Legislative Motivation for Implementation of Combined Heat and Power: The Most Successful Energy Projects in Hungary*

Abstract

Cogeneration is a very important tool for saving primary energy,
avoiding network losses, and reducing emissions, in particular of green-
house gases. In addition, ef ficient use of energy by cogeneration can
contribute positively to the security of a nation’s energy supply and to
the competitive situation in both the private and public sectors of the
energy market. For this reason, the Hungarian Ministry for Economy
and Transport enacted legislative motivations for the implementation of
combined heat and power (CHP). As a result of this legislation, power
grid administrators have been obliged since January 2003 to purchase,
at a subsidized price, electricity produced by cogeneration plants. The
legislation of the Ministry heavily in fluenced energy investment, and
implementation of CHP units with gas engines, which were the most
successful energy projects in Hungary in the last few years.
This article:
• introduces the Ministry mandate to purchase cogenerated electric-
ity at a subsidized price
• shows the in fluence of the mandate on investments
• reviews changes, reasons, and market reactions chronologically
from instatement of the mandate
• shows the results of an economic analysis of a selected project