Hungary: electricity from biogas and biomass — METÁR, KÁT and the brown premium. An overview of the system

Hungarian electricity from biogas and biomass is currently supported by three mechanisms: the METÁR system with premiums awarded in auctions, the expiring KÁT system for existing installations and the so-called brown premium for plants that have exhausted their previous support. The size of the installation is key: below 1 MW the rules are simpler, above 1 MW the money depends on the auction result.

METÁR: premiums for new installations

METÁR (Megújuló Támogatási Rendszer) has been operating since 1 January 2017, following statutory changes passed in June and December 2016. The rules depend on capacity:

• below 0.5 MW (excluding wind) — the operator MAVIR buys the electricity and sells it on the HUPX exchange, which protects small generators from market risk;
• 0.5–1 MW — an administrative premium, according to the IEA at a level similar to KÁT, without auctions;
• above 1 MW — premiums only in competitive auctions (apart from demonstration projects).

Generators in METÁR do not have mandatory offtake of energy, except for installations below 0.5 MW.

KÁT: the system for existing installations

According to the IEA, the KÁT system (mandatory offtake) continues to operate for existing installations. New participants can enter only METÁR. For owners of older biogas plants this means that their support is tied to the commissioning date and expires with the period covered by the regulations.

The brown premium

For biomass and biogas plants that have exhausted their previous support, METÁR provides a brown premium (barna prémium), intended to prevent units from being shut down or switching to fossil fuels. According to a note by the law firm Schoenherr, the premium can be obtained from the regulator MEKH without an auction for five years, and it is meant to offset the higher variable costs of biogas compared with natural gas.

Auctions with biomass participation

The fifth METÁR auction (decided on 20 December 2021) was open only to plants commissioned at least 20 years earlier. The bid cap was 38.15 Ft/kWh, the budget HUF 17 billion a year and 870 GWh/year, and six of the eight bids concerned biomass (details). Converted, 38.15 Ft/kWh is about EUR 106 per MWh (at about 360 Ft per euro, indicative, end of 2021).

How the auction caps rose

Hungarian auctions have a bid price cap in Ft/kWh. In the two auctions preceding the fifth the cap was 26.70 and 27.32 Ft/kWh, and in the fifth 38.15 Ft/kWh, that is about 40% more than in the fourth. At the same time the support budget grew 20 to 36 times and amounted to HUF 17 billion a year at 870 GWh of supported energy, which gives an average of about 19.5 Ft of subsidy per kWh. MEKH announced the fourth auction on 15 October 2021 but withdrew it on 19 November; the fifth appeared on 22 November 2021 with a one-day bidding deadline.

Biogas: scale and direction

According to Világgazdaság of 18 December 2024, biogas accounts for 0.9% of the Hungarian energy mix. According to Világgazdaság, the EU assumes a tenfold increase in biogas and biomethane production by 2030; in the REPowerEU plan the target concerns biomethane (35 billion m³ a year by 2030). According to calculations by the AKI institute, using all the potential feedstock could cover about one third of national natural gas consumption; this is a theoretical value.

Support policy is shifting from electricity to gas. According to Kinstellar, the Jedlik Ányos Energy Program provides HUF 40 billion (about EUR 100 million) for ten biogas and biomethane projects, of which HUF 18 billion is reserved for installations producing less than 500 m³ of raw biogas per hour.

Who gets what

For the owner of a small biogas plant (up to 0.5 MW), the MAVIR buy-back is what matters. For a medium-sized one (0.5–1 MW), the administrative premium. For larger ones, auctions, and for old units, the brown premium or participation in the auctions for existing plants. In Germany, where tenders concern hundreds of megawatts, this is described in the post Germany announces tenders for more than 1 GW.

What the capacity thresholds mean

The capacity bands determine the generator's risk. Below 0.5 MW the transmission system operator MAVIR buys the electricity and sells it on the HUPX exchange, so the owner of a small biogas plant bears no price risk. Between 0.5 and 1 MW the generator receives an administrative premium, according to the IEA at a level close to KÁT, without having to win an auction. Only above 1 MW, that is for most biomass plants and the largest biogas plants, is the subsidy decided by competition in an auction, and the price cap sets the upper limit of what can be won.

Aims of the system

According to the IEA, the brown premium is meant to prevent biomass and biogas plants from being shut down or switching to fossil fuels, and the system also provides guarantees for wood fuel, intended to limit illegal logging. The Hungarian design therefore differs from the German one mainly in that new installations are a rare exception in it, and support serves to sustain existing ones.