Renewable energy in Portugal

Although its extensive maritime coast (almost 943km in the continental area), Portugal has been striving throughout the years to have a fully implemented offshore wind sector. One of the small steps given, was the implementation of the Windfloat Atlantic project which was installed in a maritime public domain located 20km off Viana do Castelo and 100m deep and entered into operation in 2020.

In this view and considering several national plans and strategies (e.g. the approval of the Industrial Strategy and Action Plan for Ocean Renewable Energy through the Council of Ministers Resolution no. 174/2017 and the PNEC 2030, the Energy and Climate National Plan) the Portuguese Government has taken a serious path in view of the effective implementation of offshore wind projects having defined a total of 10GW of grid capacity to be allocated up to 2030 through competitive procedures such as auctions (being 2GW to be fully operational up to such date).

As to reach such goal and in view of the launching of the first offshore wind auction, during 2023, the Portuguese Government has been very active, preparing the relevant territorial plans (e.g. public consultation of the Allocation Plan for Offshore Renewable Energies up to 13.12.2023) and also carrying out the legal and technical studies. One of the most relevant documents approved was the final report of July 2023 of the working group (composed by members of the most relevant public entities from energy sector, seaports, infrastructures, environment, among other) which has enlightened and recommended several relevant aspects. Among other aspects, the most relevant recommendations may be summarized as follows

• Capacity of up to 3.5 GW in Viana do Castelo, Leixões and Figueira da Foz in a first phase (1, 05 and 2 GW respectively), subject to one or more competitive procedures.
• Two competitive models that can be implemented for the development of the offshore wind market in Portugal were identified: the so-called centralised model, which assumes the allocation of a remuneration support mechanism for the production; and the so-called decentralised model, which does not have such a mechanism associated.
• Network infrastructures and the offshore industrial sector shall be developed as to support the development of wind offshore projects.

Following such recommendations, the Government has opened very recently a period for expression of interest, in which promoters/interested parties were invited to share their track record and experience (in particular, the reference to their respective financing models and development of supply chain) and also provide some input on the interested parcels of the auction. Around 50 entities have expressed their interest as to develop offshore wind projects, including relevant players in the market such as Iberdrola, RWE, OceanWinds, Equinor, Greenvolt BlueFloat and REPSOL.

Following such phase, the Portuguese Government will invite to a dialogue phase with the promoters which shall take place potentially during January or February 2024. The auction is expected to be launched in 2024, being the exact timing still to be defined, considering particularly the recent political contingencies (new legislative elections which shall take place on 10 March 2024, following the resignation of the Prime Minister back in November this year).

The extent and content of the tender documents and the model to the approved is still unknown, however, will surely reflect the input from the promoters under the expression of interest phase and also the recent outcomes from other international tenders, particularly in UK where, very recently (September 2023), the UK government announced that zero offshore capacity was awarded (the auction was based on a Cfd scheme included a price cap of GBP 44 per MWh).

The 2023 United Nations Climate Change Conference or Conference of the Parties of the UNFCCC, more commonly known as COP28, held from 30 November until 12 December 2023 at Dubai determined the transition from fossil fuels in energy systems in a fair, orderly and equitable way, accelerating action in this crucial decade in order to achieve carbon neutrality by 2050 in accordance with scientific recommendations.

Electric mobility, with a particular focus on road transport, will be key to ensuring the progressive replacement of fossil fuels and promoting greater incorporation of renewable sources in energy consumption.

Advanced biofuels and hydrogen are an alternative and complementary solution to electric mobility, in particular for the long-distance heavy goods road transport, heavy goods road and rail passenger transport, maritime freight and aviation sectors, to leverage the decarbonization of consumption and promote increased consumption of renewable energy source.

These two fossil fuel alternatives were already identified by the Portuguese Government in the National Energy and Climate Plan approved by Ministers Council Resolution no. 53/2020, of July 10, that also identifies course of actions and measures to increase the penetration of renewable sources into the transports system and respective goals.

Such National Plan is totally aligned with the COP28 goals regarding fossil fuels transition, but it was publicly announced that the Government’s intention is to revisit and review such Plan during next year, in order to establish more aggressive and ambitious goals.

Among the measures and initiatives defined and in force to leverage the development of electric mobility, the following stand out, inter alia, (i) the introduction of electric vehicles will be promoted and supported by tax incentives and benefits (ii) charging infrastructure must be strengthened at various levels adopting mandatory criteria for the installation of charging stations, namely in residential and commercial areas by determining the mandatory installation of electric vehicle charging stations in publicly accessible infrastructures and by creating the technical and regulatory conditions, as well as the appropriate incentives, to grow the electric vehicle charging network in private buildings and spaces; (iii) Promoting electric vehicles in urban micro-logistics; (iv) Promoting electric two-wheelers and (v) creating an obligation to comply with quotas for the purchase of electric vehicles by the state administration, as well as providing incentives for the introduction of electric vehicles in the state vehicle fleet.

By the end of 2022 (the data for 2023 is still unknown), electric vehicles represented only 12% of the national vehicles and the hybrids 27%, meaning that, despite the positive evolution we have witnessed mostly during the last 2 years, Portugal still has a long way to go to make electric mobility a dominant reality in our Country.

Finally, it is important to mention that we expect a change in the current regulatory framework of the electric mobility in order to adapt it to the Regulation (EU) no. 2023/1804, on the deployment of alternative fuels infrastructure, commonly known as AFIR, notably in the establishment of a clear definition and segregation between charging points of public and private access and a swifter ad-hoc payment system, throughout payment instruments widely used in the EU.

In Portugal, in recent years, we have seen a substantial increase in the decentralized production of electrical energy, mainly from solar sources. In fact, in 2021 we had a total installed capacity of 580.46 MW and in 2023, until October, we have an installed capacity of 1,769.21 MW of decentralized electricity production.

The PV plants within the decentralized production are usually installed on rooftops of buildings, but also at pre-existing built structures that do not constitute buildings or implanted directly on the ground in delimited areas, such as shopping malls, large commercial areas, parks or industrial centres, logistic platforms, camping sites and car parks.

The Portuguese legal framework applicable to the decentralized production - which has been stable and favourable to investments in this area, accommodating the developments necessary for market evolution - is designed as a self-consumption model, through the installation of self-consumption production units (unidades de produção para autoconsumo or UPAC) whose produced energy is intended to be consumed on site and the excess to be injected into the public grid or shared within a collective self-consumption scheme or an energy community. The ownership of the UPAC may belong to third parties (namely investors) and it may also be installed in a third-party property, facilitating the implementation of ESCO business models. In fact, the Portuguese legislation is aligned with European regulations on this matter, providing since 2019 the three key legal concepts for the development of decentralized production, i.e.: (i) individual self-consumption; (ii) collective self-consumption; and (iii) energy communities.

Actually, the Portuguese legal framework is clearly favourable to the development of this type of project, as, for example, the installation of solar panels in buildings, pre-existing built structures that do not constitute buildings or implanted directly on the ground in delimited areas is not subject to construction licensing from municipalities. Also, under the terms of a decree-law that has approved an exceptional regime that is in force until 19 April 2024, all UPAC’s with installed power equal to or less than 1 MW are exempted from prior control of urban operations from municipalities. Moreover, under the terms of this exceptional regime, PV Plants intended for self-consumption are exempt from environmental impact assessment, when: (i) are installed in constructed structures or in buildings, except in the case of classified buildings or in the process of being classified and respective protection zones; or (ii) are installed in existing or future artificial areas.

Finally, the Portuguese National Energy and Climate Plan 2030 (PNEC), which is the main energy and climate policy instrument for the period 2021-2030, is currently under review and presents an enormous ambition in this matter, particularly with regard to photovoltaic solar, whose target has more than tripled, from 9.0 GW to 20.4 GW, of which 5.5 GW will be decentralized power.