In an unexpected move, on 31 January, the Hungarian government announced and enforced a critical change within just one hour late Friday night. The new regulation, published around 10 PM, became legally binding by 11 PM the very same evening, fundamentally reshaping the mandatory purchase price system (KÁT) for industrial-scale solar power producers.

What changed?

The inflation-adjusted mandatory purchase prices have been abolished overnight, directly impacting around 3,100 MW of industrial solar capacity. This means significantly lower revenue growth potential for solar plant owners, while industrial energy consumers—who had been carrying much of the financial burden—may see lower electricity costs.

The justification: a state of emergency

The government cited the ongoing state of emergency related to the war in Ukraine and its humanitarian and economic consequences as the basis for this urgent regulatory amendment. This legal framework has been in effect since 2020 and is currently set to remain until at least May 19, 2025.

While emergency measures are designed to address extraordinary situations, their use for economic and energy policy decisions raises questions about long-term regulatory predictability, a concern Hungary’s legislator has faced criticism for in the past.

Key points of the new regulation:

• No more automatic inflation adjustment: From 2025 until at least 2029, KÁT purchase prices will remain fixed unless annual inflation exceeds 6%.

• Producers can opt for the free market: Those leaving the KÁT system may still benefit from tax exemptions and indexed pricing under a premium support scheme. A crucial open question remains—if producers exit the KÁT system and sell on the free market, will they be subject to the Robin Hood tax, a windfall tax currently burdening energy producers? The regulation does not clarify this.
  
• Immediate impact: The Hungarian Energy Authority published the new 2025 mandatory purchase prices by midnight, with only a 2.7% increase—falling short of the 3.7% annual inflation just reported by the national statistics office.

The big picture

This extremely swift and impactful policy change introduces new challenges for the energy sector. While industrial consumers may benefit from cost reductions, renewable energy investors will need to navigate the evolving regulatory landscape to determine the best path forward. The Hungarian Solar Panel and Collector Association (MNNSZ) strongly criticized the decision, saying it harms sector growth and investor confidence by retroactively suspending inflation-based pricing for five years starting in 2025. The association also indicated it is considering legal action over the sudden regulatory changes.

International regulatory parallels

This abrupt regulatory shift raises serious concerns about investor confidence and the long-term stability of Hungary’s energy policy. Similar retroactive changes regarding the renewable energy production sector in Spain and the Czech Republic triggered international arbitration cases, where investors sought compensation for unexpected losses caused by abrupt policy reversals. Given the scale and sudden nature of Hungary’s decision, it remains to be seen whether this move will undermine foreign investment, lead to legal disputes, or deter future capital inflows into the country’s renewable energy sector.

The full effects of the tariff freeze will unfold in the coming years. The question remains: will this measure help ensure price stability and energy security, or will it slow down the growth of Hungary’s renewable energy sector?

By Barbara Sandor and Petra Pataki