Today, renewables contribute 59% of Portugal’s electricity needs, with wind and hydropower doing most of the work. 

Pedro Amaral Jorge, President of the Portuguese Renewable Energy Association (APREN), explains Portugal’s achievement: ‘We have no fossil fuels of our own and even if we did, our protective environmental laws would most likely prevent businesses from extracting them. Consequently, transitioning to renewables has made sense from both a business and environmental perspective for a long time.’

Jorge attributes much of Portugal’s decarbonising headway to successfully conveying the advantages of renewables to the government, businesses, investors and the populace. Geography has played a key role here as the Iberian country is well placed to take advantage of both wind and solar power. This has persuaded the government to provide a supportive regulatory environment and a legal framework that encourages investment, leading to investors financing multiple renewable projects over the past decade or so. 

More recently, with the war in Ukraine and attendant volatility of oil and gas prices, the argument in favour of renewables to boost energy security has also become increasingly pertinent. But whatever the justification used, Portugal is undoubtedly committed to moving away from fossil fuels and replacing them with clean and unlimited energy sources, and is achieving its targets ahead of most other countries. 

In Jorge’s opinion, the model that has worked in Portugal could be applied elsewhere too. ‘It can be replicated as long as you have an understanding of what you need to do in terms of public policy and how you explain the benefits,’ he comments. ‘You need the involvement of the national government with a clear policy of what to do; you need to clearly show the citizenship the benefits; and you need a regulatory framework in place that will attract the investment to install renewables as cheaply as possible.’

Persuading everyday people of the benefits of a clean energy transition should not be difficult, especially in the context of spiralling energy bills. As Portugal’s declining energy bills demonstrate, installing renewable energy sources does not just reduce emissions, it has also been good business practice, resulting in electricity costs decreasing by as much as 50% over the past decade. APREN’s research shows that due to the high proportion of clean electricity generation, the average Portuguese household saved up to €300 and non-domestic consumers up to €30,000 on bills in 2021. 

Portugal’s electricity generation

Portugal enjoyed a slight head start in renewables compared to many other countries due to its large hydropower resources which the country invested in during the 1950s. But the majority of its recent progress has been down to a commitment to growing its wind, solar and biomass electricity generation. 

Between 2000–2019, Portugal increased its renewable energy supply by 26%, achieving 28% of total final energy consumption, according to the International Energy Agency. A significant expansion in wind generation and a small but gradually expanding proportion of solar PV generation are largely responsible for this increase. Using biomass, principally in industry and for residential building heating, has also saved the country just over 2mn toe/y since 2012.

Investment in wind began in the 1990s and, by 2021, wind was generating 26% of the country’s entire electricity supply, surpassing hydro at 23%. In 2021, biomass generated 7% and solar PV 3.5% of Portugal’s electricity, bringing the share of renewables to a remarkable 59% of all electricity consumption. In comparison, clean energy provided 37% of all European electricity production and 38% of the entire world’s electricity in 2021. 

Here comes the sun

It might be surprising to discover that solar PV does not contribute more to Portugal’s electricity mix given its latitude and climate. This can be explained in the context of Portugal’s 2010–2014 financial crisis. 

In 2011, just as solar PV was beginning to take off, the government was forced to declare insolvency, causing frozen investments and projects. The European Commission and the Portuguese government did not provide support for solar PV and therefore its growth was stunted compared to wind, which was already enjoying momentum with multiple financeable projects at that point. 

Now, however, the proportion of power produced from the sun is growing in Portugal. In the last two years, PV capacity has increased by 82% and Jorge predicts that it will maintain this pace year-on-year going forward. Portugal installed 701 MW of solar power in 2021, bringing cumulative PV capacity to 1.77 GW, according to the country’s Directorate General for Energy and Geology (DGEG). 

This growth is needed if the country is to meet its National Energy and Climate Plan, published in 2018. The plan anticipates solar PV capacity rising to between 8.1 GW and 9.9 GW by 2030. This year is already off to a strong start with a Portuguese auction for floating solar energy breaking global records for the lowest price for future output, at –€4.13/MWh.

Portugal is developing its solar PV generation. Onyria Quinta da Marinha Hotel, near Lisbon, recently installed 553 PV solar panels to power the hotel’s lighting, reducing its emissions by 85,446 t/y

Photo The Azalea Group

Other sources of emissions

Portugal might have a strong plan for increasing green electricity generation and ambitions to expand electrification to slash emissions elsewhere, but it still has a lot of work ahead to fully decarbonise its energy mix. In 2019, 73% of the country’s primary energy supply was from fossil fuels, predominantly oil at 43%, but also natural gas 24% and coal 6%. 

‘Some sources of emissions will take longer to abate, namely converting fossil fuel consumption for transport and buildings to renewables,’ Jorge admits. ‘But the industry is looking for solutions in advance to avoid the risk of insolvency. Corporations are going to move faster than anyone else to reduce emissions, then households, then finally transportation, with shipping and aviation coming last,’ he predicts. 

To address its emissions from buildings, Portugal has implemented a number of rules. From January 2019, all new public buildings must meet almost-zero energy buildings (NZEB) requirements. As of January 2021, all newly constructed or significantly renovated private buildings with an area larger than 1,000 m² must also satisfy NZEB requirements. 

Likewise, Portugal has introduced measures such as the National Buildings Energy Performance System (SCE) that ensure all residential, service sector and public buildings undergo an audit to receive an energy certificate when they are constructed, deeply renovated, undergo a change ownership or are leased. The SCE further mandates that new buildings and heavily renovated older buildings meet improved insulation, heating and cooling standards. 

‘APREN is involved in reducing the emissions from heating and cooling buildings, but we haven’t gone into the buildings directly yet. Instead, we are more focused on representing the generation side of things whilst supporting the fact that buildings need to be improved to be more efficient,’ Jorge explains. 

‘You need the involvement of the national government with a clear policy of what to do; you need to clearly show the citizenship the benefits; and you need a regulatory framework in place that will attract the investment to install renewables as cheaply as possible.’ – Pedro Amaral Jorge, President of the Portuguese Renewable Energy Association (APREN)

COVID-19 recovery

Portugal is also taking other actions to accelerate its transition. Following the COVID-19 pandemic, the government purposefully aimed to reduce its reliance on fossil fuels. It fast-tracked the authorisation and grid connection of 220 solar PV projects, gave funding to transportation operators, and introduced a successful financial support programme for constructing energy efficiency measures. 

Portugal also requested €13.9bn in grants and €2.7bn in loans from the European Union’s (EU) €750bn funding for supporting COVID recovery and resilience plans. Portugal’s plan has focused largely on the energy sector, including directing €610mn towards energy efficiency and renewable energy in buildings, and €185mn for 264 MW of renewable gas production. The EU estimates that this plan, combined with other governmental efforts, should result in a strong recovery from the pandemic, with GDP rising by 4.3% in 2022.

Consigning coal to history

The Portuguese government also stopped public financing for coal in 2018, investing heavily in renewables instead. It was subsequently the fourth country in Europe to go entirely coal-free at the end of 2021, following the closure of its 628 MW Pego coal-fired power plant. 

The Pego plant had been the country’s second-largest emitter of CO₂. Analysis is ongoing to decide whether the country can replace coal with forest biomass at the site, but it seems unlikely the government will provide the grants for it. Closing Pego arrived eight years ahead of the country’s 2030 target, due largely to public pressure from environmental NGOs and carbon pricing making coal unprofitable, demonstrating the feasibility of an accelerated reduction in emissions. 

Additional measures 

Overall, Portugal intends to achieve its main goal of decarbonising its entire energy system by electrifying as much as possible and generating an increasing proportion of its electricity from renewables. Accomplishing this is taking many forms. For instance, the country is investing heavily in green hydrogen and creating the conditions for investors to increase the production of biofuels. 

The national target is to produce 80% of electricity from renewable sources by 2030. But Jorge says the country is on track to hit this target early and meet 90% of electricity demand from renewables by the end of the decade. He is optimistic about achieving net zero goals, in Portugal and elsewhere. 

The Green Taxation Law, passed in 2014, is yet another factor behind Portugal’s decarbonisation achievements. Under this law, a carbon tax was initiated that covers fossil fuel demand across all non-EU emissions trading systems (ETS) sectors. It also removes autonomous taxation on the purchasing of electric vehicles and exempts certified advanced biofuels and green hydrogen from excise taxes. 

Revenue generated from the carbon tax is allocated to Portugal’s Environmental Fund which finances various programmes, including certain decarbonisation approaches. 

What next for Portugal’s electricity?

Besides traditional sources of renewable energy, Jorge believes Portugal could someday take advantage of nascent technology like tidal power. ‘We are designing a roadmap to include this as Portugal has good wave resources and ideally it needs to be part of the baseload power generation. But it’s not yet commercially deployable as commercial applications are not working yet,’ he says. 

Nevertheless, with the natural advantages that the Iberian country boasts, Portugal could become a net exporter of clean energy. Jorge regards this as a massive opportunity for Iberia and predicts that the peninsula will have the cheapest power in Europe. However, exporting it abroad depends on expanding the interconnections with France and the rest of Europe. Jorge does not consider this to be likely any time soon.