Degree of reliance on imported energy:
Concerning Portugal´s energy profile, in what regards energy dependency Portugal (PT) was in the 9th position of the EU´s countries with around 80% energy import in 2010, which shows a heavy dependence on external energy sources, despite the advances on national energy production. In 2010, 5.2 bcm entered the National Natural Gas Transmission Network. No gas is produced in Portugal. The main sources of imported gas were Nigeria, through the Sines LNG facility (52%), and Algeria (38%), through the pipeline from Spain.
Main sources of Energy:
The predominant energy source is oil, which comes in its entirety from other countries, since Portugal does not have oil reserves. Renewables now are the second most important energy source regarding consumption, while natural gas is the third, and coal the last.
Generation from renewable sources has increased to one of the highest levels in Europe (48% of gross electricity production in 2011), largely due to the rapid growth of wind power.
Portugal’s binding 2020 RES target is 31% up from 20.5% in 2005, although the authors of the National Renewable Energy Action Plan have reduced the 2005 starting point to 19.8%. The overall target has been split into 55.3% electricity from RES, 30.6% heating and cooling from RES and 10% RES in transport.
Extent of the network:
The Portuguese electricity grid is connected with Spain’s; the interconnection capacity is approximately 10 % of the demand.
Portugal currently has relatively few interconnections with France and Spain. To reduce splitting in the Iberian Electricity Market, an investment programme has been put in place to increase the capacity of interconnections with the Spanish transmission network. It includes the construction of a new 400 kV line and the construction of two new 400 kV interconnections. They will almost double capacity. Under the European Energy Programme for Recovery (EEPR), REN received EUR 45 million to reinforce the two interconnections with Spain (Douro Region and the Algarve).
Portugal intends to have 60% of its generated electricity coming from renewable resources by 2020, in order to satisfy 31% of its final energy consumption by the same year. In addition, Portugal intends to reduce its dependence on energy imports and on the use of fossil fuels. The National Transmission Grid Development and Investment Plan for the period 2012-2017 (PDIRT) foresee a gradual and phased expansion of the electricity network.
The possibility to export RES-E production depends on the development of the interconnection capacity with Spain, but moreover between Spain and France. The grid operator is not legally required to develop the grid, but considering that Portugal imports energy from Spain and wants to reduce this dependence, it is essential to adopt measures, encouraging domestic electricity production. Thus, grid development in Portugal is a key issue to increase energy production and decrease foreign dependence.
Potential for Renewable Energy:
Portugal has a high solar potential, one of the European countries with the highest solar radiation availability. By the end of 2011, Portugal had installed 143.6 MW of photovoltaics. A large photovoltaic power project, the Serpa solar power plant, has been completed in Portugal, in one of the Europe's sunniest areas. The 11 MW plant covers 150 acres (0.61 km2) and comprises 52,000 PV panels. The panels are raised 2 metres off the ground and the area will remain productive grazing land. The project will provide enough energy for 8,000 homes and will save an estimated 30,000 tonnes of carbon dioxide emissions per year.
There has been a rapid development of the installed capacity of wind energy in Portugal, considering that the capacity in 2005 was 1.065MW and in 2009 this number has tripled and has reached 3.500MW. Wind energy is the second most developed renewable source in Portugal, just behind hydropower, and according to APREN’s forecast, it can represent 30% of the electricity generated in 2020
Portugal has a high biomass potential which can be used in energy production, although it is already used by pulp and paper industries and furniture industries. The potential use of biomass has a tendency to increase, however it is necessary to invest in the management and sustainability of the Portuguese forest.
Portugal has a large potential still to be developed in terms of large-hydro capacity. In past last years, hydro-electric production has grown less than in the other European Countries. At the end of 2007, a National Plan for High Potential Large Hydro was published, aiming at bringing hydro capacity up to 7,000 MW in 2020.
Potential for Energy Efficiency:
The industrial and transport sectors contributed most to Portuguese final energy demand in 2011 (29.4% and 33.1% respectively). Primary energy consumption in the country had reduced by approximately 9% from 2000 levels by 2010, and primary/final energy intensities per unit GDP also decreased by 15% and 6.7% respectively in the same period. The public sector is a key area for future efficiency developments, however a significant lack of funding in the sector is a barrier to any efficiency measures. The current National Energy Efficiency Action Plan for Portugal provides only limited information on public-sector measures, and implementation of the energy certification and CHP subsidies that are mentioned remains unclear. Overall removal of financial incentives for energy efficiency in the residential sector, due to the ongoing financial crisis, have also been highlighted as a key policy barrier to further implementation. Finally, in transportation, improvements to the rail network, as well as restructured logistics in land and maritime transport, are mentioned in the current NEEAP, but again, implementation strategies are lacking for these measures.
The ownership of production is still highly concentrated on the previous incumbent and competition at the retail level is very limited (especially for households).
Structure / extent of competition:
Market concentration at retail level is very high. The market share of the three biggest companies was 95.6% in 2010. Many big customers and industrial customers switch suppliers (27.4%). Very few households switch however (2.3%). The retail market consists of a regulated market and a liberalised market. In 2010, the regulated tariff, which had been a barrier for new entrants, was abolished for customers with a contract for more than 41.4 kW of power. Industrial electricity prices gradually increased between 2005 and 2011.
With regard to electricity generation, the market concentration is high. In 2010, the three biggest electricity producers (EDP, REN Trading and Iberdrola) held a combined market share of approximately 70%. EDP was the clear market leader with a share of around 55%. The Portuguese market has been integrated into the Iberian market since July 2007. The spot market operator (OMEL) is located in Spain, while the forward market operator (OMIP) is located in Portugal. The situation has been improving since 2008. The market was split for 68% of the time in 2008 and for only 21% of the time in 2010.
Thanks to the complete liberalisation of the Portuguese natural gas market, all customers could choose their supplier in 2010. In mainland Portugal, the end-user sales market consists of a regulated system of integral tariffs offered by last-resort suppliers and a market-driven system in which energy is supplied through contracts with non-regulated prices. During 2010 around 1,100 industrial users, roughly one third, switched gas supplier. Gas prices for industrial consumers were much lower than for households during the last couple of years.
Existence of an energy framework and programmes to promote sustainable energy:
Concerning the national policy structure and the respective instruments in the Energy sector, the National Strategy for Energy 2020 (Estratégia Nacional para a Energia 2020 – ENE 2020) is the main policy document, and frames the strategy for the energy sector in Portugal till the year 2020. This instrument was approved in 2010 and their main objectives are:
- reducing Portugal´s energy dependence through an increase in energy production from endogenous resources;
- guarantee the fulfilment of the agreements assumed by Portugal in the context of the climate change policies;
- reducing in 25% the energy imports balance with energy produced by endogenous sources;
- creating wealth and consolidating an energy cluster in the renewables sector in Portugal;
- and developing an industrial cluster associated with the promotion of energy efficiency.
In what concerns energy efficiency and renewable, Portugal has two important policy initiatives for the fulfilment of the EU´s objectives. The PNAEE - National Action Plan for Energy Efficiency (Directive 80/2008) and PNAER - National Action Plan for Renewable Energy, that, together with the National Plan For Climate Change (Directive 104/2006), form the backbone of the Portuguese Policy towards the 20-20-20 EU Strategy.
The PNAER (National Action Plan for Renewable Energy) establishes Portugal´s objectives concerning the quota of renewables in the consumption of energy in 2020, considering the energy used in the transportation, electricity and heating and cooling in 2020, identifying the measures and actions predicted in each of those sectors.
The PNAEE (National Action Plan for Energy Efficiency) focus the promotion of energy efficiency in the areas of transportation (urban mobility, public transportation, incentives for car changing and efficient technology), residential sector and services (retrofitting, efficient equipment, renewables, and certification), state and behavioural measures.
Both PNAEE (National Action Plan for Energy Efficiency) and PNAER (National Action Plan for Renewable Energy) suffered a revision process in 2012, and were approved in February 2013, being the main objective in the revision of the PNAER the projection of new targets to 2016 considering the main concerns in reducing primary energy to 2020, while the changes in PNAER reflect concerns that take into account the new economic scenario and the resulting reduction of the demand and excess in the energy offer.
The government has placed a strong emphasis on increasing the share of renewable energy generation, the share of environmentally related revenues is higher than the OECD average and the share of public research and development (R&D) spending related to the environment is among the highest in the OECD.
Current energy debates or legislation:
REN, the Portuguese grid operator, released figures that show that nearly three quarters of the country’s energy needs were met by renewable energy sources during the first three months of 2013. Portugal was able to generate 70% of its electricity needs in the first quarter of 2013 due to a combination of favourable weather conditions and huge investment in wind and hydro-electric projects over recent years.
The hugely increased contribution from renewable energy has meant that demand for fossil fuel sources have fallen. Coal-fired power stations now contribute 29% less electricity to the grid and natural gas-fired power stations contribute 44% less, compared to the first quarter of 2012. It is very likely that this reduction in fossil fuel use has led to a significant drop in carbon emissions.
Major energy studies:
European Energy Network
Portugal is member of the EnR, which is a voluntary network of European energy agencies which aims at promoting sustainable energy good and best practice. EnR also strengthens cooperation between members and other key European actors on all sustainable energy issues (energy efficiency, sustainable transport and renewable energy).
Role of government:
The institutions in charge of developing and implementing energy policy in Portugal include a line ministry –the Ministry of Economy, Innovation and Development-, an implementation and support agency (the Agency for Energy), and the independent regulator for natural gas and electricity ( the Energy Services Regulatory Authority). Portugal has taken an innovative approach to unbundling gas and electricity transport assets, with a unique entity –the National Energy Networks- in charge of grid planning, construction, operation and maintenance. The ministry of Public Works, Transport and Communication is responsible for most energy related and environmentally related transport initiatives. Municipalities play a strong role in implementing energy measures, especially those concerning energy efficiency and, more recently, micropower generation and transport.
Government agencies in sustainable energy:
One of the major objectives of ADENE is to collect data and information on energy issues and to provide it to target publics. Regarding the implementation of national programmes, ADENE is the managing entity of the Energy Performance Certification of Buildings System (SCE), the Energy Management in Industry System (SGCIE) and the Solar Thermal Initiative. ADENE is also the support entity for the National Energy Efficiency Action Plan (PNAEE).
Energy planning procedures:
10-year transmission network development plans are issued biennially by the Portuguese transmission system operator, REN. As of 2007, energy sector plans require an environmental impact assessment to set the framework for individual environmental assessments for projects. Recent transmission system developments have included grid reinforcements in the North of the country, to improve load feed and receive new renewable energy sources, as well as the up-rating of existing 220 kV lines to 400 kV, to improve inter-change capacity. New 400 kV lines have also been constructed to meet requirements for the high-speed rail project between Lisbon and Madrid.
Transmission network development plans must be submitted to the competent authorities (government, national regulator) for prior approval before implementation. REN is also legally obliged to collaborate in official studies of medium and long term energy supply security plans.
Energy regulator Date of creation:
The Portuguese National Energy Regulatory Authority, Entidade Reguladora dos Serviços Energéticos (ERSE), in operation since 1998.
Degree of independence:
ERSE is a public corporate body with administrative and financial independence and possesses its own assets. It is governed by its Statutes, which have been approved by Decree Law no. 97/2002 of 12 April, as emended by Decree Law no. 212/2012, of 25 September and Decree Law no. 84/2013, of 25 June.
Regulatory framework for sustainable energy:
ERSE undertakes a set of activities which are aimed at promoting the active participation of consumers in the great challenge of sustainability, in terms of the efficient use of energy.
The definition of tariffs which, on the one hand allow the recovery of costs associated with each activity, and on the other present billing variables which translate to the costs actually caused by each consumer, and lastly, which present structures and prices related to the structure of marginal or incremental costs, induces the rational use of electricity and associated resources. Under these circumstances, it is considered that the current methodology for calculating electricity tariffs established in the Tariff Code which covers the three requirements mentioned above, promotes efficiency in the consumption of electricity.
Further, the recognition of the existence of various barriers (extended payback period, the difference between supply prices or applicable tariffs and short-term marginal costs, external factors, lack of information and high associated transaction costs, misalignment of interests between agents and the financial constraints of consumer) in the adoption of more efficient equipment and consumption habits by consumers, as well as the possible existence of external environmental factors not reflected in the price, justifies the implementation of measures to promote efficiency in consumption.
Recognising this situation, ERSE has tried to ensure that the regulation of the sector dynamises actions which contribute to the promotion of energy efficiency in this area. In particular, in the Tariff Code for the electricity sector, a competitive mechanism called the Consumption Efficiency Promotion Plan (PPEC) has been established to promote measures for managing demand.
In the electricity PPEC, incentives are awarded for the promotion of measures aimed at improving efficiency in electricity consumption through measures taken by suppliers, network operators and organisations that promote and protect the interests of electricity consumers in mainland Portugal and in the Autonomous Regions, and which are aimed at consumers of different market segments. The actions result from specific measures proposed, subject to a selection tender, whose criteria are defined in the Rules for the Consumption Efficiency Promotion Plan approved after a public consultation. This tender allows the selection of the best measures for energy efficiency to be implemented by the abovementioned promoters, taking into account the amount available in the PPEC annual budget which is approved at the start of each regulation period for each one of its years.
The aims of ERSE’s activities are: to protect the interests of consumers, in particular the vulnerable customers, with regard to prices, service quality, access to information; to ensure the existence of conditions of economic and financial balance by the activities of the regulated sectors exercised in the public interest, when managed properly and efficiently; promoting as regulator and accordance with applicable law, competition in the energy markets; to encourage efficient energy use and protection of the environment; and also to arbitrate and resolve disputes, encouraging the settlement of disputes outside of the courts.
Role of government department in energy regulation:
The Securities Market Commission participates in the management of the Iberian Electricity Market with representatives of the ERSE and Spanish regulators/government entities. No other government department takes an active role in energy regulation.
Considering main barriers to the integration of RES-E production, the complicate and time-consuming licensing procedure was indicated by stakeholders as one of the main issues in grid connection. According to the practical experience of one of the consulted stakeholders, the average time to connect wind farms is 6 years, which can even take longer if a farm is planned to be installed in an environmentally sensitive area, and in cases of small hydro power plants it can take more than 10 years.
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