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The Hungarian Act X of 2006 on Cooperatives (“Cooperatives Act”) has been amended with effect from 1 January 2026 with provisions governing energy cooperatives (“Amendment”). The purpose of this article is to briefly present the background to the Amendment, introduce the concept and key characteristics of energy cooperatives as a new legal institution, and provide an overview of the most important rules applicable to energy cooperatives.

The background of the Amendment

Legal basis and purpose of energy communities

In order to mitigate the adverse effects of climate change and promote the achievement of climate neutrality, the European Union adopted in 2019 the Directive (EU) 2019/944 on common rules for the internal market for electricity and amending Directive 2012/27/EU. This Directive introduced the legal framework for citizen energy communities within the EU.

An energy community is a voluntary association of energy producers and energy consumers. Its operation is based on open and voluntary participation, and it is governed by its members or shareholders, who may be natural persons, small enterprises, or local authorities.

Under EU regulation, energy communities may be established in various legal forms. For example, they may operate as associations, cooperatives, or non-profit companies.

The primary purpose of an energy community is not to generate financial profit, but to provide environmental, economic, and social benefits to its members, shareholders, or the area in which it operates. These benefits may be achieved, inter alia, through the generation, distribution, supply and consumption of energy, as well as through aggregation, energy storage and the provision of services aimed at improving energy efficiency. The activities of an energy community may also extend to solutions related to electric vehicle charging and to the provision of other energy-related services to its members or shareholders.

Energy community operations in practice

It is a legitimate question how an energy community operates in practice and how it can provide tangible benefits to its members.

An energy community can best be understood as a small-scale system that is partially or fully energy self-sufficient. Within the community, members with different roles cooperate with each other. Some are solely energy generators, others both generate and consume energy, while some participate exclusively as consumers. Energy producers may include, for example, households with their own solar panel systems, as well as biogas plants or even wind turbines. These production units are typically developed through community funding from the shared budget of the energy community.

Energy storage solutions form an integral part of the system, enabling the storage of energy that has been produced but not immediately consumed. The key to operation is the continuous interaction between generation, storage and consumption units. This is ensured by an intelligent management system, the so-called smart grid, which monitors production and consumption and directs energy to where it is needed at any given time.

Ideally, an energy community produces slightly more energy than its members consume, which may allow it to become fully independent from the public grid. However, if the balance between production and consumption cannot be maintained—meaning the community produces either too much or too little energy—the energy community may trade with the universal service provider to balance its energy needs.

In conclusion, it can be stated that by promoting energy communities, the European Union seeks to achieve interconnected short- and long-term objectives. In the short term, energy communities can contribute to alleviating energy poverty and strengthening local communities. In the long term, the EU aims to increase the share of renewable energy sources, establish a decentralized and sustainable energy system, and achieve its climate neutrality target set for 2050.

Regulation of energy communities in Hungary and practical experience

To fulfil its legislative obligations arising from EU law, Hungary established the legal framework for the operation of domestic energy communities through the amendment adopted in 2020 to Act LXXXVI of 2007 on electricity (“Electricity Act”).

According to the Electricity Act., an energy community is a legal entity operating in the form of an association, cooperative or non-profit company, whose purpose is to create environmental, economic and social benefits for its members or for the area of operation defined in its statutes. This purpose may be achieved, inter alia, through the generation, distribution, supply and consumption of energy—including the use of renewable energy sources—as well as through aggregation, energy storage and the provision of services aimed at improving energy efficiency.

In connection with energy communities, it should be noted that registration with the Hungarian Energy and Public Utility Regulatory Authority (MEKH) is a prerequisite for acquiring legal status. In addition, to conduct licensed activities—such as electricity generation, energy trading, aggregation or energy sharing—an energy community must obtain the relevant regulatory permits in the same way as any other market participant. According to the MEKH register, there are currently 17 registered energy communities in Hungary.

Rules applicable to energy cooperatives under the Cooperatives Act

It can be concluded that the concept of energy cooperatives has been present in the Hungarian legal system for several years as one of the possible legal forms of energy communities. Although the Electricity Act allows for the establishment of energy cooperatives, detailed and specific regulation had so far been lacking. This regulatory gap was addressed by the Amendment, as a result of which the Cooperatives Act has been supplemented with a separate chapter dedicated to energy cooperatives.

Cooperatives are legal entities established through the members’ capital contributions, with the objective of lending assistance to its members to satisfy their economic and societal needs. The primary obligations of members consist of making their capital contributions and providing the personal involvement specified in the articles of association. The general rules applicable to cooperatives are set out in Act V of 2013 on the Civil Code and in the general provisions of the Cooperatives Act. It is important to note that these general rules also apply to energy cooperatives, in accordance with the specific provisions applicable to them.

Under the Cooperatives Act, an energy cooperative is one form of energy community within the meaning of the Electricity Act, operating within a cooperative structure and conducting energy-related activities in the interest of its members. Its primary purpose is to improve the economic and social situation of its members, while also providing environmental, community and educational benefits, thereby serving the public interest.

Any natural or legal person who meets the statutory requirements may participate in the establishment and subsequent operation of an energy cooperative. At the same time, the regulation allows the energy cooperative to make membership subject to geographical or technical conditions as set out in its articles of association.

Due to the specific purpose and operation of energy cooperatives, members may contribute different amounts to the cooperative’s assets, but this does not affect the equality of membership rights. In decision-making, each member participates with equal weight, meaning that each member has one vote. The Cooperatives Act also allows for the admission of members who are not required to provide personal participation but support the operation solely through capital contributions; such members are referred by the law as investor members.

The operation of an energy cooperative must be conducted in a manner that is consistent with the interests of its members and is both efficient and sustainable. To ensure this, the Cooperatives Act provides that matters affecting the articles of association fall within the general meeting, thereby guaranteeing the cooperative’s autonomy. The legislation regulates in detail the procedure for transferring cooperative and investor shares and the related notification obligation and grants pre-emptive rights to members and the cooperative itself.

A key rule concerning the fiscal management of energy cooperatives is that the legislation requires the creation of mandatory reserves. In this context, the energy cooperative must establish a reserve fund amounting to 10% of the profit generated. The purpose of the reserve fund is to ensure the long-term financial sustainability of the energy cooperative. The regulation also requires the establishment of an education and information fund, which serves as the financial basis for the continuous training and knowledge-sharing of members. At least 2% of the profit from the previous fiscal year must be allocated to this fund.

Summary

Overall, it can be concluded that the amendment to the Cooperatives Act, in line with EU objectives, establishes the legal framework for the operation of energy communities in cooperative form. As non-profit organisations, energy cooperatives may participate in the energy market while promoting community, environmental and economic interests, thereby contributing to sustainability, energy efficiency and environmental protection. The regulation prioritises democratic decision-making, transparent operation and the protection of members’ interests, while also allowing for the involvement of external investors.

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