Construction of a new biogas plant is under way in Hungary, where officials predict it will cover the energy needs of thousands of homes.

Executives of Hidashati Farm Ltd. and the plant's builder, Biogaz Unio, said Saturday the $6 million, 1.2-megawatt anaerobic digestion plant they've started putting up near Bekes in eastern Hungary will transform animal waste and other farm materials into enough power for 2,500 homes and heat for 1,500 homes annually.

Such plants produce power by breaking down wet, biodegradable, organic wastes such as manure, whole crop silages, wet food and feed wastes.

Hidashati Farm Chief Executive Laszlo Vegh said the raw material will be provided from the manure of 2,400 head of cattle on the 800-acre farm. The plant will produce both electricity and heat, as well as 2,000-2,500 tons of fertilizer and soil conditioners as by-products.

"In the longer term, costs will be reduced and thus increase our competitiveness," Vegh said. "The ability to compete against Western European companies is a very important part of the process for us."

Biogaz Unio Chief Executive Peter Pongracz said the development of the biogas plant was made possible with a $2.9 million investment from the Hungarian government's transport operational program via the European Union and additional funding from local investors.

Bekes Mayor Gabor Izso declared the introduction of advanced technologies into Hungary's farm country is necessary to ensure the country's energy independence.

"It's very important to us that the biogas plant is being built -- it is city's major contribution to strengthening energy security," he said.

Hungarian Member of Parliament Jozsef Kovacs noted raw materials for biogas production are abundant locally, which makes it a good bet for future projects. He also praised the environmental and economic development potential of biogas, the regional daily Bekes County News reported.

Hungarian agriculture is dominated by high livestock density, which is accompanied by production of a surplus of animal manure. That poses over-fertilization and environmental risks, and so excess of nutrients need to be carefully managed and recycled when possible.

Through the use of anaerobic digestion, odors and pathogens from manure can be cut and a renewable fuel -- biogas -- can be produced.

The EU has set a goal of producing 20 percent of its power needs through renewable sources by 2020, with at least 25 percent of that total from biogas.

Budapest's political target is to reach 34 megawatts of power to be generated from biogas by 2020, about 5 percent of the total renewable energy sources in the country.

The EU has determined Hungary has a very good chance to reach that target, with the potential to generate almost 9 billion cubic meters of biogas from agricultural resources such as animal by-products, sewage sludge and municipal organic waste.

?However, the commercial profitability of biogas is still insufficient for it to compete with cheaper fossil fuels such as natural gas and coal on its own. Backers hope further technological advances combined with guaranteed feed-in tariffs and other support programs will help trigger new investments in Hungary.