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Portugal

Portugal

Special Report Europe 2020 - Maturing Markets - Expected to keep rolling along - Portuguese development is virtually mapped out

Under the EU renewable energy directive, Portugal must meet a mandatory 2020 target of 31% of total energy from renewables. While the Portuguese government is yet to say how much of that is likely to come from wind, Antonio Sa da Costa of the Portuguese Association of Renewable Energies says the industry should be able to meet around 7-8% of Portugal's total primary energy demand.

Strong government action and a stable framework is set to ensure wind's continued success in Portugal.

Under the EU renewable energy directive, Portugal must meet a mandatory 2020 target of 31% of total energy from renewables. While the Portuguese government is yet to say how much of that is likely to come from wind, Antonio Sa da Costa of the Portuguese Association of Renewable Energies (APREN) says the industry should be able to meet around 7-8% of Portugal's total primary energy demand, accounting for around 17.5 TWh of the 250 TWh required. Installed capacity will have to rise to 8.5 GW, from less than 3 GW last year. That much capacity could generate enough electricity to meet 29% of Portugal's electricity demand, estimated to be 61.3 TWh in 2020, and would see wind contributing almost half of all electricity generated by renewable energy sources, according to Sa da Costa. Last year, wind supplied 11.3% of Portugal's electricity, the second highest after Denmark, he adds.

Obligation to buy

Portugal's primary means of promoting wind is an obligation on electricity utilities to buy all the power generated by wind at a fixed priced for 15 years. This is set at EUR0.073/kWh in the regions of the country with the highest demands for electricity, and EUR0.074/kWh elsewhere. The policy is designed to encourage construction of wind farms in less developed regions. Both rates are indexed to the annual inflation rate. After 15 years, wind power producers sell electricity on the open market together with associated green certificates. Meanwhile, the government has awarded a series of large wind farm construction contracts, with 1800 MW of capacity now under development.

Largely thanks to these concessions, Portugal also has a source of locally made turbines on its doorstep. German turbine supplier Enercon, for one, is close to bringing its Portuguese operations online, says Sa da Costa. Public opposition to wind farms in Portugal is virtually non-existent these days. The introduction of a levy of 2.5% on profits, to be paid by operators to municipalities, is credited with having been the principle reason for the change in public sentiment.

Easily achievable

With the projects already under construction or at an advanced stage of development, Portugal will have 5.1 GW of installed wind capacity producing 8.99 TWh by the end of next year. On that basis, the 2020 target, requiring a further 3.4 GW to be installed in the following nine years, seems easily achievable. Portuguese grid operator REN is gearing itself up to cope with the extra demand on transmission capacity by investing around EUR1.4 billion between now and 2014 to overhaul and upgrade the network. Meantime, the government is investing around EUR5.4 billion on renewables research and development, EUR3.3 billion of which is earmarked exclusively for wind.

But even with all this support in place, APREN says more may be needed. It points out that over the past four years wind plant equipment prices have risen by half, while network operators have tightened requirements on wind power producers to adjust output to the grid to prevent network instability, a demand requiring expensive technology. To offset the increased financial burden, APREN says guaranteed wind power purchase prices need to increase.

Meanwhile, the Institute for Engineering, Technology and Innovation (INETI) says it expects onshore installation rates to slow after 2015, so the government needs to act now, it says, to encourage investment in offshore wind development. Around 3.5 GW of offshore wind capacity could be developed initially, INETI says. To its credit, the government is examining possible legal frameworks for offshore.

Branislav Pekic, Windpower Monthly.

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