Recently, the Portuguese government unveiled their Roadmap to Carbon Neutrality, a national energy and climate plan, to be submitted to the UN, that would have Portugal produce 90% of its energy needs via renewable resources by 2050, making it effectively carbon neutral. Simultaneously, a new report was released: the Portuguese Market Outlook up to 2040, by consultants Pöyry, which details various analysis for electricity market development in Portugal – and sheds a lot of light on how the government can make good on their carbon-neutral ambitions.
Part of Portugal’s aims include total decarbonisation of public transportation. Portugal will rely on both innovative biofuels, and electromobility, to make the transition. The goal is to cut emissions in half by 2030, slash them to 84% of the current rates by 2040, and to 98.5% by 2050 – which is near total decarbonization.
Regarding the final 1.5% of emissions, José Mendes, Portuguese first secretary of state for mobility, said “In 2050, we will still have some few emissions that will be compensated by the forest sector.”
This plan reveals the government’s integrated approach to decarbonization, rather than a sudden shift to electric vehicles. Electric options will not be sufficient on their own to decarbonize the transport sector. Aviation, shipping, and long-distance transportation remain particularly tricky to electrify – hence the reliance on biofuels as well.
“What we believe is that by 2030, we will have one-quarter of the consumption being biofuel; this is important, mainly for aviation, considering that it’s not easy to fully electrify an airplane,” Mendes said.
Personal cars, however, are a different story. In Europe, the average personal vehicle is not in motion 92% of the time, and when it runs, it is only carrying around an average of 1.5 people per trip. In addition to promoting ride-sharing and use of public transport, Portugal also intends to switch all personal vehicles over to electric. “We believe that by 2040, the country can have 1/3 of its trips using shared mobility,” Mendes said. “By 2043, all vehicles running in Portugal will be fully electric,” he added.
Mendes also spoke of collaborating with China to adopt new eco-friendly technologies. China and Portugal have signed a Memorandum of Understanding, focused on energy and transportation.
“What has to be clear is that we all follow the same international rules and regulations, and agree on the principle to decarbonise our economies around 2050,” he said.
All this is only one part of Portugal’s decarbonisation efforts, which was examined in the Portuguese Market Outlook report. The report by Pöyry, had some good news for Portugal, namely that renewable energy is a competitive market. If Portugal’s renewable energy sector were to maintain an adequate level of investment, by 2040, Portuguese wind production could grow by 72%, and electricity prices across the Iberian peninsula should maintain an average of 1.19% annual growth.
However, there is some bad news: The Iberian market’s price-setting mechanism is creating volatile market conditions, and this in turn prevents the predictable and steady environment that investors favour. Market reforms could set the sector on track to be more stable. The president of Apren, a renewable energy lobby, António Sá da Costa, proposed introducing contracts to differentiate, “seeking a satisfactory balance between producer and consumer interests regarding the length of the contracts”.
However, implementing such reforms isn’t so simple. One obstacle is the need to select a tender model, an issue that Sá da Costa said can be handled in a matter of months. But the other obstacle is structural, namely the lack of interconnection points; which means that the power grid itself cannot yet handle the new and improved power capacity.
The 2019 federal budget, which was approved this past November, might also complicate things. Included in the budget is a tax on energy producers, known as CESE, and it includes renewable energy producers. This will have a negative impact on the growth of renewable energy, including wind power, which will contribute most of the expected 30 million Euros in tax revenue. While Portugal’s newest wind developments are exempt from the tax, it is not likely that they will be renewed beyond 2019.
Sá da Costa said that “It is stupid to tax renewables when we need more investment, and even more stupid that it is levied at 0.85% of liquid assets, which means younger projects, which have lower feed-in tariffs and tighter margins, have to pay more.”
Overall, Portugal is doing well in the energy sector. In the latest Climate Change Performance Index (CCPI), Portugal was placed 14th overall, out of a list of 57 countries, but was first in terms of policies to counteract the effects of climate change. This new roadmap will only continue to boost Portugal’s status.
As for who ranked at the bottom of the list? The USA and Saudi Arabia.