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Overview

Until the first half of the 1990’s, the promotion of electricity and the development of the system’s main infrastructures was handled by state-owned Eletricidade de Portugal, E.P. (“EDP”). From 2006 onwards, a centralized planning of generating centers was replaced by a liberalized marketplace, in which the State acts as a complement to private initiative.

As a result of these changes, the electricity sector was unbundled, and is currently divided into several activities, each one with different operators.

The sector is structured in:

• Production;
• Transportation;
• Distribution;
• Transmission; and
• Supply.

According to the most recent data of 2020 published by REN – Rede Elétrica Nacional, S.A. (“REN”) the electricity market has been witnessing a decrease in consumption of 2,2% since 2019.

Renewable production was responsible for 56% of consumption, divided between:

• Hydroelectric with 24%;
• Wind with 23%;
• Biomass with 7%; and
• Photovoltaic with about 3%.

Non-renewable production supplied 39% of consumption, mainly natural gas, with coal accounting for about 3% of consumption.

Electricity Production

• Ordinary production regime: this electricity production regime applies to the production of electricity based on traditional non-renewable sources and large water-producing centers. The production activity of electricity is fully liberalized and subject to a competitive market, since 2007, following the implementation of MIBEL (Iberian Electricity Market). Thus, power plants have started to offer their energy on a common energy platform, integrated at the Iberian level, only requiring the granting of a production license to be issued by DGEG (“Portuguese National Energy Agency”), in accordance with the Electricity System Law. There are only 4 producers included in this regime, which are: Grupo EDP (Produção); ElecGas, S.A.; Tejo Energia - Produção e Distribuição de Energia Eléctrica, S.A.; and Turbogás - Produtora Energética, S.A.
• Special production regime: this production regime refers to the activity of production subject to special legal regimes, as is the case with electricity production through cogeneration and endogenous, renewable and non-renewable resources, micro-production, mini-production and production without injection of power into the grid. It is expected that as renewable energy technologies mature and become more competitive, special regime producers will also offer energy produced on the market on similar terms to ordinary producers.

Electricity transmission network

The activity of electricity transmission is carried out through the operation of the national transmission network (RNT) to which corresponds a single concession exercised exclusively and as a public service.

The concession is granted for a period of fifty years, and cannot be transferred, sold or otherwise charged by the concessionaire, without prior authorization from the Government.

The concession includes the planning, construction, operation and maintenance of the RNT, as well as the overall planning and technical management of the National Electric System to ensure the harmonized functioning of its infrastructures, as well as the continuity of service and the security of electricity supply.

The electricity produced in places far from the areas of consumption is delivered to the transmission grid and conducted at very high voltage (EHV), in order to bring large amounts of energy to the various points of the territory without significant losses, thus guaranteeing the supply regardless of the distance to the power plants.

This task is called Global System Management and is carried out by the transmission system operator (TSO), which is REN.

Investment in the transmission network has kept pace with the growth in national consumption. Currently, the transmission network operated by REN has an extension of 8,733 km of lines throughout the country.

REN´s stakeholder structure is diverse. Major stakeholders include:

• State Grid Corporation of China (25%);
• Oman Oil Company SAOC (12%);
• Lazard Asset Management (7%); and
• Fidelidade – Companhia de Seguros, S.A. (5,3%), which is owned by Chinese multinational Fosun.

Energy distribution network

The distribution activity is carried out by the exploitation of the infrastructures that, as a whole, make up the National Network of Distribution of Electricity.

Electricity distribution is carried out under public service concessions granted by the Portuguese State. The entities responsible for the distribution must be legally unbundled, not being able to carry out other activities within the sector.

The electricity distribution activity is carried out in the following forms:

• Concession of national distribution networks exercised exclusively and under public service in high and medium low voltage (HV and MV);
• Concessions of regional distribution networks under public service in low voltage (LV).

The public service concession for national distribution of electricity has been granted to EDP Distribuição – Energia, S.A.

Electricity supply

The supply activity of electricity is fully liberalized and subject to a competitive market, only requiring the granting of a license to be issued by the Portuguese State, in accordance with the Electricity System Law.

Licensed suppliers, in the exercise of their activity, can freely buy and sell electricity and have the right to access the transmission and distribution networks upon payment of access tariffs set by ERSE.

The energy regulator

The Regulatory Entity for Energy Services (ERSE) is the entity responsible for regulating the electricity and natural gas at national level.

ERSE has the responsibility to ensure that operators in the electricity and natural gas sectors comply with public service obligations and other obligations laid down in laws and regulations, as well as in the concession contracts.

Specifically, regarding the electricity sector, ERSE has the following attributions:

• Ensure the existence of conditions to meet the demand for electricity efficiently; and
• To guarantee concessionaires and licensed entities the existence of conditions that allow them, within an adequate and efficient management, to obtain the economic and financial balance necessary to fulfill the obligations set forth in the concession agreement and in the respective licenses.

This briefing intends to give an overview on the functioning and organization of the different activities of the Portuguese Electricity Sector, as well as on the main players that operate on the market. if you want to find out more, please download our PDF down below. 

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Energy production and comsuption

Energy production. Consumers have been, until recently, seen as mere recipients of energy policies, that do not take an active role in managing their energy consumption.

However, as of 2014, Portugal began to focus on decentralized energy production solutions which, combined with technological innovation on PV, began to enhance the role of the producer-consumer of electricity.

The energy transition has accelerated since 2019, with the integration of European policies for self-consumption of energy and decarbonization, making it possible for consumers to invest more simply and quickly in the production of electricity through renewable energy.

This transition is part of the goal of achieving a 47% share of energy from renewable sources by 2030, which will only be possible with the development of electricity production by consumers.

Producers-consumers are being placed at the center of energy production, assuming themselves as the main figure in the energy transition process.

Currently, there are two models of decentralized energy production in Portugal, in which the consumer has an active role in energy production.

• Small Production Units (Unidades de Pequena Produção - "UPP"), which are installations with a maximum connection power of 1 MW, based on a single renewable production technology, with all the electricity produced being sold to the Public Service Electricity Grid (Rede Elétrica de Serviço Público - “RESP"); and
• Production Units for Self-Consumption (Unidade de Produção para Auto-Consumo - "UPAC"), which are electricity production installations, based or not on renewable technologies, whose energy is intended predominantly for self-consumption, with the possibility of selling the surplus to RESP.

UPP regime may be found in articles 27º-B, 27º-C and 27º-D of Decree-Law No. 172/2006, of 23 August, and it is only accessible to natural or legal persons.

The electricity produced by UPP and delivered to RESP is remunerated, at the producer's option by one of the following mechanisms:

• General: where producers sell the electricity produced: (i) on the market, (ii) through bilateral contracting, or (iii) through the market facilitator at a price previously agreed between the parties.
• Guaranteed: through a tariff assigned based on a bidding model, in which producers offer discounts to the reference tariff set at €45,00.

The second modality cannot be cumulative with another type of incentive to the production of electricity and is in force for 15 years, after which the producer transits to the general remuneration regime. Access to the guaranteed remuneration scheme is carried out through monthly injection power allocation sessions promoted by DGEG, with an annual quota limit of 20 MW. Producers that have failed to obtain injection capacity in a relevant allocation session are carried over to the next one, and so forth.

The UPAC regime results from Decree-Law No. 162/2019 of 25 October, and it is accessible to:

• Individual self-consumers;
• Collective, organized in condominiums/apartments/houses located in the same geographical area; industrial, commercial or agricultural units, and other infrastructures; and
• Renewable energy communities (RECs).

Excess energy from production for self-consumption may be sold and remunerated in the following ways:

• In an organized market or through bilateral contracting, at a price previously agreed between the parties;
• Through the market participant against payment of a price freely agreed upon between the parties;
• Through the market facilitator, who is subject to the obligation to purchase the energy produced by the producers; and
• Through the LRS until the market facilitator license is granted against payment of a market-based fee.

LRS is only bound to acquire the electricity produced by producers whose authorized injection capacity does not exceed 1 MW.

What does the future hold for small production?

Pursuant to the Paris Agreement, Portugal intends to promote solar energy produced until in the country reaches 1 GW by the end of 2030.

To achieve this goal, it will be important for Portugal to reinforce its measures to promote energy transition and to reinforce its grid infrastructure, so that over the next few years a greater capacity for injecting electricity into the grid can be achieved.

These measures are part of the Government's strategic plans, which include meeting 80% of the country's energy demand from renewable energies by 2030 and electrifying 65% of the economy by 2050.

Regarding decentralized solar photovoltaic energy, the objectives outlined in the National Energy and Climate Plan are for Portugal to have 0.8 GW of installed capacity by 2025 and 2 GW by 2030.

Currently the market presents installation solutions for UPACs in which the receiver of this technology does not assume any financial burden, committing only to self-consume the energy produced and sharing the costs reduction and all or part of the surplus energy being handed over to the installer as compensation for the installation, operation and maintenance of UPAC.

The Portuguese Government has announced a new law to reinforce renewable energy communities, opening the possibility of managing communities on dynamic management digital platforms and giving differentiated treatment for self-consumption to industrial communities involving electro-intensive consumers. The so-called heavy industry will be allowed to produce offsite energy for self-consumption.

To learn more, please download our PDF down below. 

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Guarantees of Origin (GO) are electronic documents that prove the final electricity purchaser that a certain amount or percentage of the electricity supplied originates from green sources.

The GO system is being implemented in all European Union Member States to foster of use of energy from renewable sources, in Portugal, despite its early planning (since 2012), the GOs system took some time to be established and the first Portuguese GO was only issued in June 2020.

Click on our PDF to learn more about the Portuguese Guarantees of Origin.

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In 1993, Portugal had no backbone high pressure natural gas pipeline, storage and other infrastructures. From 1993 onwards, such infrastructures were built, and natural gas became one of the most important sources of energy used in Portugal.

According to 2020’s most recent data, the natural gas market has been witnessing an increase in consumption of 7.2% since last year.

Until 2006 the promotion of natural gas and the development of the system’s main infrastructures were handled by the Galp group companies, Transgás – Sociedade Portuguesa de Gás Natural, S.A. (“Transgás”) and GDP – Gás de Portugal, SGPS, S.A. (“GDP”), under concession agreements entered into with the Portuguese State.

The public service concession for the import, transmission and supply of natural gas through the high-pressure pipeline, was granted to Transgás, and the public service concession for the distribution of natural gas through regional pipeline networks, was granted to six different companies, held by the GDP group.

Most importantly, Decree-Law no. 30/2006 of 15 February 2006 (“Gas System Law”) transposed Directive 2003/55/EC, implementing in Portugal the common rules for the EU internal market.

The Gas System Law established (i) a National Natural Gas Distribution Network (RNDGN), licensed or licensed to several operators, to guarantee non-discriminatory and transparent access to the network infrastructures of Liquid Natural Gas (LNG) and RNDGN terminals, (ii) the legal unbundling between the network and infrastructure operators of the National Natural Gas System (SNGN) and the marketers, and (iii) the natural gas supplier and the last resort supplier.

The Gas System Law principles were specified by Decree-Law 140/2006, of 26 July 2006 (“Gas Regulatory Law”), with new rules regarding transmission, LNG facilities’ storage, and distribution and supply services.

As a result of these changes, the natural gas sector was unbundled, and is currently divided into several activities, each one with different operators. Thus, the sector is structured in (i) reception, (ii) storage and regasification, (iii) underground storage, (iv) transmission, (v) distribution, and (vi) supply.

With this briefing, we intend to present an overview on the functioning and organization of the different activities of the Portuguese Natural Gas Sector, as well as on the main players that operate on the market.

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The first 2020 solar auction in Portugal was announced on March 27th and has now begun on 15 June 2020, to be completed by the end of the summer. 

The outcome of the 2019 solar auction has shown how competitive the Portuguese solar market can be. There was some uncertainty for a while as the Covid-19 forced the Portuguese Government to postpone new solar energy auctions, but now it's happening! 

This paper provides a guide through its stages and rules, learn about them in the PDF. 

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After mini-hydro and wind, photovoltaic solar energy could become the third wave of the renewable energy revolution in Portugal. By 2030, the power output promises to grow up to 6.6 GW using this technology. 

Portugal has been one of the most enthusiastic countries regarding renewable energies. In 2016, 28,1% of the energy produced was by renewable sources, compared to 19.2% in 2004. This is the eighth highest percentage among European countries and the fifth highest in the Eurozone. Portugal’s target for 2020 is set at 31%. Portugal has a strong solar energy potential, boosting an annual average of 2,200 to 3,000 hours of sun in the mainland, making it the European country with the highest average of hours of sun exposure. Today, the solar power output in Portugal is of 1.006 GWh. The Amareleja solar plant with its 46MW and annual production of 93 GW is the largest in Portugal. 

In 2017, renewable sources represented 41% of the electricity generated in Portugal. Still, more than 30% of the renewable quota was achieved by the electricity generated by large-scale hydro power plants. Solar energy remains very far from what it could potentially be. The Portuguese Government has, early in 2017, suspended the licensing of any new feed-in tariff photovoltaic plants. The political motive was not increasing the electricity invoice paid by consumers, but the argument passed to the market players was that the market already offered adequate conditions for the deployment of new projects without a feed-in tariff due to the continuing solar panels’ cost reduction. 

The lack of stability on promoters’ remuneration led to the tightening of the financing conditions and to several licensed projects never being built or operated. The lack of grid capacity has been another challenge to the growth of the Portuguese photovoltaics. 

Aiming at solving these challenges, in 2019 the Portuguese government made several modifications on the licensing photovoltaics power plants and changed significantly the solar production ecosystem.

To learn more about this subject, click on the pdf.

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The low voltage grid is the part of the grid that leads directly to the consumption locations. In Portuguese mainland the low voltage grid stretches across 108.938 km above ground and 33.389 km underground. It also includes 67.063 transmitters. ​

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Despite biomass electricity production not showing a significant increase in recent years, the need to rearrange the forest sector and the new governmental plans will provide an opportunity for growth.

Portugal has proved to be one of the European leading countries as far as the investment on the production of renewable energies is concerned. In 2015, 28% of the energy consumed was produced by renewable sources. This means the country is the eighth largest among European countries and the fifth largest among countries that share the euro and is expected to reach 31% in 2020.

In 2016, 58% of the electricity produced in Portugal was generated by renewable sources. In 2017, it slightly decreased to 47%.

Taking into account 2017 most recent data, biomass represented 5.1% of the electricity produced in Portugal, wind power represented 21.6%, hydropower represented 15%, and solar power represented1.6%; the remaining 56.7% were still supported by fossil fuel.

The last 9 years witnessed an exponential growth of electricity generation capacity from biomass. Between 2008 and 2017, power increased from 454 MW to 735 MW, corresponding to an increase of 61,9% In turn, the biomass production of electricity increased by 66% since 2008, ranking the Portuguese current production by 3075 GWh per year.

The target set by the National Action Plan of Energy for 2020 (“PNAER 2020”) of 769 MW of biomass electricity generation capacity by 2020 has almost been fulfilled, although, since 2010 the generation capacity has only increased by 3%.

The Portuguese Government’s current policy aims to change this scenario by issuing new production licenses for biomass energy. Decree law 64/2017 establishes a special and extraordinary regime for the installation and operation of new municipally owned biomass power stations. Municipalities will be allowed to assign their management to public or private entities.

The present paper is intended to provide readers with an overview of this specific sub-sector of renewable energies that could benefit from the long-awaited political impulse regarding the reform of the forest sector.

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After mini-hydro and wind, photovoltaic solar energy could become the third wave of the renewable energy revolution in Portugal. By 2020, the established power in the country promises to grow three times up to 900 megawatts.

Portugal has been one of the most enthusiastic countries regarding renewable energies. In 2015, 28% of the energy consumed was produced by renewable sources, compared to 19.2% in 2004. The amount consumed through renewable energy is the eighth highest among European countries and the fifth highest between countries that share the euro, being Portugal’s target for 2020 set at 31%.

In addition, in May 2016, the country used only renewable energy for four consecutive days and was able to supply the country's electricity grid without any carbon emissions relying only on wind, water and solar energy.

Regarding solar energy, Portugal has a strong potential, boosting an annual average of 2,200 to 3,000 hours of sun in the mainland, making it the European country with most hours of sun exposure.

Today, the established solar power in Portugal is of 299,89 MW. This represents a 484% increase compared to the 62 MW installed in 2008. The Moura solar park with its established 46MW and an annual production of 93 GW is the biggest in Portugal.

However, in 2016, despite the fact that renewable sources represented 58% of the electricity generated in Portugal, still, more than 30% of the renewable quota was achieved by the electricity generated by large-scale hydro power plants (with more than 10 MW of capacity), continuing solar energy very far from what could be its potential in the country, representing only 1% of the energy produced.

Given that evidence, the Government has already begun to reverse this trend with the issuing of licenses to build around 400 central MW. In addition, the establishment  costs of a solar power plant in Portugal has decreased by 80% compared to 2008, being expected that by 2020 the capacity in the country will be 900 MW and by 2030, it will increase to 2,871 MW.

As a result of these changes, the construction of 15 new solar plants is currently being planned. The largest investment will take place at Alcoutim with  the installation of the largest solar power plant in Portugal with 220 MW, and an estimated cost of 200 million euros, led by the international consortium China Triumph International Engineering Co. group and its Irish partner WELink.