Towards a climate neutral EU:
efficient allocation of EU funds

The geothermal heating of municipalities: a former best practice, discontinued

Organisation: Clean Air Action Group, Hungary Website: Added: April 06, 2022
Project start date: August 25, 2010
Project end date: December 31, 2011


In Hungary, between 2006 and 2013, several municipalities received EU funding to implement geothermal heating systems for households, public buildings, and industrial and agricultural facilities. Hungary has a good geothermal potential, currently ~15% of the potential is in use. Geothermal heating systems provide cheap and clean renewable energy at moderate maintenance costs, and they generate steady revenue for the municipality, adding good potential for regional development as well.

For example, the town of Veresegyház developed its geothermal heating system with the help of EU funds between 2006 and 2011. The geothermal system has turned into a lucrative, income-generating municipality asset, attracting private businesses and spurring the municipality to invest in the system’s further development from its own budget. Demand for geothermal heating is high among residents, public institutions and businesses. A strong awareness-raising capaign around the project focused on students, engineers and authorities, but from 2013, there have been no further successful geothermal projects using EU funds. Since then, there have been fewer open calls for tenders, and most of the newly realised EU-funded geothermal projects tend to be of low quality (e.g., the implemented geothermal infrastructure is often unable to function due to poor design and insufficient risk assessment). Innovation and efficiency improvements in the sector have ground to a halt.

Thus, despite some earlier good examples, new opportunities to expand geothermal energy capacities are largely being missed.

Financial data

Total Budget of project in Veresegyház: EUR 1,800,000 EUR

EU Contribution: EUR 1,000,000 (60%)


The current European funding programmes should offer calls for tenders to utilise the available geothermal capacities and thus increase the share of renewables in Hungary’s energy mix. Calls for tenders should be similar to those announced before 2013 (open to all applicants, requiring serious technical expertise, etc.), which led to successful and feasible projects. Low-income municipalities in underdeveloped regions should be prioritised to create revenue and jobs in the region, and to attract companies (greenhouse producers, factories, etc.) with cheap, renewable energy. To prevent the recent decline in the quality and feasibility of geothermal developments, stringent feasibility studies – containing technical details and numerical targets and indicators, evaluated by an international expert committee – should be required as part of any project application.

Also, applicants should prove that they hold the necessary technical expertise and experience. Long-term maintenance costs should be factored in the feasibility studies. Prestigious professional organisations should be involved in outlining the feasibility requirements (e.g., the Hungarian Geothermal Association). Long-term maintenance should be prepared for in the planning phase: a technical and budget plan should be required for new project applications. Stricter control should be exercised on the de facto functioning of water re-injection: geothermal energy can be considered renewable only if the extracted water is re-injected after cooling. Feasible municipal geothermal heating needs good economic management. If such skills are missing in a municipality, capacity building should be provided.

The regulatory and tax environment should be reviewed to ensure that profitable projects are not punished or otherwise disincentivised. The current price caps on household energy are a serious obstacle to renewable energy investments, and also an enormous waste of public resources (among others, because they provide most of the subsidy to those households which do not need them). Price caps must be abolished, and vulnerable households should receive a compensation in the form of monthly direct payments and help in energy-efficiency investments. Dissemination of knowledge and good examples of EU-funded projects should be required. All active stakeholders (e.g., authorities, professional associations) should be incentivised to study best practices.

Information sources

Veresegyház project's website, Declaration of the Hungarian Geothermal Association (member of the International Geothermal Association) on the trends of geothermal heating projects realized since 2013

Other info

European Climate Initiative (EUKI)
This project is part of the European Climate Initiative (EUKI). EUKI is a project financing instrument by the German Federal Ministry for Economic Affairs and Climate Action (BMWK). The EUKI competition for project ideas is implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. It is the overarching goal of the EUKI to foster climate cooperation within the European Union (EU) in order to mitigate greenhouse gas emissions.