HUNGARY'S THREE ENERGY VULNERABILITIES

The energy crisis of 2022 forced Europe to confront the reality of practicalities. For Hungary, however, the question was never simply whether energy existed somewhere in the world. Energy can be abundant on international markets and still fail to provide security. Across Europe — and seemingly across the world as well — countries are rediscovering a simple reality: energy policy is ultimately about reliability. The reliability of infrastructure, partners, and supply.

Can energy reach the country when it is needed? Through which route? At what cost? And under what circumstances? After years of recurring energy crises, Hungary's energy system appears stable. Yet stability should not be mistaken for the absence of vulnerability.

There are three issues that will have to be addressed in the next ten years. And not merely in technical terms, but also on the level of logic.

Nuclear energy remains the backbone of Hungary's electricity system. The Paks Nuclear Power Plant currently provides roughly half of domestic electricity generation and remains one of the country's most important strategic assets. In 2025, nuclear energy accounted for approximately 40 per cent of Hungary's overall electricity mix, placing the country among the most nuclear-dependent electricity systems in Europe. Yet behind this apparent stability, important questions remain unresolved. The existing reactors continue to operate following lifetime extensions, but they will not operate indefinitely. For twelve years, the long-term replacement project, Paks II, has progressed almost nothing. More than a decade after the original agreement, the project remains surrounded by financial, technical, and geopolitical uncertainty.

At the same time, another strategic issue has emerged. For many years, conventional wisdom held that Soviet-designed VVER reactors could only operate using Russian-produced fuel assemblies. Today, this assumption is increasingly being challenged. Westinghouse has successfully developed alternative fuel for VVER reactors and already supplies several operators across Central and Eastern Europe.

Hungary has also begun examining fuel diversification options. Agreements have been signed and technical discussions have taken place, yet a fully operational alternative fuel supply chain has not yet emerged. As long as this remains unresolved, one of Hungary's most important strategic assets continues to depend on a single external source.

Small Modular Reactors frequently appear in political discussions as a potential solution. Cooperation agreements have been signed and several international companies are exploring opportunities across the region. Yet despite growing enthusiasm, commercial reality remains unchanged. No SMR technology has yet demonstrated large-scale, long-term operation under mature market conditions. For Hungary, SMRs remain a future possibility rather than a present solution.

If nuclear energy represents Hungary's electricity challenge, oil represents its transportation and to some extent, an industry related challenge. Hungary produces only a fraction of the oil it consumes. Hungary's crude oil system has two physical pipeline entry points: the Druzhba pipeline and the Adriatic pipeline.

Therefore, the main strategic question here is not simply where the oil comes from, and on which route, but whether Hungary's infrastructure can adapt to optionality. Refining systems were historically optimised for Russian crude. Alternative supplies can be processed, but not always with the same efficiency, economics, or logistical simplicity.

The importance of this challenge became visible during the fuel price interventions of recent years. Both the 2021–2022 fuel price cap and the reintroduced system in 2026 demonstrated the same reality: fuel security depends not only on global markets, but on physical infrastructure, refining capacity, reliable supply chains and of course adaptability.

Natural gas in this sense presents a different picture. From a purely infrastructural perspective, Hungary is in a relatively strong position. The country's transmission network is interconnected with nearly every neighbouring state, import capacities exceed annual demand, and underground storage facilities remain among the largest in Central Europe.

Domestic production contributes approximately 1.7–1.8 billion cubic metres annually, while national consumption currently stands at around 8.5 bcm. Fully filled storage facilities can cover a significant share of annual demand.

Yet the political and economic questions remain more complicated. Most imported gas continues to arrive through long-term agreements linked to Russian supply. While Hungary possesses the physical infrastructure required to receive gas from alternative sources, replacing existing contractual arrangements remains a separate challenge altogether.

This question becomes particularly important when viewed through the lens of household affordability. For more than a decade, Hungary has maintained a system of regulated household energy prices. The policy has protected millions of households from international price volatility and remains one of the most consequential elements of Hungarian energy policy.

Yet every regulated system ultimately and consistently raises the same question: who pays the difference when market prices rise? The answer becomes even more complex when energy poverty enters the discussion. Many Hungarian households continue to live in poorly insulated buildings with outdated heating systems. For them, affordable energy is not merely a political preference but an economic necessity.

This is why energy efficiency may ultimately become one of Hungary's most important energy security questions. The cheapest unit of energy remains the one that never needs to be consumed. In the end, Hungary's energy future will not be decided by a single pipeline, a single power plant, or a single contract.

It will be determined by whether the country can reduce its vulnerabilities while preserving affordability and reliability.

The challenge is not a lack of energy.

The challenge is managing dependence. And in the end, dependence is determined not only by numbers, but by diplomacy.