The current compensation scheme (net-metering) applied to small household power plants in Hungary will be phased out for new users by the end of 2023 at the latest. However, details of the new scheme have not yet been disclosed by the legislator. The policy brief introduces the most commonly used compensation mechanisms for distributed generation drawing on literature and regulatory experiences of other countries and examines which of them could comply with EU regulation. It also reviews the issues that need to be considered to achieve the desired policy objectives.

• In addition to the metering and billing rules, the compensation mechanism also has to specify the retail price system applied to prosumers and the sell rate and system charges associated with uploading the excess electricity to the grid.
• Based on the regulation released so far, the new system wishes to follow the EU requirements for the fair bearing of network costs, reflected by the introduction of new rules on the payment of system tariffs and power charges, as well as defining time zones for variable distribution fees. However, the exact level of these charges is not yet known.
• Among the compensation schemes discussed in the literature, net-billing or buy-all-sell-all with self-consumption could be considered in Hungary.
• It is not clear how the new accounting system will ensure the EU requirement which sais that the sell rate for electricity fed into the grid should reflect the market value.
• In this context, there is a question of whether new small household power plant owners will be allowed to remain in the Universal Service System.
• The mandatory fitting of smart meters alongside solar panels and the new system charges rules are positive steps forward, provided that the latter would be designed to encourage demand-side response.

The policy brief is available in Hungarian here.