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In July 2015, Act LVII of 2015 on Energy Efficiency ("Act") as well as Government Decree No. 122/2015 (V. 26) on the Implementation of the Energy Efficiency Act ("Decree") (the Act and Decree hereinafter together referred to as the "Laws") entered into force. The Laws transposed into Hungarian national legislation the European Union regulations set out in Directive 2012/27/EU regarding energy efficiency, amending the Directives 2009/125/EC and 2010/30/EU, and repeals Directives 2004/8/EC and 2006/32/EC.

The Act sets forth the tasks and conditions for implementation of these regulations, which are necessary for the fulfilment of the national energy efficiency target, efficient energy supply and consumption and for the implementation of the EU Directive. The Act establishes the tasks of the Government as well as the Hungarian Energy and Public Utility Regulatory Authority ("HEA").

Compared to the Act, the Decree contains more technical rules, especially on the National Energy Efficiency Action Plan ("Action Plan"), on: (i) the applicability of the so-called "professional energy evaluators"; (ii) the content of energy efficiency-based contracts that public institutions should conclude; and (iii) energy audits.

There are certain other by-laws that are relevant for implementation, such as NFM Decree No. 25/2015 (V. 26.) providing detailed rules on informing energy consumers and market participants concerning energy efficiency, TNM Decree No. 7/2006 (V. 24.) on the determination of the energy specifications of buildings, HEA Decree No. 7/2015 (X. 16.) on registration fees of energy auditors or Gov. Decree No. 201/2016 (VII. 21.) on cooling-related energy efficiency issues. HEA Decree No. 1/2017 (II. 16.) on the data supply of energy auditors and auditor companies, as well as the yearly reporting obligation of contributory organisations, HEA Decree No. 2/2017. (II. 16.) on the data supply of large industries, as well as business entities which are obliged to consult energy evaluators regarding the extent of energy consumption and energy savings.

The HEA also provides certain guidelines on its webpage.

It is worth noting that the national legislation is still developing. For example, a new title to the Act was introduced with effect as of 1 January 2017, which establishes certain tasks for the operators of state- and municipality-owned buildings (elaboration of local energy savings action plans, data provision obligation and mandatory cooperation with the National Energy Network). In addition, certain new by-laws were also introduced in February 2017. It seems Hungarian energy efficiency-related legislation is still developing.

Comparison

The Laws transpose Directive 2012/27/EU on energy efficiency partially, as "[i]n its role as a Member State of the European Union and by virtue of international treaty, Hungary may – to the extent necessary for exercising its rights and fulfilling its obligations arising from the founding treaties – exercise certain competencies deriving from the Constitution together with the other Member States, through the institutions of the European Union" (Section 2 of Article E of the Hungarian Constitution) whilst "generally binding rules of conduct may be laid down in European Union legislation within the framework set out in Section (2)." (Section 3 of Article E of the Hungarian Constitution). These rules mean that to a certain extent, EU law is part of Hungarian national law without direct transposition. However, concerning the final outcome, the goal is that "[D]uring legislature, it shall be ensured that the legal regulation […] complies with the obligations arising from international and European Union law." (Subsection 4 c) of Section 2 of Act CXXX of 2010 on Legislation). Hence, the Laws essentially integrate into the existing body of domestic energy efficiency-related regulations in Hungary.

The Laws provide for the following:

-mandatory renovation of government buildings (all government buildings above 250 m² must comply and at least three percent (3%) of these should undergo such mandatory renovation annually);

-public tenders for energy efficiency (where public authorities should conclude contracts only for high energy efficiency products, services or buildings);

-tasks for the operators of state- and municipality-owned buildings like elaboration of local energy savings action plans, data provision obligation and mandatory cooperation with the National Energy Network;

-certain tasks concerning buildings owned or used by public institutions;

-energy audits (large companies not qualifying as SMEs are obliged to carry out energy audits every four (4) years with the exception of those certified by EN ISO 50001 standard);

-energy efficiency webpage; and

-use of professional energy evaluators (by those companies where the energy consumption in question exceeds 400,000 kWh electricity, 100,000 m³ gas or 3,400 GJ heat. The professional energy evaluator cannot be an employee of the company in question).

The Decree contains more technical rules, especially on:

- the Action Plan;

-the applicability of the so-called professional energy evaluator;

-the content of energy efficiency-based contracts the public institutions should conclude; and

-energy audits.

The main programmes that have been implemented so far are the following:

Action Plan

According to the provisions of the Directive 2006/32/EC as well as to Section 3 of the Act, Hungary drew up its Action Plan as elaborated by the Ministry of National Development (final version August 2015). Through this document, Hungary pledged to reduce its final energy consumption by an average annual rate of one point five percent (1.5%), i.e. an annual 7.3 PJ reduction of final energy consumption. The total final energy saving for the period 2012-2020 is forecasted as 73 PJ, from which 40 PJ for households,

10 PJ for industry, 14 PJ for transport and 9 PJ for agriculture, trade and services. The factual data of the

Action Plan for the period 2008-2012 as well as the energy consumption forecasted as 2020 per sector are:

However, it is worth mentioning, that compared to the figures of the National Energy Efficiency Action Plan, the Government accepted forecast targets for planned final energy savings between 2016 and 2020 in its Government Resolution No. 1160/2015 (III. 20.) as:

The National Energy Efficiency Plan identifies: (i) horizontal measures; (ii) building energy efficiency measures; (iii) public institution-related measures; (iv) industrial and transport-related measures; (v) heating and cooling utilisation measures; and (vi) energy conversion, transport, distribution and demand- related measures to achieve these goals.

The estimated final energy savings for 2008-2012 as well as planned final energy savings for 2016 and 2020 in the National Energy Efficiency Plan are:

Sectoral Operational Programmes

Financed by the European Union, Hungary has employed operational programmes to promote energy efficiency under the so-called "Environment and Energy Operational Programme" and from governmental sources the so-called "Green Investment System / Green Financing System" – governed by 18/2011 (III. 11.) NFM Order1 . These are closed, now but the following operational programmes are open or planned:

-Warmth of Home Programme – Support for modernisation of blocks of flats (existing);

-Environmental Product Rating System (existing); and

-Continuation of the Large Household Appliance Replacement Programme (planned).

National Building Energy Strategy

According to Section 4 of the Act, Hungary drew up its National Building Energy Strategy (final version February 2015) approved by Government Decision No. 1073/2015 (II. 25.) aiming to reach 49 PJ/year (until 2020), as well as to 111 PJ/year primary energy savings of the energy consumption of the buildings through a number of measures:

-the level of energy efficiency should be increased in case of both existing and future buildings;

-special attention should be paid to the renovation of family houses;

-renewable energy methods should be applied (e.g. solar panels);

-new support and financing schemes should be available; and

-improvement of research and development.

Comparison

The Laws provide for the most important requirements of the Directive to be carried out. Through the Action Plan, Hungary pledged to achieve the one point five percent (1.5%) energy savings per year target as mandated by the Directive but through alternative measures in line with Article 9 (2) of the Directive. The National Building Energy Strategy declares the targets of primary energy savings as 49 PJ/year (until 2020), as well as 111 PJ/year of the energy consumption of the buildings. Hungary's sectoral operation programmes aim to make funds available for certain activities resulting in energy efficiency.

Hungary, in line with the preceding Government targets, has opted to meet the energy efficiency targets through alternative measures in accordance with Article 9 (2) of the Directive. These are, according to Section 13 of the Act:

-energy or CO2 taxes that have the effect of reducing end-use energy consumption;

-financing schemes and instruments or fiscal incentives that lead to the application of energy efficient technology or techniques and which have the effect of reducing end-use energy consumption;

-regulations or voluntary agreements that lead to the application of energy efficient technology or techniques and which have the effect of reducing end-use energy consumption;

-standards and norms that aim at improving the energy efficiency of products and services, including buildings and vehicles, except where these are mandatory and applicable in Member States under EU law;

-energy labelling schemes, with the exception of those that are mandatory and applicable in the Member States under EU law; and

-training and education, including energy advisory programmes, that lead to the application of energy efficient technology or techniques and have the effect of reducing end-use energy consumption.

Concerning the energy audit obligation (see in more details in Section 4 below), SMEs are exempted as well as those companies which are certified by the EN ISO50001 standard. There is a unique institution in Hungarian law which is separate from the energy audit obligation – specifically the mandatory use of professional energy evaluators (see in more detail in Section 4 below). Companies are exempted from this obligation where their energy consumption does not exceed 400,000 kWh electricity, 100,000 m³ gas or 3,400 GJ heat.

The Laws also regulate the obligations of certain state entities concerning the progress report to the EU Energy Commission. The HEA is the data manager for companies having obligations under the energy efficiency regulations. The HEA is also the responsible entity in connection with energy audit control, collecting registration fees, imposing fines as well as the registration and supervision of the professional energy evaluator system. The HEA has a separate subdivision to carry out these tasks related to energy efficiency, and issues important by-laws (such as HEA Decree No 1/2017 (II. 16.) on the data supply of energy auditors and auditor companies or HEA Decree No. 2/2017 (II. 16.) on the data supply of large industries) or "soft" laws (such on guidance on energy audit obligation as well as professional energy evaluators) where it deems appropriate.

Comparison

Hungarian legislation has been put in place to define the scope of energy audits and exemptions thereto, as well as the unique Hungarian institution, the use of professional energy evaluators. Since the EU Directive only stipulates that energy distributers achieve a one point five percent (1.5%) energy reduction every year, Hungary has opted to meet the energy efficiency targets through alternative measures in line with Article 9 (2) of the Directive.

The Laws

The Act provides that large industries must carry out a mandatory audit every four (4) years. Although the Directive sets a deadline of 5 December 2015, sanctions may only be imposed commencing from 30 June 2017. Large industries are all companies which are not considered as SMEs under Hungarian law.

An enterprise qualifies as an SME if it:

-employs fewer than 250 persons; and

-its annual net turnover does not exceed the HUF equivalent of EUR 50 million or its annual total balance sheet does not exceed the HUF equivalent of EUR 43 million.

The Act also specifies some exceptions. For example, a large industrial company is not obliged to carry out an audit if it operates based upon an EN ISO 50001 energy management system. However, the Decree provides that the National Energy Network particularly encourages SMEs to carry out audits and implement its recommendations.

For the purpose of the mandatory audit implementation, the HEA acts as a supervisory authority. Large industries must register – along with paying a registration fee – at the HEA homepage, as well as fulfil certain data supply obligations towards HEA. The Act also sets forth the control measures, as well as sanctions which are imposed in case of a breach.

The Act also regulates the various conditions and qualifications which entitle persons and companies to carry out audits, as well as the mandatory further education programmes and exams. After the successful registration, HEA operates the nomenclature for auditors.

The Act further specifies the criteria for cross-border services for both EEA and third country members.

The Decree provides detailed rules regarding the content of the audit, qualifications and other requirements. The Act (as well as the Decree) also specifies the applicable rules regarding the "professional energy evaluator". The professional energy evaluator is – among others – an observer and consultant at the energy audits who makes recommendations regarding efficient energy solutions and compiles monthly and yearly reports. A business entity must engage a professional energy evaluator if its energy consumption average in the last three (3) years exceeds:

-400,000 kWh electricity;

-100,000 m³ gas; or

-3,400 GJ heat.

Apart from energy auditors and evaluators, special "contributory organisations" also assist in the Hungarian audit system by organising professional exams and further education programmes for energy auditors and evaluators. For the time being, the only licensed contributory organization is the Hungarian Engineer Chamber.

The National Energy Network gives advice to public institutions, municipalities and companies in order to facilitate their energy efficient operation, as well as to households in order to decrease their energy consumption.

In addition to the Laws, HEA decrees provide some further rules. HEA Decree No. 7/2015 (X. 16.) defines detailed regulations regarding the sum, payment and refunding of the registration fee paid by energy auditors and energy audit companies. HEA Decree No. 1/2017 (II. 16.) further specifies the data supply of energy auditors and auditor companies, as well as the yearly reporting obligation of contributory organisations. HEA Decree No. 2/2017 (II. 16.) regulates the data supply of large industries, as well as business entities which are obliged to consult energy evaluators regarding the extent of energy consumption and energy savings.

The first round of data provision was due on 31 March 2017 on auditing activities while the first report on contributory organisations will be due on 31 January 2018. For large industries, the additional data supply obligation is due on 30 June 2017, for companies obliged to use evaluators not qualifying as large industries this deadline is 30 June 2018.

Comparison

Hungarian Law precisely defines the parameters for large companies which are subject to mandatory energy audits. Furthermore, Hungary has established the National Energy Network which also encourages SMEs to carry out these audits. The HEA acts as the supervisory authority and operates the nomenclature for auditors. Beside the auditors and audit companies, the services of a mandatory professional energy evaluator must also be retained in case of extensive energy use.

National Building Energy Strategy approved by Government Decision No. 1073/2015 (II. 25.)

The objective of this strategy is to achieve 49 PJ/year (until 2020), as well as 111 PJ/year primary energy savings from the energy consumption of buildings.

For this purpose, the strategy sets forth the following measures to be taken:

-the level of energy efficiency should be increased in case of both existing and future buildings;

-special attention should be paid to the renovation of family houses;

-renewable energy methods should be applied (e.g. solar panels);

-new support and financing schemes should be available; and

-improvement of research and development.

Laws

In line with the Directive, the Act establishes which public buildings are subject to renovation requirements and to which exceptions may apply. According to the Act, these buildings, their floor area, as well as energy efficiency data must be duly registered. The following public buildings are not subject to mandatory renovation

-buildings for religious use;

-historical buildings and buildings subject to local protection in case of which the compliance with the minimum requirements of energy efficiency would result in an unacceptable amount of change of its historic or protected value; and

-buildings for national defence used by armed forces or central Government.

The Act also establishes a special public procurement procedure in the framework of which only highly efficient energy products, services or buildings may be acquired above a certain procurement limit. Furthermore, the Act encourages public bodies to achieve greater energy efficiency by drawing up an energy saving action plan, as well as a report on its implementation. The Decree establishes the National Energy Network, which assists public bodies, companies and people by offering free energy consultancy and other services.

The Action Plan sets out the necessary measures for the fulfilment of both the long-term renovation strategies and public sector energy efficiency. The National Plan for Nearly Zero-Energy Building is an annex to the Action Plan.

In the framework of the long-term renovation strategies, the Action Plan defines the various tasks for the implementation of the National Building Energy Strategy:

-establishment of financial resources;

-administrative regulations and programmes for renewable energy supply (with special regard to solar panels);

-revision and specification of the energy regulations regarding new buildings and renovations, including nearly zero-energy buildings;

-development of energy certification and classification;

-research and development of innovations, as well as smart solutions;

-education for consumers, companies and further education programmes for professionals; and

-data collection and databases.

In terms of public sector energy efficiency, the Action Plan defines the mandatory renovation of three percent (3%). Furthermore, the Action Plan also specifies how Hungary encourages other public bodies which are not subject to this obligation as follows:

-an energy efficiency web site maintained by HEA;

-establishment of a new database called National Building Energy System; and

-introduction of special support schemes for these public bodies and municipalities to cover the costs of renovation.

The list of the buildings of public bodies which are subject to mandatory renovation are found in an annex to the Action Plan. The Action Plan also emphasises the special public procurement procedure, in which case only highly efficient energy products may be obtained by the public sector.

Government Decree No. 176/2008. (VI. 30.) on the certification of the energy specifications of the buildings

This Government Decree specifies the applicable requirements for energy certification of buildings. The Government Decree establishes a wide scope for mandatory energy certification, including new building, sale and purchase, as well as leasing.

TNM Decree No. 7/2006. (V. 24.) on the determination of the energy specifications of the buildings

The TNM Decree defines further detailed, technical regulations regarding certain energy specifications of buildings, including the definition of nearly zero-energy buildings, as well as the minimum requirements of energy efficient renovations for the public sector.

Comparison

Hungary specifies various tasks necessary to implement long-term renovation strategies. Hungary defines the exact scope of the renovation for public buildings and also encourages other public bodies to achieve greater energy efficiency. The implementation of the various measurements is also supported by the National Energy Network and National Building Energy System maintained by HEA.

As a Member State of the European Union, Hungary must transpose EU Directives into its internal legislation and observe the energy policy measures established by the European Commission.

Action Plan

PJ of primary energy consumption until 2020, which was duly notified to the Commission in 2013. However, this target was not reached by 2012 and remained at the amount of 992 PJ. Based on the 2012 values, Government Resolution No. 1160/2015 updated the target and thus the target for primary energy consumption is 1009 PJ. The target for final energy consumption totals 693 PJ. In accordance with this, the gross final energy consumption will be 603 PJ/year by 2020. Through this document, Hungary pledged to reduce the final energy consumption by an average annual rate of one point five percent (1.5%), i.e. an annual 7.3 PJ reduction of final energy consumption. However, Hungary chose to introduce the obligations gradually, along the following path:

The total final energy savings for the period 2012-2020 is forecasted as 73 PJ, from which 40 PJ for households, 10 PJ for industry, 14 PJ for transport and 9 PJ for agriculture, trade and services. The factual data of the Action Plan for the period 2008-2012 as well as the energy consumption forecasted as 2020 per sector are:

However, compared to the figures of the Action Plan, the Government accepted forecast targets for planned final energy savings between 2016 and 2020 in its Government Resolution No. 1160/2015 (III. 20.) differently, see above.

Comparison

The EU Directive establishes an indicative target of at least twenty percent (20%) energy efficiency for Member States. Hungary has established its national energy efficiency target as 1113 PJ of primary energy consumption until 2020, meaning a 73 PJ total final energy saving for the period 2012-2020. Concerning the steps to achieve these targets, the reduction of the final energy consumption would take an average annual rate of one point five percent (1.5%), i.e. an annual 7.3 PJ reduction of final energy consumption. However, there is little information indicating if that target is actually going to be reached.

2. Specific Provisions of the Law

Unit: PJ

2008

2012

2020

Primer energy utilisation

1120

992

1009

Final energy consumption

704

600

603

Industrial sector

139

96

114

Transportation

192

157

147

Households

233

215

207

Trade and services

117

116

118

Agriculture and fishing

22

17

17

Unit: PJ

2012

2020

2030

fact

"BAU"

"policy"

"BAU"

"policy"

Primer energy utilisation

992

1101

1009

1217

1028

Final energy consumption

677

766

693

840

629

Industrial sector

96

124

114

139

126

Transportation

157

161

147

173

151

Households

215

247

207

284

187

Trade and services

116

126

118

135

121

Agriculture and fishing

17

18

17

19

17

Consumption without energy purpose

77

90

90

90

90

Electricity consumption

153

170

164

197

181

Sector

Savings achieved until 2008-2012 (PJ)

National target 2012-2016 (PJ)

National target 2012-2020 (PJ)

Households

29.7

20.0

40.0

Industry

13.1

5.0

10.0

Transportation

26.6

7.0

14.0

Agriculture, trade, services, other (incl. public institutions)

9.9

4.5

9.0

Total

79.3

36.5

73.0

1 A number of programmes on other subsidiary schemes were opened under these systems, such as the GIS Frontal Doors and Windows Replacement Sub-Programme, the Large Household Appliance Replacement Energy Saving Sub-Programme, the Heating Modernisation (boiler replacement) Sub- Programme, etc.

3. Obligations

4. Mandatory Audit of Large Industry

Criteria to examine

Possible versions

Number of employees

< 250 persons

<250 persons

<250 persons

≥250 persons

≥250 persons

≥250 persons

<250 persons

≥250 persons

Annual net turnover

≤ 50 M EUR

>50 M EUR

≤50 M EUR

<50 M EUR

≤50 M EUR

>50 M EUR

>50 M EUR

>50 M EUR

Total balance sheet

≤43 M EUR

≤43 M EUR

>43 M EUR

≤43 M EUR

>43 M EUR

≤43 M EUR

>43 M EUR

>43 M EUR

SME

Large Industry

5. Strategies

6. Targets

Year

Projection base (TJ)

Prescribed annual savings (%)

Final energy saving per year (PJ)

Final energy saving per year (PJ)

2014

489.08

1%

4.89

4.89

2015

1%

1%

4.89

9.78

2016

1%

1%

1.25%

6.11

15.9

2017

1%

1%

1.25%

1.25%

6.11

22.01

2018

1%

1%

1.25%

1.25%

1.5%

7.34

29.34

2019

1%

1%

1.25%

1.25%

1.5%

1.5%

7.34

36.68

2020

1%

1%

1.25%

1.25%

1.5%

1.5%

1.5%

7.34

44.02

Unit: PJ

2008

2012

2020

Primer energy utilisation

1120

992

1009

Final energy consumption

704

600

603

Industrial sector

139

96

114

Transportation

192

157

147

Households

233

215

207

Trade and services

117

116

118

Agriculture and fishing

22

17

17

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