Five years ago, the leaders of this sun-scorched, wind-swept nation made a bet: to reduce Portugal’s dependence on imported fossil fuels, they embarked on an array of ambitious renewable energy projects. Nearly 45 percent of the electricity in Portugal’s grid will come from renewable sources this year, up from 17 percent just five years ago.
Land-based wind power — this year deemed “potentially competitive” with fossil fuels by the International Energy Agency in Paris — has expanded sevenfold in that time. And Portugal expects in 2011 to become the first country to inaugurate a national network of charging stations for electric cars. While Portugal’s experience shows that rapid progress is achievable, it also highlights the price of such a transition. Portuguese households have long paid about twice what Americans pay for electricity, and prices have risen 15 percent in the last five years.
Aggressive national policies to accelerate renewable energy use are succeeding in Portugal and some other countries, according to a recent report by IHS Emerging Energy Research, a leading US energy consulting firm. By 2025, the report projected, Ireland, Denmark and Britain will also get 40 percent or more of their electricity from renewable sources. To force Portugal’s energy transition, Mr Sócrates’s government restructured and privatised former state energy utilities to create a grid better suited to renewable power sources. To lure private companies into Portugal’s new market, the government gave them contracts locking in a stable price for 15 years — a subsidy that varied by technology and was initially high but decreased with each new contract round.
European countries have powerful incentives to pursue renewable energy. Many, like Portugal, have little fossil fuel of their own, and the European Union’s emissions trading system discourages fossil fuel use by requiring industry to pay for emissions. Government officials say the energy transformation required no increase in taxes or public debt, precisely because the new sources of electricity, which require no fuel and produce no emissions, replaced electricity previously produced by buying and burning imported natural gas, coal and oil.
Necessity drives change
With a rising standard of living and no fossil fuel of its own, the cost of Portugal's energy imports doubled in the last decade, accounting for 50 percent of the country’s trade deficit, and was highly volatile. Portugal is now on track to reach its goal of using domestically produced renewable energy, including large-scale hydropower, for 60 percent of its electricity and 31 percent of its total energy needs by 2020.
The country’s electricity production costs and consumer electricity rates are about average for Europe, but still higher than those in China or the United States. Mr Shinji Fujino, of the International Energy Agency, said Portugal’s calculations might be optimistic. But he noted that the country’s transition had also created a valuable new industry: last year, for the first time, it became a net power exporter, sending a small amount of electricity to Spain. Tens of thousands of Portuguese work in the field. Energias de Portugal, the country’s largest energy company, owns wind farms in Iowa and Texas, through its American subsidiary, Horizon Wind Energy.
Indeed, Portugal’s engineers and companies are now global players. Portugal’s EDP Renováveis, first listed on stock exchanges in 2008, is the third largest company in the world in wind-generated electricity output. “Broadly, Europe has had great success in this area,” said Mr Juech, the analyst at Garten Rothkopf. “But that is the result of huge government support and intervention, and that raises questions about what happens when you have an economic crisis or political change; will these technologies still be sustainable?”
Running a country using electricity derived from nature’s highly unpredictable forces requires new technology and the juggling skills of a plate spinner. A wind farm that produces 200 megawatts one hour may produce only five megawatts a few hours later; the sun shines intermittently in many places; hydropower is plentiful in the rainy winter, but may be limited in summer.
Denmark, another country that relies heavily on wind power, frequently imports electricity from its energy-rich neighbor Norway when the wind dies down; by comparison, Portugal’s grid is relatively isolated, although it has greatly increased its connection with Spain to allow for energy sharing. Portugal’s distribution system is also now a two-way street. Instead of just delivering electricity, it draws electricity from even the smallest generators, like rooftop solar panels. The government aggressively encourages such contributions by setting a premium price for those who buy rooftop-generated solar electricity. To ensure a stable power base when the forces of nature shut down, the system needs to maintain a base of fossil fuel that can be fired up at will.
Energy experts consider Portugal’s experiment a success. But there have been losers. Many environmentalists object to the government plans to double the amount of wind energy, saying lights and noise from turbines will interfere with birds’ behavior. Conservation groups worry that new dams will destroy Portugal’s cork-oak habitats. Local companies complain that the government allowed large multinationals to displace them. Until it became the site of the largest wind farm south of Lisbon, Barão de São João was a sleepy village on the blustery Alentejo coast, home to farmers who tilled its roller coaster hills and holiday homeowners drawn to cheap land and idyllic views. Renewable energy has brought conflict.
Lights dim on solar subsidies
Until the 2008 crisis, "governments readily provided subsidies for companies investing in renewable energies, writes Il Post. Now, the Italian online daily explains, "The crisis and higher energy prices have led to a reduction of subsidies, thus making things difficult for those who have invested in the sector. As well as threatening the plans of the European Union, which decreed that 20% of power produced by 2020 should be renewable. In Spain, notes the Wall Street Journal, the government has halved the subsidy for some solar systems, while in Germany, where there has been a veritable explosion of subsidised solar installations, they have been cut by 16%.