Financial subsidies and the location decision of solar power plants in Hungary: An empirical investigation

Abstract

Recent years have witnessed a significant increase in the number of solar power plants worldwide, including in the European Union. In Hungary, solar capacities have increased tenfold in the past three years, primarily due to the lower cost of solar technology and the favourable investment environment. The integration of these weather-dependent power plants into the electricity system, hitherto, has not been a problem in Hungary. However the expected increase in capacity over the next decade may cause grid problems, implying that the decision about the location of solar power plants is not a secondary issue. Hence, this study examines the factors that impact investors’ choice of the optimal installation site and the extent to which financial assistance, primarily operating support, influence this installation decision. This type of research has not yet been undertaken in the Hungarian context. Therefore, our research – based on a questionnaire survey conducted in March 2018 – fills an important gap. In contrast to the conclusions of the extant literature covering other countries, in the case of solar power plants in Hungary the installation location is not based on natural factors (e.g. irradiation) but on the marketability and price of electricity – classified in the financial support category – as well as the network connection options. Additionally, operating support may influence the location of solar power plant installation, which can be used as valuable information for regulation in the course of further expansion of the domestic photovoltaic power generation.