Seraphim Insight: Portugal’s new government brings forward 80% renewables target to 2026

The new Portuguese government recently announced it will bring forward its target of increasing the share of renewable energy in power production to 80% by 2030 to 2026, which represents a significant acceleration of the decarbonization process of Portugal's power industry. The share of renewable energy in electricity production increased from 41% to 58% from 2010 to 2022.

Portugal has been committed to energy transition, but the continuation of the Russia-Ukraine conflict is pushing Portugal to introduce new measures. The government plans to eliminate unnecessary procedures in order to speed up the development of PV power plants. According to the country’s secretary of state for energy, Jo?o Galamba, environmental impact assessments for projects with a capacity of under 50MW will no longer be required. Galamba said at a large-scale solar event hosted last week by Solar Media, the publisher of PV Tech, that a high level of production and consumption of electricity from renewable energy sources is the best way to guarantee that Portugal won’t rely on fossil fuel imports and to have a stable and low electricity price.

Portugal's PV market set a record in 2021, with an increase of 361% over 2020, the country newly added 701MW of PV capacity last year. Algarve is the region with the largest growth, which has jumped from the minimum installed capacity in 2020 to the second largest region in 2021, second only to Alentejo. The installed capacity of these two regions is far ahead of others, mainly due to the country’s second 700MW solar energy auction held in August 2020. On the whole, new installations of the five regions in 2021 shows different degrees of growth compared with that in 2020. By the end of December last year, Portugal’s cumulative PV installations hit 1.8GW.

In November 2021, the Ministry of Environment and Climate Action of Portugal launched an auction for 263MW of floating PV to be deployed on seven national dams. Portuguese utility EDP has won the largest project at a record negative price of –€4/MWh (-US$4.51/MWh) with a 15-year contract, plus another 15 years to produce under normal market conditions. The project will come online in 2025 with immediate connection availability.

In March 2022, the European Commission announced they will cut Russia's natural gas imports by two-thirds within one year. Portugal is currently negotiating with Spain to set the maximum electricity price in the spot power market at 180 euros/MWh in order to improve the Internal Rate of Return (IRR). In addition, with the continuous deployment of Portugal's national hydrogen energy strategy, to achieve low-cost and efficient solar hydrogen production, which is the objective that Portugal is committed to. Based on the current situation, we believe Portugal is well on the way towards being in the GW-level PV market, further driving rapid decarbonization.