In Portugal, electricity production is an activity open to competition, under two legal regimes: general regime (related to traditional non-renewable sources and large hydroelectric generating centres) and special regime (related to cogeneration and electrical production from renewable energy sources).
The legal regime applicable to production of renewable energy has been subject to constant updates, in order to comply with the provisions of the Regulation on European Union Governance and Climate Action (EU Regulation 208/1999 ) and the Integrated National Energy and Climate Plan (PNEC 2030) for the 2021-2030 horizon, in order to promote the optimization of national energy resources (especially renewable ones) towards a carbon neutral economy by 2050.
Among the rules that regulate large electricity production (greater than 1MW) from renewable sources, the following stand out:
- Decree-Law no. 29/2006, of 15 February
- Decree-Law no. 172/2006, of 23 August
- Ordinance No. 237/2013, of 24 July
- Ordinance No. 62/2018, of 2 March
2. Legal Regime Photo:
According to the provisions of article 4, no. 1 of DL 172/2006, the exercise of the activity of electricity production from renewable sources is subject either to a production and exploration license or to prior communication to the General Directorate of Energy and Geology (DGEG), as the licensing entity.
More specifically, the installation of the photovoltaic plant is subject to a production license whenever one of the following conditions is met:
- Grid connection power greater than 1 MWA (Megavolt Ampere).
- Subjecting the installation of the photovoltaic plant to the legal regimes of environmental impact assessment, under the terms of the applicable legislation (depends on the location / conditions of the project – case by case analysis);
- The installation of the photovoltaic plant is designed for maritime space under national sovereignty or jurisdiction;
- The applicable/choose regime is the guaranteed remuneration;
All other cases, which do not fit into any of these assumptions, are merely reliant on prior communication.
Granting of the production license (as result of licensing o prior communication) depends on the project’s compliance with the objectives and priorities of the energy policy and on the observance of the following requirements:
- The electro-producing centre impact the on the economic and financial costs of the SEN;
- The contribution of the request to the achievement of energy policy objectives, especially in the context of promoting security of supply, with a view to diversifying primary energy sources;
- The contribution of the request to the achievement of environmental policy objectives, namely those arising from the Paris Agreement and the control of the emission of acidifying substances, as well as to the fulfilment of national and Community targets in the field of renewable energy in gross energy consumption;
- The contribution of the request to local development and to attract wealth for the installation area of the electro-producing centre;
- The share of electricity production capacity held by the interested party on December 31 of the year prior to the filing of the request, within the scope of the Iberian electricity market, which cannot exceed 40% concentration;
- Reservation certificate for injection capacity – see 3 below
- Production technologies, considering their contribution to achieve the objectives of environmental policy and to the flexibility of the electrical system operation;
- The reliability and safety of the electricity network, installations and associated equipment, under the terms set out in the Regulation of the Transmission Network and the Regulation of the Distribution Network;
- Compliance with the regulations applicable to land occupation and location, the use of the public domain and the protection of public health and population safety;
- The specific characteristics of the applicant, namely his technical, economic and financial capacity.
3. Reservation of injection capacity at RESP – the case of the solar in Portugal
Previously to the administrative procedure for obtaining the electricity production license or carrying out prior communication, it is necessary to obtain a certificate of injection capacity in the Public Service Electric Network (in Portuguese “Título de Reserva de Capacidade de Injecção na Rede”, hereinafter RESP).
Law provides allocation of the injection capacity reserve in the RESO, granted upon dispatch from the Government member responsible for the energy area, may be dependent on the execution of a previous competitive procedure, namely electronic auction.
The opening of the procedure is carried out by means of an announcement published in the official journal, the pieces of the procedure are then advertised on the DGEG website and, in the case of an electronic auction, also on the chosen electronic platform for tender.
The modality of the procedure, the conditions and criteria for allocation of the injection reserve in the RESP, remuneration regime, respective access, length, maintenance, conditions, schedules and deadlines for the start-up of the electro-producing centres and respective extensions, guarantees and value of security deposits, are defined and determined in the procedure documents (specifications and procedure program).
In June 2019, the Government launched the largest electronic auction (in capacity), to allocate a reserve of injection capacity in connection points to the RESP for photovoltaic solar energy, produced in power generation centre. Within the scope of this procedure, 1150 MW were awarded, divided into 24 lots (of which only 22 were awarded).
In this case, it was decided to use the electronic auction that has been immediately referred to as a successful case. The number of interested entities registered for this auction and the interest that they expressed in several lots, with an average of 10 candidates per lot, made this bid one of the most relevant ever in the national energy sector.
It resulted in the determination of prices substantially lower than those practiced in the Iberian market for renewable energy production for the next 15 years.
It is therefore important to understand how this auction proceeds.
The admission of the application enables the bidder to participate in the Bidding phase. The bidding process is held through a specific electronic platform identified in the tender documents, accessible to all interested parties through an Internet site.
In the auctions, the volume of injection capacity in the RESP attributed to the Contracting Bidders is determined, along with the financial benefits for this allocation, and the remaining conditions relevant to the allocation, maintenance and validity of the capacity reserve titles attributed under the Procedure are defined in the Procedure documents and in the applicable legislation.
The Auction is based on anonymous, competitive, non-discriminatory and transparent procedure, ascending clock type, composed of successive sets of Rounds, and consequently the number of Rounds is determined by the offers introduced by the Competitors.
4. Remuneration schemes
Electricity production activities using renewable sources is subject to two possible remuneration regimes:
- General regime – where producers sell produced electricity at a market price;
- Guaranteed remuneration regime – in which producers sell electricity produced at a guaranteed price in each period, the price being fixed or indexed to a benchmark, with or without setting minimum and / or maximum thresholds.
Competitors’ offers in the two accepted remuneration models (“general remuneration” or “guaranteed remuneration”) are, for the purposes of comparability and determination of the ranking order, converted into a Net Present Value (VAL), expressed in € / MWh, under the terms described in the Bidding Regulation.
The results of the last auction can be consulted on the website https://leiloes-renovaveis.gov.pt/.
Bearing in mind that Portugal needs to comply with determined national goals and objectives of reducing GHG emissions and producing electricity from renewable sources, it is necessary to significantly increase the installed capacity to produce electricity from renewable sources.
This objective, however, comes up against a real limitation of network capacity. As such, auctions have been a way that the Government has adopted in order to reconcile the interests in question and, also, bring transparency and dynamism to the process.
Given the success of the previous auction, the Minister of the Environment, Matos Fernandes, publicly announced, during the hearing in Parliament in the scope of the examination, in particular, of the OE2020 that “In the first quarter [of 2020] there will be a new auction for the allocation of energy but now also with the possibility that some of these projects have storage ”. The Minister also pointed the month of March for the start of the 2nd auction to be held in Portugal and revealed that it will have a capacity of 700 to 800 MW.
The opening of the perspective of storage at this moment, to which no specifications or technical standards have yet been published, can mean either an opening to new technological solutions or the availability for appreciation of projects with greater infrastructure, which would allow for example connection to water networks.
It is true that while awaiting the technical details for the announced procedure, operators are already preparing to submit their applications, either by resuming previous projects or preparing new proposals that may accommodate the new characteristics to be defined.
Expecting strong demand in that market, the same Minister also said that the Government plans to launch a 3rd auction still in 2020.