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Portugal advanced plans for Europe's largest floating solar PV
project as preliminary results from the continent's biggest auction
devoted solely to the sector were announced in early April, a
precursor to hopes of doubling the country's renewable generation
capacity.
Mainland Europe's most westerly and southerly nation sits in an
isolated position at the far edge of the continent's grid network.
So, alongside plans to build more land-based solar PV capacity and
jumpstart an offshore wind sector, the floating PV auction is part
of the recently re-elected Socialist Party government's ongoing
push to advance the energy transition using the resources it does
have—sun, wind, and a relatively long coastline (see map
below).
Some 60% of Portuguese power capacity is already renewable, with
just over 56% of that renewable generation hydro-electric and the
remainder onshore wind.
Prime Minister António Costa's government wants to accelerate
construction of renewable generation, diversify supply options,
advance a target for renewables' share of the generation stack, and
wean the country's consumers off imported fossil fuels—a
necessity heightened, as is the case elsewhere in Europe, by the
war in Ukraine.
Another reason for the diversification is a prolonged drought
that means renewable generation only supplied 57% of the country's
power needs in March, according to electricity grid operator Redes Energeticas
Nacionais, and 49% in the first quarter of 2022. Hydro-electric
dams, Portugal's biggest source of power, operated at historically
low levels in the first quarter, with their ability to produce
electricity constrained to less than a third of typical generation
levels.
At the start of February, Portugal's environment ministry warned that the month would see
very little rain, compounding an already difficult situation. The
ministry banned production of power on five dam systems for the
rest of February in order to conserve water for the public.
Multi-pronged transition plan
So, following its commanding victory January's snap election,
the government laid out a program to invigorate the electricity
sector.
The program submitted to parliament
on 7 April would double installed renewable capacity over the next
decade, bolster the least energy efficient housing
stock in the European Union, hold hydrogen auctions, boost
solar output by 2 GW in just two years, and raise the output of
onshore wind projects. It would also launch an offshore wind
sector, increase storage capacity, and promote production of
advanced and synthetic biofuels, including green ammonia and
methanol, to aid industrial and transportation decarbonization.
Doubling Portugal's renewable capacity in the next decade,
reaching the 80% renewables target by 2026, and adding 2 GW of
solar capacity a year for two years is achievable, S&P Global
Commodity Insights European Research Analyst Wassim Dghoughi told
Net-Zero Business Daily 15 April.
By focusing on solar, the government is easing the feasibility
of reaching the goals, Dghoughi said, as construction is much
quicker than for alternative sources of power once the permits are
in place. Portugal currently has 1.5 GW of solar capacity, he
added. Dhoughi anticipates at least one government-run solar PV
capacity auction a year.
The government is committed to speeding up the approval process,
Cabinet Minister Mariana Vieira da Silva said during an 8 April press conference. In
particular, the government will be streamlining solar farm
approvals, she said, as it seeks to boost onshore and floating PV
capacity.
Minister of Environment and Climate Change Duarte Cordeiro added
that a framework would be created to simplify environmental
assessments, which will help facilitate the approval process for
all types of renewable generation, as well as offering greater
support for energy storage.
Portugal is also accelerating its energy transition to counter
higher energy prices than a large part of the rest of Europe,
Vieira da Silva said during the briefing, a disparity that has been
exacerbated by the war in Ukraine. In the short-term, the
government plans to support domestic prices for petrol and diesel
as well as natural gas.
Fuel poverty is among the issues the government's program seeks
to tackle. Data collected by the statistics arm
of the European Commission show a fifth of Portugal's population
struggles to keep their homes warm. Eurostat data show Portuguese electricity
prices for households in the first half of 2021 were the eighth
highest out of the 27 members.
Later in the briefing, Cordeiro said the price of electricity
could be decoupled from that of natural gas to help customers in
the short term. In late March, Portugal and Spain submitted a plan
to the European Commission that would see the price of gas used by
power plants capped at €30/MWh ($32.43/MWh) for at least the rest
of 2022.
Portugal imported 76% of its primary energy supply in 2019 (43%
oil, 24% gas and 6% coal), the International Energy Agency (IEA)
said in 2021.
Gasoline, diesel, gas, and electricity prices have all increased
since Russia invaded Ukraine in March, adding to 2021's price
inflation, heaping pressure on governments across Europe.
Efforts from the German coalition government and
Costa's administration are necessary and appropriate, according to
the IEA, which in early March released a 10-point plan for
decreasing the continent's dependence on hydrocarbon imports from
Russia.
The Portuguese government's plans won qualified backing from
industry groups and environmentalists.
"Now more than ever Europe needs to strengthen its energy
security. Renewables are a home-grown alternative to imported
fossil fuels from Russia and elsewhere. Portugal has successfully
trialed floating wind with WindFloat Atlantic, one of Europe's
first floating wind farms," a spokesman for WindEurope said in an
email 15 April.
"Now is the time to ramp up the Portuguese offshore wind supply
chain, create lasting jobs and hold Portugal's first competitive
auction for offshore wind. To reach the new 80% renewables target,
onshore wind will play an important role. It is even cheaper and
faster to scale than offshore wind," he told Net-Zero Business
Daily.
Environmental NGO ZERO said in a statement 3 April
that the program "maintains the good strategies for expanding
renewables and improving energy efficiency," although it also
questioned how streamlined environmental assessments would maintain
the integrity and transparency of the process.
Biggest floating solar auction
Solving part of the production problem at Portugal's existing
key renewable generation sites was one of the reasons for the
floating solar PV auction on 4 April.
The government awarded the rights to develop
183 MW, of which around 56% were awarded in the form of Contract
for Differences (CfD). One of the other lots awarded though saw
what the government said was the lowest tariff for renewable
project yet, with the developer paying €4.13/MWh to the system to
produce the power.
EDP Renewables, a subsidiary of once state-owned monopoly EDP,
was the biggest winner in the auction,
securing lots for a combined 70 MW, while Portugal's second-largest
renewable energy producer Finerge won three lots with a combined 38
MW of capacity.
Describing itself as the world's fourth largest renewable energy
producer, EDPR said the 70 MW of grid connection capacity won for
floating PV is expected to allow the company to install up to 154
MW of renewable capacity, including 14 MW of solar overcapacity and
70 MW of hybrid wind capacity, neither of which will receive the
CfD as they were not part of the auction. The project is expected
to be operational in 2025.
The diversification of hybrid projects improve the potential for
profitability when bids into auctions are as low as they were with
this one, sources said, as the additional output can be sold at the
market price. In addition, the rights to produce power on the
reservoirs are for 30 years, while the initial tariff is only for
15 years, meaning that the developer can obtain the market price
for the remainder of the period.
As well as domestic players EDPR and Finerge, Paris-listed
renewable developer Voltalia won 33 MW of capacity
development rights. The company's 33-MW Cabril project is expected
to be commissioned no later than 2026 and project received the
highest price of €41.025/MWh.
Companies have been waiting to invest more in Portugal, said
S&P Global's Dghoughi, citing the case of Spain's Endesa, the
fourth company that won rights to develop floating
PV capacity. Endesa plans to build a 42-MW floating PV project on
the Alto do Rabagão reservoir by 2026 at a cost of €115 million, it
said.
Endesa won government approval at the
end of March to transform the site of the former Pego coal plant
with a hybrid solar, wind, and battery storage complex. The company
plans to install 365 MW of solar capacity, 264 MW of wind turbines,
and 168.6 MW of storage capacity, as well as a 500 kW green
hydrogen electrolyzer.
Irish floating wind developer Simply Blue Group is also eyeing
opportunities in Portugal, the company said 14 April. The firm signed a memorandum of
understanding with Spanish engineering group Proes Consultores and
Spanish renewable energy developer FF New Energy Venture to explore
the floating offshore wind opportunities in Spain and Portugal.
Spain in December announced plans to build an
offshore wind sector from scratch that will see as much as 3 GW of
floating offshore wind capacity built. It followed that in March
with a floating PV roadmap that would
offer 25-year concessions. Spain has around 100 state-owned
reservoirs. Spain is Europe's second largest market for traditional
PV.
Portugal is set to hold its first floating offshore wind auction
later in 2022, with as much as 4 GW of capacity to be made
available, industry sources say. EDPR is expected to be at the
forefront of those developments and already has a 25 MW test
project in operation in Portuguese waters, the Windfloat Atlantic Project.
The potential for development of floating wind capacity—when
the nascent technology reaches industrial scale—is substantial
in Portugal, according to the Global Wind Energy Council.
Source: GWEC.
The onshore wind market in Portugal is well established. At the
end of March, wind turbine manufacturer Vestas said it had reached
1 GW of turbine orders in Portugal. Expanding the onshore fleet is
difficult, however, said S&P Global's Dghoughi, because of
competition for space with agricultural interests.
However, turbines can be added at existing complexes, which
already have grid connections, as Spanish developer Iberdrola is
doing at its Tâmega hydroelectric complex in
northern Portugal. Some 300 MW of wind capacity will be added at
the site of 1.158 GW hydro complex, the third phase of which will
come online in 2024. The facility also has 880 MW of pumped storage
capacity.