Hungary’s solar debate heats up: shield turned beast?

Much like Talos, the mythical bronze sentinel of ancient Crete, Hungary’s solar boom began as a protector – only to become something far harder to control. Talos tirelessly patrolled the island’s coastline to ward off invaders, until a single vulnerability, his ankle, led to his downfall. And will energy market design flaws do for Hungary’s solar as the ankle did for Talos? The story began seven years ago when solar was just a footnote in its power mix. In 2018, the country had a little over 700 MW of solar installed. By July this year, Hungary was on course for 8 GW – making it the fastest growing solar market in Europe over the last five years. The headlines write themselves: “From coal to clean – Hungary leads the way.” But dig deeper, and this is a far more nuanced tale.

From fossil fuels to solar and beyond

In 2018, solar produced just under 2% of Hungary’s power generation. Lignite was the workhorse at 17%. By 2024, solar had soared to 18% of supply (5.6 TWh) and above 27% on certain days. Meanwhile, lignite’s share plummeted to 7% last year and 3% by May this year.

And these figures are conservative. The real solar contribution is higher, as nearly 2.8 GW of household and a further 601 MW commercial rooftop solar mostly serve local demand and don’t appear directly in electricity grid statistics.

This success owes much to government support and subsidies. Hungary has 4.6 GW of solar power plants with capacity of more than 0.05 MW (50 KW). But only around 1.4 GW of this total is exposed to market prices via power purchase agreements (PPAs) or the spot market. The rest is covered by feed-in tariffs: either fixed feed-in tariffs (FiT), which pay a guaranteed rate per MWh, or feed-in premium (FiP) deals, which give a premium above the day-ahead market. Either way, exposure to energy market signals is muted for most capacity.

So, the incentive to flex output during low or negative price hours is small. Price volatility grows. Capture prices (the average price actually received by producers) fell from 90% in 2020/21 to 55% in H1 2025. The result? “Cannibalisation” and a tougher environment for new investors.

This comes at a price. The cost of solar growth in 2024 added roughly EUR 12/MWh for industrial customers, with more on the way as negative price hours increase. Households remain shielded, thanks to a long-standing government policy – the costs land squarely on the shoulders of industry. Manufacturers, logistics firms and large retailers pay the bill, with no relief based on consumption or financial means. The impact ultimately flows through supply chains, fuelling inflation.

System risk – hollowing out conventional plants

The result of the solar surge is a hollowing out of the conventional fleet, which the country still relies on when the sun isn’t shining. Hungary’s non-renewable installed capacity has dropped from 9.5 GW in 2012 to 6.7 GW this year. And this is even as peak demand has risen. If demand spikes after sunset, its grid now depends on imports to keep the lights on – a structural reliance on Europe’s coupled power market.

This flexibility isn’t free. Surplus solar during the same hours as the rest of Europe means Hungary exports at rock bottom (often negative) prices. In 2024, the export-weighted average price was just 25% of the spot average. Imports, needed during evenings or cloudy spells, come at a premium – 22% above the domestic average in 2024, 55% above so far this year. Hungary spent EUR 1.5bn on imports last year, earning just EUR 32m on exports.

The country’s average power price is already EUR 20/MWh higher than Germany’s. Add an 8-10% premium for industrial users outside of solar hours, plus 10-15% to fund legacy FiT contracts, and the effects on industrial competitiveness are obvious.

Unsubsidised solar evolving?

But there is hope. Free market, unsubsidised solar is starting to respond. Industrial-scale operators cut output when day-ahead prices turn negative – up to 500 MW “disappeared” in a single quarter hour during one such event on 21 June. They adapt by shifting production into flexibility markets or optimising against up-regulation products. If market rules and incentives catch up, forthcoming battery storage (from 2026) could help, but only if not shackled by the same subsidy mistakes.

Hungary’s market is a warning – overprotection and outdated subsidies risk turning a clean energy success into an uncontrollable force. Subsidies that once protected can create rigidity, inefficiency and rising costs for consumers and businesses alike.

Hungarian subsidy reform required

Solar made Hungary a leader in the energy transition, with world-leading renewable energy shares and coal at historic lows. But beneath the headlines lies a more complex lesson – and a warning. To keep the Talos effect working for, not against, the market, Hungary must rethink subsidies, fast-track flexibility, and let energy price signals drive investment. Otherwise, today’s protector could become tomorrow’s beast.

This article originally appeared as a column on montelnews.com