Expert View – Unlocking potential: financing greater energy efficiency in Hungary

What are the trends you observe in the Energy sector in Hungary?

The energy market in Hungary has seen significant development in the last few years, driven by national policies, European Union directives, and a growing awareness of environmental sustainability encompassing building retrofits, industrial energy efficiency improvements, and the adoption of energy-efficient technologies across various sectors.

Hungary’s commitment to energy efficiency is shaped by national and EU-level regulations. The National Energy Strategy 2030, adopted in 2011 and updated periodically, aims to enhance energy security, promote sustainable energy use, and increase the share of renewable energies. By the end of 2023, Hungary solar power capacity reached approximately 5.8 gigawatts (GW), accounting for 18.4% of the country’s electricity generation. The government anticipates that solar capacity could reach 12 GW by 2030 A critical component of this strategy is improving energy efficiency. The country is also guided by the EU Energy Efficiency Directive, which mandates energy savings targets and the implementation of energy efficiency measures across member states.

The construction sector is a primary focus for energy efficiency initiatives in Hungary as approximately 40% of the country’s energy consumption is attributed to buildings. Industrial energy efficiency is another critical area, given that industrial activities account for a further significant portion of Hungary’s energy use. The transport sector also sees efforts to boost energy efficiency. Hungary has been promoting the use of electric vehicles (EVs) and improving public transportation systems to reduce overall energy consumption and emissions.

What are the challenges faced by this industry?

Programs targeting energy-intensive industries include incentives for adopting energy-efficient technologies and practices are often supported by EU funds, such as the European Structural and Investment Funds, which help companies finance energy efficiency projects.

Various financial mechanisms support the growth of the energy efficiency market in Hungary including grants, subsidies, and loans provided by both the Hungarian government and the European Union. At the same time, several financing possibilities are also available to support energy efficiency projects through different financial institutions, banks and leasing companies.

In addition to grants and subsidies, enterprises in Hungary have access to specific financing options tailored for energy-efficient technology investments. Loans and leases can be used for various purposes, including upgrading machinery, enhancing building insulation, and implementing energy management systems (such as HVAC systems, LED lighting, and energy management systems, PV systems, chargers, or electric vehicles), targeting increased energy efficiency or carbon emission reduction.

What does BPCE EQUIPMENT SOLUTIONS Hungary brings to this sector?

BPCE EQUIPMENT SOLUTIONS Hungary provides SMEs, mid-caps and large corporates with different financial solutions especially in asset-based financing structures, making it easier to finance the acquisition or usage of energy-efficient technologies without ownership.

Enterprises can lease energy-efficient equipment at BPCE EQUIPMENT SOLUTIONS Hungary via financial leases to acquire the technology over time, or with operational leases to use energy-efficient technology without owning it, both avoiding large upfront costs.

Localizing international experiences, BPCE EQUIPMENT SOLUTIONS Hungary offers specialized financing solutions (e.g. EaaS, MES, PPU or PPA) which are designed to respond to the complexity of technology usage, maintenance, technology refreshment and updates, combining the advantages of balance sheet neutral fee structure with flexible usage. Such specialized models are tailored to the specific project content, to the enterprise, service provider or vendor aiming for a lifecycle management with long-term technology partnerships (e.g. up to 10-12 years).

Such financing solutions often offer tax incentives, may come with lower interest rates and longer repayment terms, but also align the investment with international (US GAAP or IFRS) and local accounting regimes allowing the enterprises to correspond with group expectations. 

BPCE EQUIPMENT SOLUTIONS Hungary has a strategic cooperation with the European Investment Bank (EIB), started over 15 years ago, and the leasing company offers new financing facilities (loans and leases) for SMEs and mid-caps, primarily engaged in the industry, agriculture, construction, transport, and services sectors, with a focus on green investments with beneficial conditions. This program was successfully launched in Q1 2024 and supports the green investments of many enterprises in these turbulent times.

BPCE EQUIPMENT SOLUTIONS Hungary considers the energy efficiency market in Hungary as a strategic target, as it is on a positive trajectory, characterized by supportive policies, technological advancements, and financial incentives. For enterprises, financing possibilities exist, ranging from EU funds and national loan programs to green finance initiatives, tax incentives, and specific loans and leases for energy-efficient technologies. Continued efforts in these areas will be crucial in achieving the country’s energy efficiency targets and contributing to broader environmental goals. The market offers significant opportunities for growth, innovation, and collaboration, positioning Hungary as an active participant in the global energy transition.