The European Commission has approved Hungary’s €1.1 billion (~$1.2 billion) program to support electricity storage facilities, aiming to accelerate the country’s transition into a net-zero economy.

Under the program, Hungary plans to install a minimum of 800 MW/1,600 MWh of new electricity storage facilities, enhancing the flexibility of its electricity-generating system. The support will facilitate the seamless integration of a high capacity of variable renewable energy sources into the grid.

The program will be open to energy sector companies in Hungary, excluding financial institutions, and will allow cross-border participation, enabling storage facilities in the neighboring Member States.

Selection of storage projects will be made through a competitive bidding process, with grant contracts expected to be awarded by the end of 2024.

The aid will be provided in two forms: an investment grant, disbursed during the construction phase of the supported projects, and a two-way contract for difference (CfD), providing support annually during the initial ten years of operation.

The investment grant will be financed partly by the Recovery and Resilience Facility and partly by the Modernization Fund, while the 10-year annual support will be funded through a levy.

“This Hungarian measure will facilitate the development of electricity storage capacity. The Hungarian electricity system will be more flexible. The preparation for higher integration of renewables into the electricity mix is in line with EU climate and energy targets,” said Margrethe Vestager, Executive Vice-President in charge of competition policy at the Commission.

The approved funding comes under the State Aid Temporary Crisis and Transition Framework, adopted by the Commission in March 2023, to aid sectors crucial for promoting the green transition and reducing fuel dependencies, particularly in Russia’s conflict with Ukraine.

The European Commission concluded that the Hungarian program aligns with the conditions outlined in the Temporary Crisis and Transition Framework. It ensures openness to all storage technologies, grants aid through a competitive process and requires completion of storage facilities within 36 months of contract signing by the end of 2025.

The approved program is considered necessary, appropriate, and proportionate to expedite the green transition and foster the development of key economic activities that align with the REPower EU Plan and the Green Deal Industrial Plan.

The Commission in February presented the Green Deal Industrial Plan to enhance the competitiveness of Europe’s net-zero industry and support the fast transition to climate neutrality.

In December last year, the European Union’s Modernisation Fund disbursed €74.3 million (~$78.87 million) to Hungary to modernize energy systems, reduce greenhouse gas emissions and improve energy efficiency.