The invasion of Russia in February has made gas prices for power plants reach record levels. This has prompted governments and companies around the world to expedite their embrace of renewable energy sources. Portugal is no exception. In fact, the country is leading the global shift away from fossil fuels and towards energies like wind and solar.
Portugal has long been a pioneer in the sustainable energy space. In 2016, the country introduced the first floating photovoltaics in Europe. Portugal is even home to the world’s tallest wind turbine. It sits in the ocean atop an innovative platform designed by a Portuguese company.
Since 2005, Portugal has reduced its greenhouse gas emissions the most out of all EU countries.
The Portugal government announced last month that it would increase its use of renewable sources for its electricity output from 60% to 80% by 2026. This is four years earlier than what they had previously planned. Mariana Vieira da Silva, Cabinet Minister, argued that while Portugal has been at the forefront of the transition to renewable energy, it is necessary for new measures to be taken as the war continues.
The hope is that these new energy plans will be the start of a 10-year flow of investments worth over 25 billion euros in total. This will involve both the public and private sectors, as well as incentives and financing.
Like many other countries, Portugal committed to becoming carbon neutral by 2050. The country is ahead of their European counterparts in many ways. 60% of its electricity already comes from renewable sources.
Additionally, Portugal is not dependent on Russia for its natural gas pipelines, unlike some other European countries. It mostly imports liquefied natural gas from the US and Nigeria instead. In fact, Portugal has not imported crude from Russia since 2020.
In addition to this, the government would like to increase the “installed capacity of renewable sources” by more than double over the next 10 years. The hydroelectric capacity and onshore wind parks together make up 83% of the country’s total installed capacity. As of last year, Portugal no longer has any coal-fired power plants.
Portugal’s winning strategy
In a win for energy consumption, Portugal recently auctioned rights to build floating solar plants on its dam reservoirs, setting a world record low price for future output. The panels have the capacity to convert light from the sun into 183 megawatts (MW) of electricity. This follows their record-breaking auctions in 2019 and 2020 for the lowest price of future output via solar parks on land.
70 MW will be generated at the Alqueva dam located in the southern part of Portugal.
The winning bid was a negative price. This means that over 15 years, the company who was assigned the rights to install these panels, EDP Renovaveis (EDPR), will actually be required to pay Portugal’s electric system €4.13 for every megawatt hour (MWh) it generates. For context, the average price in the Iberian wholesale market was around €112 per MWh throughout 2021. The Ministry of Environment said that over these 15 years, gains for consumers of electricity will be worth 114 million euros cumulatively.
A source close to EDPR said that the company was able to offer a negative price because it will turn a profit from the other part of the hybrid project which will produce wind and energy storage. There is even potential to further increase profits with integrated battery storage.
As well as providing services throughout the EU, Private Client Consultancy is proud to have an office in Portugal. If you have any questions about ESG or how we can help you with your sustainable investments, contact us today. You can also read our sustainability commitment here.