Trade Winds, Sound Policies Push Portugal to the Renewable Energy Forefront

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

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 href=””
target=”_blank”>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 href=””
target=”_blank”>cheapest renewable energy source after

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, href=””
target=”_blank”>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 href=””
target=”_blank”>world’s largest solar farms. But despite a
great progression of installed PV capacity in Portugal (frhref=”” target=”_blank”>om
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 href=”” target=”_blank”>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

How did Portugal assume such impressive leadership in the clean
energy transition? The key, as usual, lies in ambitious supportive
policies. 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

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. href=””
target=”_blank”>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 European Commission plays a decisive role in setting targets
for each Member State via its 2009 href=””
target=”_blank”>Renewable Energy Directive. Portugal is
expected to reach a 31-percent share of renewable energy in its
gross final energy consumption by 2020. Also, the href=””
target=”_blank”>European Emission Trading Scheme (ETS)
encourages participating countries to cut their emissions of
greenhouse gases and therefore move from fossil fuels to
renewables, by requiring energy producers and energy-intensive
companies to meet strict carbon dioxide emissions targets and to
purchase additional permits for overshooting them.

According to the International Energy Agency (IEA), Portugal
became a net power exporter last year, delivering a small amount of
electricity to Spain. Inspired by these good results, Portugal set
more ambitious targets in its National Energy Strategy (href=””
target=”_blank”>ENE 2020), adopted by the Council of Ministers
on April 15. The country now aims to reach a 45-percent renewables
share in its electricity production by the end of the year, and a
60-percent share by 2020.

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 href=””
target=”_blank”>wind farms located in the U.S. Midwest.

target=”_blank”>Prime Minister Jose Socrates’ government wants
to improve the reliability and efficiency of Portugal’s renewables
supply. Renewable energy production is often challenged by natural
flows-including the common criticism that the sun does not always
shine and the wind does not always blow, even in Portugal. By the
end of the year, the government will set up a system to monitor
on-going energy demand and potential supply from various available
renewable sources.

What is driving Portugal to undertake such changes? One factor,
of course, is the fact that the country does not possess any
noteworthy fossil fuel resources, as illustrated by href=””
target=”_blank”>2007 IEA data. Yet in 2005, the bulk of
Portugal’s gross electricity was generated by three fossil sources:
target=”_blank”>coal (32.7%), natural gas (29.2%), and oil

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 target=”_blank”>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.

In order to address initial local conflicts due to the financial
costs of intense development of wind power plants, a unique
mechanism has been set up. 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.

Overall, the IEA’s Shinji Fujino tells the href=””
target=”_blank”>New York Times, “So far, the [renewable
energy] program has placed no stress on the national budget.”


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