Portugal set to cut feed-in tariffs

PORTUGAL: The Portuguese government has announced that it will review the existing feed-in tariff mechanism following calls that the subsidies are excessive and contribute to the increase of electricity prices to final consumers.

The tariff review is anticipated in Portugal's National Energy Strategy 2020, published in June. It will consider the contribution of new technologies in the production of renewable energy, as well as the costs associated with their development.

The support mechanism is voluntary and is managed by the Directorate General for Energy and Geology (DGEG), part of the Ministry of Economy. Once a wind project is granted permission to connect to the grid, there is no limit to the annual production that benefits from the tariff.

However, the total production that can benefit from the tariff is limited to an overall value of energy or a defined number of years, whichever is achieved first. Once these limits are achieved, the installations start selling their production under a liberalised regime.

Currently, the average indicative tariff for wind is EUR74-75/MWh, with a validity of 33GWh/MW or 15 years.

High-profile opposition

In April, a group of 33 well-known Portuguese economic, business and academic personalities published a manifesto for a new energy policy warning that subsidies for renewable energy cannot be permanent.

In their view, the subsidies can be justified only for limited periods of time and in very early stages of the processes of technological development. The subsidies contribute to the "unjustified increase" of electricity prices to final consumers, which are likely to continue if the current policy is maintained. On top of that, the subsidies have negative consequences for the competitiveness of Portuguese firms, they say.

Responding to the criticisms, Portugal's secretary of state for energy, Carlos Zorrinho, pointed out that the feed-in tariffs have helped boost renewable energy production which, in turn, has helped reduce fossil-fuel imports by EUR500 million per year. He added that if oil prices continue to rise, renewable energies can contribute to the reduction of electricity tariffs.

Zorrinho also highlighted the fact that the tariff rate for this year covers all costs associated with production of renewables and, therefore, does not generate a tariff deficit. Zorrinho made clear that any changes to the feed-in tariff will not affect existing renewable energy projects. The wind industry had feared that the government would implement retrospective cuts, similar to those in Spain (see previous page).

In a statement, the Portuguese renewable energy association (Apren) said: "It is essential to ensure that no vested rights will be withdrawn and that the revision of tariffs is made with a broad discussion with the renewable energy promoters."

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