State utility Electricidad de Portugal (EDP) has reportedly begun construction of an offshore floating wind farm off the north-western coast near Agucadoura in a bid to tap pioneering technology to harness gales at sea. The National Laboratory of Engineering and Geology estimates the country's offshore wind potential at 2-2.5GW. Meanwhile, the Portuguese Renewable Energy Association, Apren, estimates that 600-700MW of new onand offshore wind capacity will be added in 2011.
During the first ten months of 2010, wind energy production grew 32% compared with the same period in 2009. By the end of 2010, total installed wind capacity in mainland Portugal, excluding the Madeira and Azores archipelagos, stood at 3.9GW, representing an addition of 465MW in 2010.
This robust growth is driven by two consortia that won the public wind power tender in 2005-07: Eolicas de Portugal, or Eneop - comprising Enercon, Enernova/Electricidade de Portugal Finerge, Generg and TP - and Ventinveste, consisting of Galp Energia, Martifer, Repower and Efacec.
Eneop aims to install 1.2GW by late 2012, a year ahead of schedule, for a total investment of EUR1.7 billion. The consortium ended 2010 with 500MW of capacity and is targeting another 250MW in 2011.
Ventinveste is developing 400MW of power and should have its first wind farm operating shortly. A EUR16 million loan has been signed with Banco Espirito Santo for the first venture, the 10MW Vale Grande wind farm. Ventinveste is still awaiting authorisation for projects in the Douro Sul and Sao Bento areas.
The pre-commercial phase of the EDP offshore project includes plans for between three and five turbines. The commercial phase involves the installation of 25 5MW turbines, at a cost of about EUR3 million/MW.
With a growth of 20% in 2010, wind became the third major source of electricity supply, behind hydro and combined-cycle gas turbines. According to power grid operator Ren, wind farms fed 9.03TWh into the grid.
Portugal has a track record of regulatory stability and investment visibility. The regulated market offers a stable feed-in tariff (FIT) for wind energy of EUR74/MWh. It is valid for 15 years and tracks inflation. However, in July the government announced it would review the FIT. Existing projects will not see changes in their operating conditions, but future projects will have lower tariffs.
Jorge Martins, executive president of Portuguese construction and energy group Martifer, believes wind power is now sufficiently competitive not to require support in the form of a FIT - a view shared by EDP.
Meanwhile, project financing is likely to see a further tightening of criteria, given the uncertainty of tariffs. Pedro Cabaco, Caixa BI bank's deputy director for project finance, estimates that the volume of loans already granted surpasses EUR4.2 billion. But he warns that banks will be faced with strong credit restrictions in 2011.
Portugal's National Renewable Energy Action Plan, which was drafted in compliance with the EU's renewable energy directive, targets an installed wind capacity of 6.9GW by 2020.