Renewable Energy in Portugal

Typically, the Scandinavian countries and Germany have set the example in the European renewables field. Yet lately, a Southern country – Portugal – has attracted attention after delivering its National Renewable Energy Action Plan to the European Commission this June.

Portugal has made dramatic changes in its energy policy over the last five years under the government of Prime Minister José Sócrates. The country’s installed renewable energy capacity more than tripled between 2004 and 2009, from 1,220 megawatts (MW) to 4,307 MW, and renewables now represent roughly 36 percent of electricity consumed. Portugal currently ranks fourth in Europe in energy production from renewables.

Of course, Portugal benefits from favorable conditions for renewables: a strong wind resource, great hydropower, good tidal waves potential, and a high sunshine rate. After the country removed several dams in recent years, Sócrates’ government has focused instead on wind power development, under most conditions the cheapest renewable energy source after hydropower. With more than 600-percent growth in wind energy production between 2004 and 2009, Portugal now ranks sixth in Europe in total installed capacity and third in capacity per capita, behind only Denmark and Spain. Some even expect Portugal to overtake its neighbor Spain in per-capita wind energy production as early as this year.

Additionally, Portugal is starting to exploit its solar potential. A photovoltaic (PV) power station located in Moura, operative since 2008 and expected to be fully completed by the end of 2010, will count among the world’s largest solar farms. But despite a great progression of installed PV capacity in Portugal (from 1 MW in 2000 to 75 MW in 2009), solar power still lags far behind wind’s installed capacity of 3,353 MW. Portugal also deploys other renewable energies, albeit at a much smaller scale. Biomass and biogas represented 3.2 percent of total consumed electricity in 2009, and the world’s first shoreline wave power plant has been operating since 2005 on the island of Pico in the Azores, with 400 kilowatt-hours (kWh) of capacity.

Prior to 2000, Portugal’s transmission lines were owned by private power companies that had no interest in investing in renewables, as the deployment of these technologies would require radical changes in the grid infrastructure and therefore raise costs. To address this barrier, the government bought the lines and began adapting the grid to renewables requirements, including more flexibility and a better grid connection in remote areas to allow the production and distribution of electricity from small generators, such as domestic solar panels.

A combination of incentives was implemented to attract investors. Feed-in tariffs (FIT) – which guarantee producers of renewable energy a specified price for every megawatt-hour of power fed into the grid – were first introduced in Portugal in 1988 and have increasingly evolved into a highly sophisticated system with individual prices for each renewable energy source. The latest tariff stipulations, issued in 2005 and 2007, take into account environmental considerations, the level of technology development, and the inflation rate. The government also integrated new technologies such as Concentrating Solar Power (CSP) and tidal power into the system.

Today, all renewable energy sources in Portugal wil benefit from the feed-in tariff for 15 years, and small hydropower prices are guaranteed for 20 years. The tariffs vary from around 7.5 Euro cents (around 9.5 U.S. cents) per kWh for wind and hydro to more than 30 Euro cents (38 U.S. cents) per kWh for photovoltaic energy. Renewable heating and cooling is also supported under conditions by financial and fiscal incentives, largely for the benefit of small and medium-sized enterprises.

The main focus of Portugal’s renewable policy will remain on wind power, a dynamic industry that represents a source of revenue and creates green jobs. The electricity operator Energias de Portugal even invests in wind farms located in the U.S. Midwest.

Yet in 2005, the bulk of Portugal’s gross electricity was generated by three fossil sources: coal (32.7%), natural gas (29.2%), and oil (18.9%). The country is therefore heavily dependent on imports that place a high toll on the national budget – amounting to 86 percent of spending in 2006, according to the European Renewable Energy Council (EREC). In its ENE 2020 strategy, Portugal aims to reduce fossil fuel imports 70 percent by 2020 and cut its energy import balance 25 percent, saving some US$2.55 billion.

Under the current feed-in tariff legislation, municipalities that host wind farms benefit from additional financial support in the form of a 2.5-percent share of the monthly remuneration paid to local wind project operators.

– from worldwatch.org