The scheme is designed to help achieve the country's 2020 renewables targets as feed-in-tariffs (FIT) for onshore wind, solar and hydro production are stopped.
The elimination of tariff support for onshore wind farms, along with conventional hydro, solar PV and concentrating-solar-power plants, is justified by the fact that these technologies are now economically viable and can compete in market conditions, the government argued.
New support programme
The support scheme proposes to award up to €5 million per developer to help those technologies, including offshore wind, "which are not yet sufficiently widespread across the country to achieve integration in the electricity grid", the government said.
Portugal's only current offshore wind development, the 15-24MW second phase of the floating Windfloat Atlantic project, is a potential beneficiary. However, the €5 million maximum "is a drop in the ocean" for developers debating between the installation of three 5MW or four 6MW machines, said Antonio Sa da Costa, president of renewables industry association Apren.
Sa da Costa also rejected the government's calculations regarding the economic viability of developing new onshore wind capacity at current market tariffs of around EUR40/MWh in a wet year, when increased hydro production forces down electricity prices, and €50/MWh in a dry year.
"From this total the wind producer has to pay additional costs to participate in the market, such as €6/MWh to the market operator. Single producers, too small to compete alone, have to pay for the services of an aggregator," he said.
"The government has adopted the position of an ostrich. We were going to meet the 2020 target of 60% of electricity from renewable sources, but now we won't because of the imposition of market tariffs," Sa da Costa said. Portugal will only achieve a 26-27% renewable contribution to primary energy consumption by 2020, well short of its 31% target, he predicted.
The only new onshore capacity likely to be built is 400MW already undergoing the licensing process, which will attract feed-in-tariffs of €58-€74/MWh. "That's quite a low price when compared to France and Germany, where financing costs are lower," Sa da Costa said.
The government's "logic behind the elimination (of FITs) is in part because of the so-called electricity deficit" of EUR5 billion accrued because electricity consumers are not charged the full costs of electricity production, said Sa da Costa.
Portugal's previous administration introduced an extraordinary tax on electricity generator EDP, oil company Galp, and the electricity grid operator REN to cut the deficit. But, according to Apren, some of the receipts have been diverted to other uses by the treasury.
Bloco de Esquerda, parliamentary ally of the governing Socialist party, wants to extend this tax to renewables producers to raise an additional €50 million a year.