Land use requirements for renewable energy projects in Hungary

Hungary is the first European country to sign a Belt and Road Initiative co-operation document with China, covering trade, investment, infrastructure, logistics and electric vehicles. The bilateral trade between the two countries has grown by 79% in the past 10 years.

In Hungary, wind energy projects are steadily developing, while solar photovoltaic (PV) projects are progressing at a faster pace. By the end of 2022, the installed wind energy capacity was 330MW and the installed solar PV capacity exceeded 4GW. Hungary has launched several incentives in recent years to boost energy sustainability and reduce the dependence on imported energy, including an energy efficiency renovation subsidy scheme and a renewable energy industry development fund.

If Chinese enterprises wish to carry out solar PV or wind energy projects in Hungary, acquiring land is one of the important prerequisites. It is critical for investors to know Hungarian laws, keep abreast of changes in local land policies and ensure compliance in business activities.

Based on the author’s legal service experience in renewables investments in Hungary, this paper looks into the country’s basic land policies and the land use requirements for solar PV/wind energy projects.

Land types and acquisition methods

The main categories of land in Hungary include agricultural, forestry and general. Below are land acquisition methods by type:

Ownership of general land. Apart from companies and individuals registered in the European Union (EU) and the European Economic Area, entities seeking to purchase land in Hungary must obtain special permission. The procedure for purchasing general land is relatively simple. Both parties need to sign a land purchase agreement in compliance with Hungarian laws, countersigned by a Hungarian lawyer. On the registration of ownership with the Hungarian Land Registry, land ownership is transferred.

Ownership of forests and agricultural land. The procedures for acquiring ownership of forests and agricultural land are different from those for general land. According to Hungarian Act No. CXXII promulgated in 2013, only Hungarian or EU citizens who are eligible farmers can own forests and agricultural land.

Due to the above restrictions, if solar PV/wind energy projects require the use of agricultural land, approval from the relevant authorities to convert the land to non-agricultural use must be obtained before acquiring ownership. This entails an examination of the land chosen for the project and its quality. For land with above-average quality, the government must establish, through a government resolution or decree, that the investment using such land is of national economic importance. Only then can agricultural land and forests of above-average quality be permanently used for non-agricultural investments.

For permitted conversion of agricultural land to non-agricultural use, investors should have a genuine need for other uses (including the construction of solar or wind energy equipment on the land) and must pay land protection fees. In practice, generally, the actual landowner should have retained ownership for at least five years before applying for non-agricultural use to obtain a permit.

Land purchase/sale and expropriation

In Hungary, the buyer and the seller, under a general purchase/sale agreement, may negotiate to determine the land price themselves. However, according to the new regulations introduced in 2023, the purchase price of agricultural land cannot exceed 10% of the local average market value for the year preceding the agreement.

When the state expropriates land, compensation issues arise. Landowners whose land is expropriated (excluding holders of retention rights and those entitled to apply for enforcement) are entitled to full, immediate and unconditional compensation for the loss of their land ownership rights. In determining the compensation amount, the local market value of the land must be considered.

Land use requirements for wind energy projects

Hungarian laws and regulations provide specific requirements on the location of wind energy projects. Unless the scale is exceptionally small, wind farms are prohibited from being built in the following areas:

1. UNESCO World Heritage sites;
2. Nature reserves;
3. Within a 12,000-metre radius of residential areas;
4. Within a 40-kilometre radius of radar operations conducted by the Hungarian defence forces or within a 15-kilometre radius of military airfields.

In addition to the above restrictions, relevant laws provide that wind farms may only be built in areas of agricultural zones established for special research and development and the use of renewable energy sources. Additionally, wind farms must obtain written consent from all property owners within a one-kilometre radius of the site ahead of construction.

Regardless of the above specific restrictions, to encourage the development of onshore wind energy, the European Commission has urged Hungary to remove the current general limitations on wind farms. But these measures have not been implemented so far.

Land use requirements for solar PV projects

Hungarian laws and regulations impose the following requirements and restrictions on land use for solar PV projects:

1. If the land area covered by the solar PV panels reaches 2 hectares (or 0.5 hectares within a nature reserve), an environmental impact assessment must be conducted in advance, and an environmental permit must be obtained;
2. For large investments exceeding HUF500 million (USD1.37 million) (equivalent to RMB102.7 million), archaeological documents shall be provided in advance, and the installation restrictions for solar PV panels as per regulations concerning archaeology and monument preservation must be adhered to; and
3. If the installation and operation of PV panels on agricultural land impact agricultural production, permission must be obtained from the Hungarian Land Protection Department, and land use must be officially converted from agricultural to other uses.

Wang Jihong is a senior counsel and Xu Yibai is a non-equity partner at Zhong Lun Law Firm