conditions and indicate their request on the appropriate form and submit it in due time.
An important difference with respect to capacity requests for conventional power plants is that for weather-dependent plants, MAVIR will also take into account the operational safety limit when allocating capacity, which can be exempted in certain cases (see below).
Individual storage facilities are expected to be able to apply for grid connection only through an individual procedure.
In the case of the modification of an existing feed-in capacity right, the general procedure will not apply, as described above. In this case, only the grid connection contract will need to be amended, except that for weather-dependent power plants it will be necessary to verify whether the power plant meets the operational safety limit or whether it fulfils the criteria for exemption from this limit.
As mentioned above, in the new grid connection procedure, the operational safety limit (i.e., the limit on the solar and wind capacity that can be accommodated in the electricity system) will also have to be taken into account for weather-dependent power plants when allocating capacity. MAVIR will set the limit on the basis of the balance of the electricity system and available balancing capacities, mainly by taking into account public data available on its website and new accreditation requirements.
MAVIR will reject capacity requests exceeding the operational safety limit unless the weather-dependent power plant exercises the option to be exempted from the limit, subject to the plant’s ability to assume aFRR regulatory responsibilities as set out in Annex 9.1 of the newly effective MAVIR Operational Code. It is expected that a time period of 3 months will be available to demonstrate this ability.
As a result of the amendment of MEKH Decree No. 10/2016 (XI. 14.) on the rules of application of electricity system usage fees, connection fees and special fees, MAVIR will include various indirect costs in the grid connection fee in addition to the direct investment costs of the connection. Such indirect investment costs may include those parts of the investments in the public grid which do not exclusively allow the connection of the plant requiring the connection, taking into account the minimum technical requirements laid down in the operation and distribution rules.
In the interest of transparency, MAVIR and the DSOs will set up a common register of network developments in the area of the DSOs.
A new government decree on the application of Act No. LXXXVI of 2007 of Hungary on electricity during emergency situations was published in the National Gazette of Hungary (see Government Decree No. 526/2022. (XII. 16.) in Hungarian Gazette No. 208/2022.), the main purpose of which is to further tighten the rules for the connection of the affected, essentially weather-dependent power plants to the grid. The newly adopted rules also affect market players with existing, granted or expected grid connection rights, and may even lead to the loss of such rights in the case of non-compliance.
The government decree applies to market players (applicants, network users) who, on the date of entry into force of the decree, i.e., 1 January 2023:
but their power plant has not yet been connected to the grid (i.e., the power plant has not yet started production). In general terms, system users holding a licence in principle for a power plant which has a significant impact on the operation of the electricity system (i.e., in essence, license holders of power plants with a nominal capacity exceeding 500 MW) are excluded from the scope of the decree.
Network operators must inform the Old-Type Applicants of their obligation to make the foregoing declaration no later than the second working day following the date of entry into force of the government decree, i.e., by 3 January 2023. The notification shall be sent by electronic mail to the last electronic contact address for electronic contact purposes provided by the market player or to the electronic contact address of the entity as indicated in the company register. It is important to note that the notification of the network operator is for information purposes only and that the receipt of the notification by the applicant is not a condition precedent for the obligation to make a declaration to take effect.
Old-Type Applicants must send the declaration by electronic means in a scanned, duly signed form or in a certified electronic document, in accordance with the template published by the network operator, indicating the reference number of the grid connection agreement or the technical economic information sheet, to the email address specified by the network operator.
If the Old-Type Applicant declares that it does not wish to use the connection, the possibility to use the connection and the right to dispose of the connection shall cease on the day following the expiry of the deadline for making the declaration. In such a case, the network operator shall refund the financial security previously provided under the distribution or operational code within 30 days and shall settle any connection fee already paid with the applicant.
In making the declaration, Old-Type Applicants may indicate a calendar year later than the 3 or 5 year deadline set in the Electricity Act as the calendar year for the use of the connection, but the indicated calendar year may not be later than 2027, subject to the following limits:
On the basis of the declarations, network operators shall determine from a technical point of view, pursuant to the conditions of the operational code relevant for the assessment of individual applications, which grid developments are necessary as indirect connection investments in order to use the connections under the declarations. On the basis of the expected completion of the identified grid developments, network operators shall then determine the earliest calendar year for the use of the declared connections, which may be later than the date indicated in the declaration, but not later than 2027 (with a view to the limitations set in Section 3), in accordance with the order of the dates of use indicated in the declaration.
It is important to note that if the Old-Type Applicant successfully justifies any of the following circumstances, the calendar year indicated in the declaration for the connection cannot be changed by the network operator:
It is important to note that if the market player does not prove the above circumstances in the ways listed, the network operator will not take them into account.
If the applicant is not obliged to pay a financial security in respect of the previously paid security or connection fee (see Section 8) and the network operator specifies a later calendar year than the calendar year indicated by the applicant in the declaration in its notice, the applicant shall declare its acceptance of the new connection date offered by 13 February 2023 at the latest.
It is also important to note that, on the basis of any newly defined necessary grid developments, the grid connection fee previously set for the market player concerned cannot be increased due to possible changes in technical content.
The network operator shall inform the applicant concerned electronically by 6 February 2023 at the latest of the acceptance or modification of the calendar year indicated in the applicant’s declaration and of the detailed rules for the payment of the related financial securities. The network operator shall provide the information by electronic means to the electronic contact address of the applicant indicated in the declaration submitted or, in the absence thereof, to the electronic contact address specified in Section 2, in such a way that its delivery can be verified.
The earliest date for the use of the connection – the commissioning date – is the 30th day of the first month of the calendar year indicated in the network operator’s notice, before which the applicant is not entitled to use the connection.
The foregoing timeframe cannot be modified unilaterally or by mutual agreement of the parties, nor can any other extension options provided by law be applied.
For the affected power plants,
shall be extended until the new deadline for applying for connection, if those would expire earlier. However, it is important to note that the deadline for the start of commercial operations related to the premium-type support awarded under the tender procedure will only be extended if the performance security related to the support entitlement remains valid for 4 months after the extended deadline, and this is duly certified to the Hungarian Energy and Public Utility Regulatory Authority.
The basis for the calculation of the financial security shall be the feed-in capacity specified in the Old-Type Applicant’s grid connection contract, technical economic information sheet or grid connection plan, unless the applicant decides to use the connection with a lower feed-in capacity than previously specified, in which case the amount of the security shall be calculated on the basis of the lower capacity so specified.
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