National and regional story (Portugal) - Energy in Portugal

SOER 2010 National and regional story (Deprecated)

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SOER National and regional story from Portugal

Published: 26 Nov 2010 Modified: 17 Feb 2025

Energy is the driving force in contemporary society and we are all very dependent on it. However, given the effects of energy consumption on climate and the growing dependency on fossil fuels, it is clear that energy policy needs re-thinking.

The Portuguese economy is characterised by high energy intensity and a strong external dependence on energy imports. The energy demand growth rate is significantly higher than the GDP growth rate and the energy system is largely dependent on primary fossil fuel sources. Since Portugal is not rich in energy resources, external dependency is high: 82.3 % in 2008 (DGEG, 2010). Therefore the contribution of hydropower, wind, solar, geothermal, biofuels, biomass, waste, wave energy and hydrogen must be increased, together with the promotion of energy efficiency.

Every oil crisis exposes the vulnerability of the Portuguese economy. Even though it has decreased recently, oil still plays a leading role in the supply structure (52 % in 2008). Over the last ten years, natural gas has diversified the energy supply structure and contributed to the reduction of external dependence on oil. In 2008, natural gas represented 17 % of the total primary energy consumption and coal accounted for 10 %. Due to the impact of coal on CO₂ emissions, a progressive reduction is planned in the percentage of coal used for electricity production (DGEG, 2010).

The renewable energy sector is important to Portugal because it can generate employment, it makes a growing contribution to GDP and it helps reduce CO₂ emissions and the country’s external energy dependence on imports of fossil fuels. In 2007, renewable sources represented 17.1 % of the total primary energy, against 16.3 % in 2006. In recent years, there has been a growth in the capacity of renewable sources for electricity production. In 2007, this reached 7 645 MW, 4 883 MW of which was hydro, 507 MW biomass, 2 201 MW wind, 30 MW geothermal and 24 MW photovoltaic (DGEG, 2010).

Although the energy sector may be of vital importance in today’s economy, the fact still remains that almost everything we do has an adverse effect on the environment, from switching on a machine to using an elevator or even disposing of waste. All of these actions have implications in terms of energy costs and influence on the environment. For this reason a package of political incentives for renewable energies will be useful, provided that the costs and any adverse impacts are identified.

It is necessary to have a clear vision of the impact of proposed measures to boost the share of renewable energy at the same time as ensuring that the targets are realistic and affordable. In keeping with this idea, the International Energy Agency (IEA) has recommended that new projects should undergo thorough environmental assessment and be subject to the broadest possible public scrutiny (IEA, 2009).

Over the last 10 years, Portugal has seen many policy developments in energy and the environment. Renewable energy has become a prominent player in Portugal’s energy strategy, mostly in relation to energy security objectives, reduction of external dependency on fossil fuels and climate change issues.

Renewable energy is one of the top priorities identified by the Portuguese government for its new mandate (2009-2013), together with concerns about energy efficiency. The government is committed to reducing the strong external energy dependence; increasing energy efficiency; reducing CO₂ emissions; improving service quality and stimulating competition through the adoption of an organisational model for energy sector undertakings with public capital (DGEG, 2010).

The National Energy Strategy, issued in 2005, set out a series of measures for achieving the objectives of:

Securing energy supply, through the diversification of primary resources and energy services and through energy efficiency promotion;
Stimulating competitiveness, in order to safeguard consumers’ rights and company efficiency;
Ensuring environmental sustainability of the energy process, through the reduction of the environmental impact on a local, regional and global scale.

The success of the strategy requires the liberalisation of the natural gas and electricity markets (creation of MIBEL – Iberian Energy Market); the development of a single transmission operator for the transport of gas and electricity; strong efforts to promote and support renewable energy sources and the implementation of a plan to increase energy efficiency. It is envisaged that 45 % of the total electricity consumption will be based on renewable energy sources.

The targets set for 2010 and 2012 have been changing over time and a new strategy has now been approved (Cabinet Resolution No.29/2010, 15 of April), updating the previous targets which are now set for 2020:

Hydropower: Increase installed capacity to 8 600 MW; implement an action plan for small hydro aiming to achieve 250 MW;
Wind power: Increase installed capacity to 8 500 MW;
Solar: Install 1 500 MW; update the micro-generation programme and create a mini-generation programme;
Biomass: Install 250 MW and support the production of biomass to secure demand;
Biofuels and biogas: Implement and correctly apply the EU Directives and best practices relating to biofuels and exploit the potential of the biogas produced by anaerobic digestion of waste;
Waves: Implement an ocean pilot zone and install up to 250 MW;
Geothermal and hydrogen: promote the exploitation of geothermal and hydrogen potential.

In an attempt to diversify the energy mix, Portugal has implemented a variety of projects and actions in most areas of the renewable energy sector (hydropower, wind, solar, geothermal, wave energy, biogas and micro-generation).

Portugal is among the leading IEA member countries in terms of both hydro and wind power generation (IEA, 2009).

In September 2007, a national programme was launched for hydro-power plants (PNBEPH), identifying ten new potential hydro-power plants, with a capacity of approximately 1 100 MW and an estimated annual gross electricity output of 1 630 GWh. Eight hydro-power plants have already been approved and five of these are to be reversible. The Portuguese government has also launched an initiative with a view to upgrading several existing hydro-power plants in order to duplicate their installed capacity.

A law on microgeneration (usually known as renewables on demand) regulates the microgeneration of electricity from renewable energy sources. It provides for a simplified licensing regime for the connection of low-voltage, small/residential renewable energy producers to the distribution grid. Licensing is conducted on-line, via the Internet. The law defines two regimes:

The general regime is applicable to any type of microgeneration (or co-generation) source. The maximum interconnection power by application is limited to 5.75 kW. The feed-in tariff equals the regulated tariff (true net metering).
The special regime applies exclusively to renewable energy sources – solar PV, wind, hydro, biomass and fuel cells (provided that the hydrogen is produced from renewable energy sources). The maximum interconnection power by application is limited to 3.68 kW. A reference feed-in tariff, for electricity from renewable energy sources (RES-E) microgeneration technologies, is initially set at EUR 0.65 per kWh and will decrease by 5 % after 10 MW of overall capacity is added. PV systems benefit from 100 % of the reference feed-in tariff, wind benefits from 70 % and hydro and biomass from 30 %. The feed-in tariff is guaranteed for up to 6 years. The installation of a solar water heating system (a minimum of 2 m²) is mandatory.

Between April 2008 and the end of 2009, a total of 5 349 certified microgeneration units were issued, corresponding to 18.9 MW of installed capacity. A further 4 423 microgeneration units, representing 15.6 MW of installed capacity, are already in production.

Portugal has a long coastline and waves with excellent characteristics, ideal for the installation of offshore power generation facilities. The Portuguese potential for electricity production from waves has been estimated at 30 MW per km of coastline. In 2008, the first wave farm was installed, five kilometres off the Atlantic coast of northern Portugal (Aguçadoura) with a capacity of 2.25 MW (three times 750 kW). The initial investment was around EUR 8.5 million and the farm is still in the testing/demonstration phase.

A special tariff was established for wave energy (Decree-Law No. 225/2007): 260 EUR/MWh for the first 20 MW (decreasing for additional installed capacity). Subsequent legislation issued in 2008 (Decree-Law No. 5/2008) established a pilot zone in Portugal and REN (Redes Energéticas Nacionais), the Portuguese transmission system operator was appointed as project manager (Decree-Law No. 238/2008).

The pilot zone is to be used for the installation of demonstration, pre-commercial and commercial wave energy devices up to a total of 250 MW of rated capacity (170 MW connected to the electrical transmission grid and 80 MW connected to the distribution grid). The zone is located approximately 120 km north of Lisbon (São Pedro de Moel) and covers approximately 320 km² of sea at water depths of 30-90 metres.

Based on an investment of EUR 261 million to produce “clean” energy for the grid within a 25-year period, the Solar Photovoltaic Power Station of Amareleja was built in the hottest area of Portugal, with very high summer temperatures. The installed capacity provides 46 MW and supplies an equivalent to the consumption of 30 000 families, eliminating 89 383 tonnes of CO₂ emissions per year.

Portugal has also set up many local and regional energy agencies, aiming to support the introduction of good energy management practices, advocate the concept of sustainability, provide information and guidance and offer a number of other local services based on specific local energy needs. These agencies work very closely with the municipalities and are supported by ManagEnergy, a technical support initiative of the European Commission’s Intelligent Energy Europe (IEE) programme. They are organised in an informal cooperation network (22 agencies so far) in order to share information and experiences and foster partnerships. This has resulted in some very interesting transboundary cooperation projects for renewable energies, such as Altercexa (www.altercexa.eu), involving partnerships between Portugal and Spain.

The new national strategy for 2020 is also dedicated to promoting the use of electric vehicles. This has led to the launch of a project to create a supply network for this type of vehicle.

Other measures related to the energy sector can be seen in the Programme of the XVIII Constitutional Government, which aims to play a leading role in the "energy revolution". Energy is considered by the government to be one of the seven main areas for structural modernisation. The objectives are as follows:

Secure Portugal’s position as one of the five leading European countries in the area of renewable energy by 2020;
Ensure the doubling of electrical energy generation capacity by 2020, reduce imports, deactivate the most polluting power plants and accommodate the increasing energy demand;
Reaffirm Portugal’s position in relation to i) technologies to support the launching of vehicle networks powered by laminated lithium ion batteries; ii) smart distribution grids; iii) production of wind towers and wind farm management systems; iv) high-voltage cables and modern transformers; v) thermal and photovoltaic solar production; vi) engineering and construction of dams; vii) construction sector with development capacity in the energy efficiency sector;
Secure positions in high potential markets since it is estimated that investments in this sector worldwide will be worth around USD 30 trillion within the next 20 years;
Support the creation of industrial and R&D units in solar and wave energy production, electrical vehicles and smart grids;
Enhance R&D resources in energy sector to ensure its strong connection with the economical system, in line with IEA recommendations (IEA, 2009);
Ensure maximisation of connectivity between the hydropower in reversible dams and the coordinated exploitation of wind power;
Multiply by 10 the current target for solar energy (from 150 to 1 500 MW) within 10 years through an integrated policy for the various solar technologies (photovoltaic, thermal solar, concentrated solar power, thin films) based on its industrial unit development model;
Ensure a 50 % coverage of national consumers by 2015 and 80 % by 2020 for electricity distribution in smart grids;
Provide strategic infrastructure for natural gas storage, with a capacity of over one thousand million cubic metres, creating the conditions for Portugal and the Iberian Peninsula to be considered as an “open door” for European gas supply;
Stop commercialisation of low-energy efficiency incandescent lamps;
Make a “B” energy classification mandatory for all new buildings in Portugal;
Encourage citizens to improve the energy efficiency of houses;
Continue with the energy certification of public buildings and the correction/improvement of energy-inefficient buildings;
Launch a programme of micro-generation in public facilities such as schools, health centres, barracks, etc.;
Simplify the processes and procedures associated with micro-generation to facilitate support from citizens and companies;
Ensure that landfills and certain types of cattle installations have adequate energy recovery facilities;
Ensure by 2015 that 50 % of vehicles purchased by the government are hybrids or electric and that, by 2020, at least 750 000 of the vehicles in circulation are hybrids or electric;
Maintain a programme of incentives for disposing of end-of-life vehicles and reinforce it with an incentive of EUR 5 000 for individuals, and 50 % corporate income tax relief for companies purchasing electric vehicles;
Establish a pilot network for electrical mobility in Portugal and ensure adequate coverage for the launch of electrical mobility;
Create a regulatory framework for the introduction and operation of charging points in new and existing buildings and encourage the establishment of charging points in each individual private parking space;
Reaffirm the national targets with a view to achieving the European biofuel incorporation target by 2020 and establish the mechanisms for implementation of these national targets;
Promote the conversion of vehicles to liquefied petroleum gas or natural gas;
Update and rationalise all legislation in the renewable energy sector and combine it under one law;
Continue to promote competition in energy markets and transparency of prices (electricity, natural gas, fuel), particularly in the context of MIBEL (Iberian Electricity Market) and MIBGÁS (Iberian Gas Market), in line with the recommendations of IEA (IEA, 2009).