Hungary – from Gas to Geothermal

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Hungary – from Gas to GeothermalÁrni MagnússonManaging Director, Renewable Energy & TransmissionAugust 27, 2014

Mannvit at a glance

An international consultancy offering a wide range of services in the fields of engineering, consulting, management, operations and EPCM contracting.

• Founded in 1963. • Employee-owned by over 100

shareholders• Management Systems certified:

ISO 9001, ISO 14001, OHSAS 18001

Headquarters in Reykjavík and 8 office in Iceland

HUNGARY

UK

NORWAY

USA

GERMANY

CHILE

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Mannvit‘s Offices

Mexico (agent)

Kenya (agent)

HUNGARY

Mannvit has been active in

Hungary since 2006. The Budapest

office, which is the base for

Mannvit‘s Central and Eastern

Europe operations, was

established in 2008. The office is a

multi-market, multi-disciple

consultancy capable of offering a

broad range of engineering,

technical, research & project

management services to its clients.

Hungarian Heat MarketGreat potential for geothermal development

• Hungary has 220 district heating systems in 92 cities supplying around 650,000 homes with heat and hot water. A total of 16% of the housing stock.

• Natural gas is the main source of district heating, accounting for around 75-80% of the market.

• Heat producers sell to district heating service providers which sell to end-users.

• The end-user price is mainly comprised of a base tariff (e.g. system usage fee) and a heating tariff based on consumed amount (HUF/GJ for heat, HUF/m3 for hot water).

• Prices differ from city to city, can be up to a 40% difference.

• Municipalities aim to reduce district heating prices by 10-20%.

• The National Action Plan on District Heating and Power Plants aims to reduce both the base and heating tariff.

Geothermal District HeatingSimple technology

Secondary LoopHeat Service Provider

Primary LoopHeat Producer

Benefits of Geothermal Geothermal energy offers several advantages over natural gas

• Lower heat price for end-users‒ In the current environment geothermal district heating can

reduce the heat price to end-users by 10-20%

• Energy independence‒ Important for municipalities to be independent of external

factors when it comes to energy supply

• Sustainable resource‒ Unlike natural gas, geothermal energy is a sustainable source

of energy which can provide a consistant base-load of heat

• Clean energy‒ Geothermal energy is considered a zero-emissions

technology

Funding PossibilitiesGrant schemes, banks and equity investors

• Two grant schemes available to geothermal district heating developers‒ KEOP (Környezet és Energia Operativ Program, Environment and Energy Operational Program)‒ EFTA (Iceland, Liechtenstein, Norway & Switzerland)

• Awarded grant amounts vary but can cover up to 30-50% of project cost

• Majority of the grant amount is drawn down in parallel with project development

• Debt financing available to developers, although banks reluctant to finance production drilling

• Equity required to complete production drilling

• Projects generate returns in the high teens for equity investors

Project ExampleSzentlörinc geothermal district heating system

• A district heating system in Szentlörinc, a town in the southwestern part of Hungary

• Project data:‒ 3.1 MWth; 1,820m; 87°C; 26 l/s‒ 55,000 GJ annual deliverable heat‒ 900 flats and two schools‒ End-user price reduced by 5-10%

• Project cost:‒ €4 million (with a 34% subsidy)

• Mannvit’s role:‒ Geological & geophysical studies‒ Licensing & permitting‒ Well siting, design & testing‒ Drilling supervision‒ Reservoir modelling‒ EPCm contractor

www.mannvit.com