Team building for serious business -- Portugal on fast forward

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By the end of 2004, Portugal had 1270 MW of wind capacity up or building -- more than four times the online figure for the end of 2003. "Current online capacity is over 500 MW and we can expect the figure to at least double by the end of the year," says António Sa dà Costa of renewables association Asociação Portugesa de Productores Independentes de Energia Eléctrica (APREN). Projects for a further 1900 MW are already cleared for grid connection from a central government grid concession in 2003. "In all, a total of 3200 MW is committed. All this should be online by 2008," says Sa dà Costa. A further grid concession to connect 1000 MW of new projects after 2007 is on the national energy department's table.

"A really important boost to the sector comes from new tariff guarantees," says Sa dà Costa. Portugal's fixed wind power purchase rate, in force since 2001, averaged EUR 85/MWh in 2004, making the market among the most attractive in Europe. Until now, however, there were no guarantees the rate would last the eight-year payback period. A new regulation on the way is set to guarantee fixed rates for wind power purchases for 15 years, although the current rate will be subjected to a 15% cut from 2007-2010. "But we have three years and good arguments to push for changes here," says Sa dà Costa.

His optimism is shared by Alvaro Rodrigues of Porto University's Instituto de Engenharia Mecánica e Gestão Industrial (INEGI). "When the president of the republic rubberstamps the regulation, the sector's main long term uncertainty will be dispelled," he says. The new regulation upholds the obligation on national utility monopoly Electricidade de Portugal (EDP) to buy all power produced.

The 15 year guarantee kicks in from the date of commissioning -- both for existing wind plant and the 1900 MW in the pipeline. "After that, operators will get the market price for electricity, plus whatever support mechanisms are then available, probably the sale of green certificates," says Rodrigues.

The Portuguese government has confirmed it will be seeking more wind capacity. "A public tender for development beyond 2007 has been on the cards for over a year. Most indicators pointed at 400-500 MW. But recently, the government has reiterated the call will be for 1000 MW," says Rodrigues. The Socialist opposition party is also vociferously committed to wind power. Even with a change of government following last month's general elections, nobody expects any back-pedalling on the tender or the new tariff regulation.

Over the past three years, wind has become the mainstay of Portugal's commitment under the EU Renewables Directive to meet 39% of electricity demand from renewables by 2010. In 2001, the national wind target for 2010 was set at 3750 MW. But electricity demand has since soared. Sa dà Costa calculates a revised target of around 4500 MW will be needed to keep pace with demand.

A domestic industry

To date all Portugal's wind turbines have been imported, but a year ago the government said it would give priority, when issuing grid connection concessions, to wind plant construction that creates wealth and jobs locally. A consortium of three developers, EDF Renewables, Generg and Finerge subsequently got together with German wind turbine company Enercon and forged a Portuguese investment plan. As a result, construction is to start in April on the country's first major turbine component facility -- a blade factory for Enercon. The company is Portugal's top wind turbine supplier, with 37% of the market. The factory will be in the docklands of Viena do Castelo, 60 kilometres north of Porto, and employ 150-200 people.

More facilities could be on the horizon. GE Energy's wind division, with 11% of the market, has formed a consortium with developers Enersis and Enernova, while Nordex and Repower are on the look out for partners among project developers. The country's second largest turbine supplier, Vestas, is not revealing its hand.

market domination

To date, the Portuguese market is dominated by four project development companies: Enersis, Portuguese utility subsidiary Enernova, EDF Renewables, and Generg, a leading small hydro operator. Between them they sit on two-thirds of the market, says Sa dà Costa. The remaining third is shared between Germany's Energiekontor, Spain's Gamesa and Portugal's own Finerge and Tecneira.

Spanish involvement in Portuguese wind is growing. Utility Iberdrola crossed the border in 2004 with the creation of a Portuguese subsidiary, Aeolia, with former Portuguese economy minister Joaquim Pina Moura at the helm. At the same time, Iberdrola agreed to buy 250 MW of projects under development in the country from Gamesa. Iberdrola is now said to be moving in to buy the country's top developer, Enersis. Neither company is prepared to comment.

Gamesa is now building the first 78 MW of 270 MW of Portuguese projects it agreed to sell to Belgian utility Electrabel two years go. But if it is to complete the combined 520 MW pledged to Iberdrola and Electrabel, it looks as if Gamesa will have to start buying into other projects; it has connection rights for only 350 MW, at most. Meantime, it is rumoured that developer Finerge is about to sell out to an unnamed Spanish utility. Portugal, as it has done for much of history, will be keeping one eye open for incursions from across the border.

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