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Eco123 Revista da Economia e Ecologia
As a researcher working on the governance of energy transitions in 2016, I was fascinated by the relatively slow growth of solar energy in Portugal despite the amazing potential. I crafted a research project to explore this with a focus on accountability relations, and successfully competed for a position at the Centre for Climate and Energy Transformation in Norway, where I feel fortunate to explore this and similar issues with some fantastic colleagues. Between 2017 and 2019, I have spent about five months in Portugal, studying the multi-sited and multi-scalar geographies of solar energy uptake, from the capital Lisbon to small towns in the Alentejo. I have interviewed over a hundred experts and sectoral stakeholders and am grateful for the insights they have shared, which have shaped my understanding of the governance of energy transitions in this lovely country and beyond.
One of the biggest changes in Portugal in recent years has been in the public discourse on renewable energy. To readers unfamiliar with Portuguese politics, this might seem surprising: after all, Portugal has been one of Europe’s leaders on renewable energy. But those who have avidly followed the country’s political debates during the 2010s will recognise the close relationship between energy and politics.
The weaponisation of renewables in Portugal
As Portugal went through the worst effects of the economic recession during 2009-2015, the energy sector became one of the main areas in which the public experienced its adverse effects. The country continues to have one of the highest electricity tariffs in Europe, as well as one of the highest rates of energy poverty – a condition in which households are unable to access adequate energy services. Chief among the many contributing factors is high debt in the energy sector, much of which is recovered through large fixed charge components in people’s electricity bills.
Renewable energy became ‘weaponised’, as one of my informants stated (see Text Box 1 for an overview of an article published in 2018 at the end), when the wind energy tariffs offered by the then-incumbent government were targeted during the election campaign of 2015. This obfuscated the issue that, in addition to wind energy subsidies, some of which favoured high company profits, a large portion of sectoral debt came from financial restructuring. The agreements made by the government in this regard were shown to place a significant burden on the taxpayer, for instance during parliamentary hearings in 2018. In the meantime, all renewable sources of energy received a bad rap, being labelled as a public burden.
Decreasing global costs of solar energy
Due to global innovation and mass manufacturing led by China, the costs of one particular renewable energy technology continued to fall during this same period, namely solar photovoltaic (or PV) energy. One of the biggest stories of the energy transition during the 2010s is that solar PV hit what is called ‘grid parity’, or the ability to compete with market prices on the electricity grid. This has already had massive global implications. For example, China recently installed more solar PV capacity in a single year (53 Giga Watts in 2017) than had existed worldwide until 2010 (40 Giga Watts)! For Portugal, with the highest solar irradiation rates in Europe, this should have been welcome news as well. However, the politicisation of renewable energy posed a problem, namely that the public discourse in Portugal during the mid-2010s was that renewable energy requires subsidies and constitutes a public burden.
This is surprising, given that Portugal had already had some successful experiences with solar energy. Amaraleja, a utility-scale solar plant in Moura (Beja district), was the largest in the world while it was being built, and came on-grid more than a decade ago, with a highly subsidised tariff at a time when solar PV costs were still high. It proved that the technology could work reliably in Portugal. Small-scale solar PV was supported by an attractive feed-in tariff scheme in the early 2010s and, as with Portugal’s experience with rooftop solar thermal energy, there were many willing adopters. This feed-in tariff was rapidly reduced, and installing rooftop solar panels soon became of limited interest as an economic investment due to the new regulations, despite continuing global cost decreases! Until 2019, the legal framework only incentivised self-consumption – not particularly attractive for households without much daytime power consumption.
Key changes in Portugal’s energy sector
When I began to study solar energy uptake in Portugal in 2017, many solar developers were interested in installing solar PV plants, and the former Secretary of State for Energy (Jorge Seguro Sanches, November 2015 – October 2018) made it a point to emphasise that unsubsidised solar plants would appear. At the same time, the Directorate-General for Energy and Geology (DGEG) made several changes to its licensing protocol as it went about selecting solar developers to install solar PV capacity. Years passed, and while some solar plants were indeed licensed, confusion and delays abounded, and many solar developers complained about a lack of transparency in the whole process. Many plants availed subsidised tariffs, and developers warned that they would find it hard to attract foreign investment without guaranteed revenue flows, as solar PV technology was still perceived as an emerging market with high up-front capital costs.
Yet things took a dramatic turn in October 2018, with the creation of a new Ministry of Environment and Energy Transition that combined the energy and environment portfolios. In January 2019, like all European Union member states, Portugal launched its draft National Energy and Climate Plan (NECP) 2030. It also brought out a Carbon Neutrality Roadmap 2050, detailing a pathway to a net zero carbon emission country to meet the climate challenge. These plans and pathways rely on decarbonising electricity, and electrifying not just energy but sectors like transport, heating and cooling, and manufacturing. This necessitates rapid growth in renewable energy, including a manifold increase in solar energy. To Portugal’s advantage, this source has good complementarity with its major existing domestic sources such as hydropower and wind energy. Yet the real world is rarely so simple.
A key requirement to increase electricity production and raise the penetration of renewable energy in the supply mix on the electric grid is to ensure sufficient grid infrastructure. This is relatively weak in the Alentejo and Algarve regions where solar irradiation rates are highest and the population density is low. Since it is geographically isolated, being connected to the European mainland via Spain, Portugal depends on grid interconnections with and through Spain. Thanks to an agreement between the European Commission, France, Spain and Portugal in 2018 relating to €578 million in infrastructural investment, Portugal’s interconnection will shortly increase from 8 to 10 percent of its installed electricity production capacity. Besides such major investments, strengthening the existing grid within Portugal can help, which is part of the plan developed by the transmission service operator, REN.
The case for small-scale solar uptake
A further necessary aspect of grid capacity is the distribution grid, which is largely controlled by EDP. This can serve to enable the addition of distributed solar PV capacity, if regulations are adequately updated. New legislation has recently begun to appear, in mid-2019, but it can only be considered a success if it rapidly brings about the possibility for households and small businesses, as well as public sector buildings, to install rooftop solar panels and benefit economically, and allows for the creation of energy communities within buildings and between multiple buildings. Trends such as positive energy blocks are being promoted within Europe, and solar prosumption has proven successful from California to Germany, so these developments are key to a desirable solar energy future in Portugal. It is the responsibility of the Energy Services Regulatory Authority (ERSE) to enable the distributed addition of clean energy capacity in line with its true economic potential, and it is also essential in order to realise the aims of NECP 2030. Distributed solar PV has the advantage of requiring only modest investment in grid infrastructure, since power generated close to sites of consumption and in areas where energy demand and the grid already exist places far less demand on grid capacity than power that needs to be transmitted over long distances at large volumes, such as from solar plants out in the countryside.
Exciting developments are already underway with grid-scale solar PV capacity. During 2019, the new ministry announced solar energy auctions and successfully completed the first one in July 2019, even setting a new world record tariff in the process, lower than one-third of the annual average wholesale market price of electricity, which usually exceeds €50 per Mega Watt hour on the Iberian Electricity Market (MIBEL). The beauty of a market mechanism like the solar auction is that it identifies a competitive market rate, and makes solar projects bankable for financial investors who have a basis to estimate a rate of return on investment. While the outcome is positive for the Portuguese government, it has upset several solar developers, who see the risk of low profit margins and worry that future auctions might not attract equal interest as investors turn their attention to more lucrative markets. One might argue that having clear policies and targets would make Portugal attractive for reliable energy investments.
While this still remains to be seen, with the next solar auction in early 2020, another concern is that the rising penetration of solar energy will bring down prices during peak solar production hours on the Iberian Electricity Market – MIBEL. This would make it unattractive for solar developers without a tariff to install additional solar capacity, unless Portugal actively creates an energy flexibility market to harness the decreasing cost of energy storage. Again, how regulations are crafted to enable this will determine whether households, businesses and energy communities who install distributed solar PV capacity can benefit economically from the Portuguese energy transition. For instance, if suppliers aggregate distributed solar energy with large batteries or other innovative energy storage solutions at the secondary sub-station level, prosumers could be rewarded with a high percentage of the benefits from charging this stored capacity, so that it is available for grid balancing.
The desirable future of solar energy in Portugal
What is clear is that solar PV energy has completed a remarkable about-turn in the Portuguese public discourse. It can no longer be called a burden on the taxpayer. Regardless of the outcome of the national elections in October 2019, the Portuguese government will remain on a pathway to increase renewable energy and decarbonise its economy. This also means shutting down fossil fuel plants, first the two remaining ones that run on imported coal (Sines, 1,192 Mega Watts in Setubal and Pego, 628 Mega Watts in Santarém) and then eventually those based on fuel oil and gas. This will only be possible with a combination of expanded solar, wind and hydropower, as well as energy storage solutions that could include reverse hydro pumping and concentrating solar power, as well as emerging methods like gravitational storage, besides batteries, including electric vehicle ones.
Less clear is what this means for the future of the Portuguese energy sector. Will it be democratised to benefit its citizens, who can contribute with rooftop solar PV and become members of widespread energy communities to unleash the full power of this cost-competitive clean technology? Or will they remain silent witnesses to the energy transition, watching companies install large solar plants at lower cost than fossil fuel plants, while they continue to pay high power tariffs? This is a question that must only be answered in one way, and it is up to citizens and the media to hold the government accountable to deliver on the potential of this historic moment. The policies and targets are in place, the intent is positive, and the challenge for the next government will be to deliver citizen-centric regulations that transpose into law and implement a Portuguese energy transition that benefits its public. What happens with small-scale solar PV during 2020 will be a good indicator of whether or not this is happening.
Siddharth Sareen (31) has been a researcher with the Department of Geography at the University of Bergen in Norway since early 2017. He leads a project called ‘Solar power: Producing accountable institutions for transitions to renewable energy’. During autumn 2019, he will be a Visiting Senior Research Fellow at the Science Policy Research Unit at the University of Sussex in the UK. See his work on governing energy transitions:
https://www.uib.no/en/persons/Siddharth.Sareen
