Competitveness of new conventional power generating units in Hungary

As a result of the depletion of easily exploitable and therefore cheap coal mines, new power plants have been built or are in construction for burning low value, high moisture content lignite in several countries. The lifespan of big power plants built in Hungary in the 1970s is close to their end which requires the construction of new electricity generation facilities. However, the regional market price of natural gas is expected to increase in the near future (even if in the recent years, due to the economic crisis, the price has been low) which makes the generation of natural gas based power plants expensive on the long run. The planning and construction of nuclear power plant units needs extremely long time and high capital costs, therefore their entry into the Hungarian electricity system is unlikely before 2020. The recently happened nuclear related problems in Japan might influence policy and decision makers negatively. The developers of the above projects generally tend to ignore the only fossil fuel abundantly available in Hungary: lignite. Further to the above facts and for the utilisation of indigenous primary energy sources the development of modern low value lignite burning power generation units could be necessary. These could replace the old, outdated generators. Our paper intends to forecast future electricity demands, find out the need for new power plants and detail the calculation of unit costs of available type of power plants in the light of actual market prices. It seems that besides the renewables a lignite fired unit can be a real option at the end of this decade. The full paper takes into account that due to the economic crisis, electricity demands have decreased in 2009, however, they have started to increase in 2010 and the continuation of price increases before 2008 can be expected in the long run.