Renewable energy was once unable to compete with fossil fuels, but now, as rates have fallen due to increasing market demand, it’s on track to outpace them in sales.

Siddharth Sareen, a postdoctoral fellow that works on energy transitions at the University of Bergen, said because renewables have become extremely competitive, the transition from fossil fuels is no longer about economic feasibility, but rather sociopolitical pressure on governments.

But Portugal’s government is positioning its country as a leader in renewables by creating an economic and political environment where the industry can rapidly expand.

Becoming a leader in renewables

Twenty-five years ago, Portugal began diversifying its energy portfolio with a big push on renewables, putting the nation on track to become an industry leader. Government subsidies led to the growth of hydro and wind electricity, generating substantial increases in wind power generation capacity as diesel plants were shutting down.

The average growth rate of wind capacity was 37 percent between 2005 to 2011 but dropped to 3 percent between 2012 and 2018.

As the financial crisis in 2008 and 2009 plunged the economy into financial turmoil, the Portuguese public’s view on subsidies and tax breaks for the sector soured. As a result, renewable energy capacity halted, and a stigma around subsidies persisted even as the economy recovered.

In 2015, the Socialist Party was pro-renewables, but struggled to take a public stance for fear that the burden would fall on taxpayers, said Sareen. The Secretary of State for Energy’s Office agreed to support the expansion of solar energy, but only without subsidies.

A cabinet reshuffle in 2018 led public servants to focus more on an energy transition. Rather than being under the finance department, state officials combined the energy and environment portfolios so they could facilitate a faster renewable capacity expansion.

This came alongside ambitious new climate targets, including reaching 100% renewable energy provision by 2050. But with the renewables industry expanding, the government continued its approach of not leaning on subsidies to promote the sector.

“In Portugal, in the last two and a half years, renewable and specifically solar energy went from something that required subsidies or was perceived as a debt burden to being recognised as an energy source that can compete without subsidies,” said Sareen.

According to the International Renewable Energy Association (IRENA) fossil fuel power generation costs between $.05 to $.17 per kWh while solar photovoltaics costs $0.10 per kWh, making it cost-competitive with traditional energy sources.

Instead of subsidies, Portugal lent in hard on stimulating the market. In July, the country held a record-breaking solar auction to procure investments at low prices, revealing a domestic and international appetite to compete in the sector. The government sold 24 licenses at $16.45 per megawatt-hour (Mwh), doubling the solar capacity in Portugal.

Building the infrastructure for a transition

An official from the Portuguese Ministry for the Environment and Energy Transition, who wished to remain anonymous, said that in order for Portugal to achieve carbon neutrality by 2050, fossil fuel energy production and consumption needs to be replaced in all sectors of the economy.

“The current economic model is based on the exploitation of resources such as extraction of fossil fuels and the use of raw materials, which is not sustainable,” said the ministry.

Rapidly phasing out fossil fuels to meet zero-carbon emission targets, requires the political will to support the expansion of the sector.

It also demands setting new standards for renewable energy sources and limiting fossil fuels that are deeply entrenched in governments’ economic strategies, which can be challenging, said Sareen.

Building the right infrastructure for renewable power generation, devising regulatory guidelines for sector stability and ensuring there is energy security – a steady availability of energy at a reasonable price – are key to replacing fossil fuel dependent systems, he added.

So how is the country enacting its plan? One means of ensuring the stability of the sector is by investing and promoting clean energy generation by devising a feed-in tariff programme – a government scheme to support an uptake in renewable energy – to facilitate rapid growth in the area.

Feed-in tariffs grant renewable energy producers long-term contracts at premium or fixed-price as an incentive for production. They are cost-effective, but also provide stability and long-term guarantees that are more attractive to investors.

Portugal credits feed-in tariffs with being a central mechanism to meet their national energy goals and build up critical infrastructure.

As new, sustainable sectors emerge and replace traditional “brown” ones, there’s always a risk that it will lead to unemployment and communities left economically stagnant.

The Portuguese government is anticipating job losses in sectors dominated by fossil fuels, but stated that “job creation in renewable energy production can more than compensate for this loss of local employment.”

The Ministry added the energy transition will organically provide new employment opportunities and business models as well as the creation of new “clusters” in sectors such as automation engineering or logistics services.

But to ensure that communities aren’t left behind, the ministry said it is working together with all relevant actors to identify specific measures they can institute for a fair transition. They are also focusing on job retraining and skills programs, particularly for the communities directly linked to the declining sectors.

Although the Portuguese government is optimistic about reaching their targets, it still anticipates challenges ahead.

For instance, advanced technologies for battery storage and energy production still need to be created.

Additionally, establishing interconnections with the EU electricity grid will also be pivotal to the future of the management and supply of the national electricity system.

But despite the roadblocks, the government still touts the positive economic contributions the efforts to decarbonise have made.

“What’s noteworthy is that the contribution of [renewable] sector to the Portuguese economy in the creation of a whole new industrial and business sector that generates jobs, promotes regional development, boosts exports of goods and services, stimulates innovation and scientific research, captures investment and encourages the internationalization of national companies,” said the ministry. - Amelia Axelsen

(Picture credit: Pixabay)