SolServices Ltd. is among the first in Hungary to develop photovoltaic solar parks, each with an installed capacity of close to 50 megawatts. In addition to the multiplication of the 0.5 megawatt capacity size that has been characteristic of Hungary so far, the projects stand out from other Central European solar park projects in several respects, including the consideration of ecological aspects and the protection of agricultural lands to the highest extent possible – explained Gábor Farkas, Managing Director of the company.
How would you introduce SolServices Ltd. and its activities?
SolServices Ltd. itself was established at the beginning of 2020, but its predecessors had been present in the Hungarian market since 2017 when the preparatory works for the projects started. Even then, our aim was to contribute to the climate-friendly transformation of the Hungarian energy sector, because while the country’s electricity consumption is increasing year by year, the performance of the currently operating power plants is gradually decreasing. The rate of growth in electricity consumption in Hungary is accurately indicated by the data of MAVIR Zrt. (MAVIR Hungarian Independent Transmission Operator Company Ltd.), according to which domestic electricity consumption increased by 2.6 percent in the first quarter, even before the pandemic, compared to the same period of the previous year.
Meanwhile, it is also apparent that more than 10,000 MW of installed capacity operated in the Hungarian electricity system around 2010, which decreased to 8,900 MW by the end of 2019. According to the forecast, the available capacity of the currently operational power plants is projected to be around 7,000 MW over the next five years, and in line with current trends, without any intervention, it could decline to 4,800 MW around 2034.
The consequences of the above-mentioned two tendencies – i.e. the aging of the Hungarian power plant portfolio and the increase in electricity demand – may even raise security of supply issues, unless the development of utility-scale power plants gains a momentum in the near future. A significant part of the current power plant park must be replaced, and having recognised this, we can provide a realistic alternative by producing electricity in Hungary in a clean and sustainable way.
And is this where the utility-scale solar power plants come into the picture?
As a pioneering approach in Hungary, we have been focusing on installed power plant capacities up to 50 MW since 2017, which is much larger than the average Hungarian project size today (the most typical project size is still in the range of 0.5 MW).
In the past, there was a considerable lack of information and experience on the side of both the authorities and domestic small investors regarding the licensing of projects of this size, therefore entering the market posed a significant challenge, inducing an intensive learning process of almost three years, in which I think, SolServices Ltd. took on a substantial role. We tried to channel our existing international best practices into the domestic processes, and basically we were among the first to go through this process together with the Hungarian authorities and NGOs, which provided important lessons for all concerned.
Contributing to this, for example, we have developed best practices for the coexistence of the surrounding ecological environment and the local residents, and we also pay special attention to the conservation of green areas and their environmentally friendly utilization.
Furthermore, it is important to take into account that this is the size range that already allows and even requires the investor to associate different grid infrastructure developments related to a solar park. These grid developments will then support the public grid and contribute to the complex and comprehensive transformation of the domestic electricity system, which is essential on the way towards carbon neutrality.
Fundamentally, these are the size of solar parks that will make it possible to significantly reduce the country’s dependence on energy imports, and at the same time increase security of supply based on clean and domestic resources by exploiting the competitive advantage over the fossil fuel-based producers that still dominate the region to this day.
This could mean a considerable market potential in the future.
Undoubtedly. For the time being, we are focusing on the large-scale solar (LSS) market, this is our specialty. However, it is important to note that it is not our goal to cover the entire territory of Hungary with solar panels. We believe in creating a balanced and healthy system where household-sized, industrial/commercial-sized, and ground-mounted large built-in capacity projects not only co-exist, but necessarily complement each other.
Solar park development activities are similar to property development, which means that our responsibilities are the site selection, the arrangement of design and the full licensing process.
This last sentence inevitably raises the question: what do you think about the assumptions and criticisms that developers were created only for “license trade”, they will not really build projects?
I think this is a misconception due to the relative immaturity of the Hungarian market, which has arisen many times in the recent period, but this is already natural in more developed markets. Although the technology may seem novel in our region, so the experience available is limited, but let me draw an analogy to shed more light on the issue.
I do not think anyone considers it objectionable when a property developer buys a condemned building at his own cost, surveys, demolishes, arranges design, permits and financing, and then freely decides whether to sell the entire package to an investor, or to construct the building and possibly operate the project as part of his own investment.
The licensing process – although better covered by the term “project development” due to its complexity – requires experience and great attention, and represents high value-added operation. Therefore, the licence is only the tangible form of this comprehensive know-how, value-added process. I do not think that there is anything objectionable with this approach in the possible sale of licensed projects.
What is the ownership structure of the company?
The owner of SolServices Ltd. and our projects is Adnan Polat, Turkish businessman, who has been maintaining business relations in Hungary since 1990 and established his European logistics-business center in the early ‘90s.
Polat Holding has been involved in the use of renewable energy sources in Turkey since 2000, when even the legal framework was undeveloped. Today, Polat Energy’s power plant division has successfully completed investments of the order of 700 MW, and is currently operating 585 MW installed capacity in the country. The knowledge base acquired there provided the confident, professional background and international network for establishing direct business relations in the renewable energy sector in Hungary and the region.
Would you mind sharing some details about the ongoing projects?
Our projects are geographically diversified, so we are present in several regions of the country. In Hungary, the Electricity Act sets the upper size limit of the small power plant category at 50 MW, above which the licensing procedure follows completely different aspects, which are hardly compatible with renewable power plant developments.
We strongly emphasize that in accordance with the market practice, we develop small power plants, which fully comply with all the elements of the Hungarian legislation.
Although the name refers to small power plants, it is worth mentioning that a project of almost 50 MW can secure the entire annual electricity supply of 40 thousand households. To illustrate the magnitudes, one single project reduces the CO2 emissions of Hungarian electricity generation by more than 20,000 tonnes, which is equivalent to the CO2 sequestration capacity of nearly 200 hectares of mature oak forest. Once these projects start production, they will contribute significantly to achieve Hungary’s energy and climate policy goals.
In our opinion, these targets cannot be achieved without large built-in capacities. According to the timetable set by the new National Energy Strategy adopted in January, at least 6,000 MW of solar capacity must be operating in Hungary by 2030, which can only be accomplished if large-scale project development starts in the country as soon as possible.
Are you considering entering other markets?
Already in 2017, the launch was made in a specifically regional approach. We have planned to open in the CEE region with our Hungarian headquarters, and we also see significant potential in the Balkan market. We hope to be able to complete the first phase of project development in Hungary in the near future, and there are already new projects in the preparatory phase. We are currently examining the experiences of the recently concluded solar METÁR tenders, looking for new opportunities in the Hungarian market.
At the same time, we are paying great attention to the markets of the region, as we are seeing substantial movements in the renewable sector of several countries, and fortunately we have already been able to take the first steps of project development in some of them.
What other activities belong to the company profile? How do these relate to solar parks?
In addition to the development of the renewable power plant portfolio, but closely related to this core business, we carry out two other key activities: research, development and innovation (RDI), and a strong, general educational and awareness-raising activity.
Certain trends are emerging at both European and domestic level, of which I would like to highlight the role of the key players in the transformation of the energy sector, such as energy storage projects or activities related to the electrification of mobility. Naturally, we pay close attention to these topics as well.
The domestic and global renewable energy market, especially solar park development, has a significant demand and potential for innovation. That is why we have started several experimental projects in cooperation with universities and research institutes which seeks answers to questions, such as how the maintenance of operational photovoltaic solar power plants with large installed capacities can be optimised, or how to make the operation of a solar park even more sustainable.
These are very practical areas of research.
Just think about it, a 50 MW solar park consists of approximately 170 thousand photovoltaic panels and each panel consists of 60-72 cells. Measuring the performance of the panels is a very serious challenge, however, if the poorer performing solar panel can be localized, it has a momentous added value in terms of operation in the long run.
I also consider it important to highlight the polarization study of solar panels, which can clarify whether these surfaces can have any effect on the environment, including the behavior of polarotactic insects. But in order to optimize the cleaning of the panels, we have also launched an experiment to find out the nature of the accumulated contamination and how its removal can be most expedient and environmentally friendly, taking into account domestic climatic conditions such as the composition and distribution of precipitation.
What do you do as part of the educational activity?
It is not so much an educational, but rather a comprehensible, science-based attitude forming activity.
In Hungary, the utilization of renewable energy sources is still in its infancy, and in order for this to change, we consider it essential to spread the concept of energy awareness as widely as possible. It is no secret that our primary target group is local residents and communities affected by the solar developments, who are among the first to benefit from the best solutions focusing on local needs and interests, based on international experiences.
How can you meet the challenge of developing 50 MW solar power plants, which counts as a novelty in Hungary?
SolServices Ltd. consists of a dedicated project development team, specialized in the development of solar parks with large installed capacities. At the start, we had only four employees, but today there are 33 colleagues working together, and each design department is represented – electric engineer, lawyer, agricultural engineer, geologist, economist, environmental engineer. We try to solve as many tasks as possible in-house, which is also a novelty in Hungary, as the domestic practice is typically to outsource everything to the fullest extent possible.
In this solution, we see the problem that the work of external consultants is in many cases not put together in a coherent and harmonized package. Thus, in the construction phase, it is not uncommon for the authorized investment to be practically incompatible with the various sections of work. In the past four years, investors have submitted over two thousand requests for amendments to the Hungarian Energy and Public Utility Regulatory Authority (MEKH), behind which there is a clear intention to retroactively adjust certain issues of project development.
At the same time, industrial experience shows that the sector also deviates from the usual trends in job creation, as in addition to high value-added engineering knowledge, there is a need for a less skilled, possibly local workforce, beyond the construction phase, to a limited extent, but also in the decades of operation. In light of this, the integration of the local community is paramount in the life of a project.
Power plant development is an extremely complex process, and it may take up to three-five years from the birth of the project to the deployment of the power plant. The project developer must get positive answers to several cardinal questions in order to make sure that the area is really suitable for the solar park investment, and to be able to start the construction successfully. The biggest bottleneck in Hungary is the availability of a grid connection point, especially if the investment falls within the size range of 50 MW – in this case, the condition can typically only be created with significant grid development.
The connection points must be found in such a way that – according to one of the strictest domestic regulations in international comparison – the environmental value of the area forming its indirect and immediate surroundings is compatible with the solar investment, i.e. the investment area must not, for example, fall under Natura 2000 protection, or be a core area of the Ecological Network and subject of cultural heritage protection.
In the case of greenfield investments in Hungary, arable land has priority protection; only areas of quality class below the settlement average can be utilized for industrial purposes. This was the main consideration for us as well: when selecting the site, we typically focused on brownfield, depleted land, or land overexploited in agricultural cultivation. An additional cardinal task for the project developer, especially in the case of such dimensions, is that due to the regional significance of the investment, not only should the development tools be modified at the local level, but the development should be brought in line with the county development plan.
Should all the abovelisted criteria be met, it must also be considered whether an agreement can be concluded with the landowner of the area concerned. The domestic land structure is characterised by fragmented, small parcels, so reaching an agreement with the owners of an undivided common land can also be a big challenge. In particular, because the active involvement of owners in the entire development phase is expected, as they have to make a declaration in several procedures, they should be available throughout the permitting process.
Although I am not in a position to classify the work of other market players, this has become an important issue for us because we have seen a number of bad practices in the field of land and environmental protection in recent times.
Projects of this size are already significantly transforming the landscape; how can a multi-hectare solar power plant co-exist with its surroundings?
We plan our solar parks in a broadly sustainable way. The Carpathian Basin has such unique ecological features that that it would be a serious mistake to ignore, and it is the fundamental duty of every solar park expert to completely protect and develop it as much as possible.
One of the most important tools for this is the so-called “biomonitoring program”, in which we have mapped the existing properties of all the areas in the portfolio and are conducting research on how the solar power plant will affect the surrounding habitat over time. There are a lot of misconceptions about this, in the past, many people thought that solar parks were harmful to wildlife. The experiences of solar parks that have been operating in Western Europe for many years were unavailable or difficult to obtain in Hungary so far, therefore a significant information deficit has developed among the environmental experts who are otherwise well versed in other topics.
Based on international experience, it can be stated with great certainty that such a project can be classified as a kind of environmental investment, not only due to its effects on the energy system, but the development of solar power plants essentially means the set-aside of actively used land for at least 25-30 years, therefore it has a positive effect here as well. The solar panels are installed on a supporting structure consisting of piles or earth screws laid directly into the ground, which does not necessarily require a concrete foundation, we also try to avoid this solution. It is important to emphasize that in the case of our parks, 50 percent of the investment area will remain green even after the start of commercial operation.
We have also launched an independent project to research additional utilization methods with the involvement of experts with relevant experience, where we examine how the area of the power plant can be included in secondary agricultural utilization in the framework of complex land use in the future. There are several options in this area. Such is the beekeeping activity, in the framework of which, a kind of “bee reserve” is being established in the age of mass bee deaths. In practice, the area between the rows of the support structure can be used with a vegetation cover that creates excellent living conditions for the bees. Shade-tolerant crops can be sown under panel rows and grazed by sheep.
All of this can represent added value on top of clean energy production, in the introduction of which we want to play a pioneering role, and which, in my opinion, will form the basis of well-referenced studies at the international level. However, the widespread practice of this is still at an early stage, although we are monitoring a huge number of interesting and forward-looking initiatives.
With the involvement of industry, we are also preparing a so-called white paper on how to lay down guidelines along which a photovoltaic power plant can be installed in an ecologically optimal way. Recommendations have also been made at the EU level, and in its latest sustainability report, the European Commission also emphasizes that a solar park can specifically increase the biodiversity and value of an area.
Full text of this interview is available at portfolio.hu website in Hungarian. Published: 9 November 2020.