PORTUGAL: An Introduction to Energy & Natural Resources

Portugal’s energy sector is undergoing a significant transformation, driven by ambitious renewable energy targets under the National Energy and Climate Plan (Plano Nacional de Energia e Clima (PNEC) 2030), the Portuguese government has set a target of reaching 51% renewable energy in final energy consumption by 2030. Offshore wind energy is a key component in achieving this goal.

The energy sector is currently at a critical juncture, with significant opportunities for growth driven by renewable energy expansion and regulatory reforms. With the right policies and market adaptations, Portugal is well positioned to solidify its leadership in the European energy transition.

Portugal continues to position itself as a leader in the energy transition, with a strong focus on decarbonisation, innovation, and sustainability. However, legal complexities, economic challenges and evolving EU regulations pose both opportunities and hurdles for stakeholders, who must navigate legal complexities, economic pressures, and infrastructure constraints.

Despite the consistent renewable energy policies and the successful phase-out of coal-fired power plants in 2021, Portugal faces challenges such as public opposition to large-scale solar projects and the need to accelerate decarbonisation in sectors such as transportation.

Economic Conditions and Investment Trends

Portugal’s economy has shown resilience following the COVID-19 pandemic, with stable GDP growth and increasing foreign direct investment in infrastructure and energy projects. The government has prioritised energy transition initiatives, attracting both domestic and international investors. However, inflationary pressures – together with the rise in global energy prices – have affected project financing costs and consumer energy prices, prompting policy adjustments to mitigate volatility.

Despite these challenges, Portugal remains an attractive market for renewable energy investment, particularly in solar and offshore wind. The country’s strategic location and existing interconnection capacity with Spain and France further enhance its role as an energy hub in Europe.

Regulatory and Legislative Developments

The Portuguese government has been actively updating its regulatory framework to align with EU energy policies and the objectives of the European Green Deal. Several legislative changes are shaping the legal landscape for energy sector players.

Decree-Law No 15/2022 of 14 January, which regulates the organisation and operation of the National Electricity System (Sistema Elétrico Nacional, or SEN) in Portugal, was amended in December 2024 to streamline licensing procedures for renewable energy projects, aiming to reduce bureaucratic delays and attract investment. This amendment partially transposed Directive (EU) 2023/2413 of the European Parliament and of the Council of 18 October 2023 (the “RED III Directive”).

Licensing processes for energy projects are slow and complex. This delay can be attributed to several factors, including bureaucracy, stringent regulatory requirements, and the need for detailed environmental assessments. The slow licensing process has a direct impact on the market, particularly in M&A activities. To address administrative bottlenecks and uncertainties in permitting processes, the Portuguese government has announced the creation of a one-stop licensing office in 2025, aimed at streamlining and expediting administrative procedures related to renewable energy projects.

Portugal has been increasingly committed to developing offshore wind energy, recognising its potential to diversify the energy mix and achieve ambitious sustainability goals. Recently, the Portuguese government approved a Council of Ministers resolution defining maritime areas designated for offshore renewable energy exploration, including offshore wind.

Additionally, the Portuguese government plans to launch the first auction for offshore wind licensing later this year, aiming to install 2 GW of capacity by 2030. In the long term, the goal is to reach 10 GW of installed capacity. The government is also investing in transmission infrastructure upgrades to support the integration of renewable energy sources.

In relation to energy storage and hydrogen strategy, the Portuguese government continues to adopt measures marking significant steps in fostering energy storage solutions and hydrogen development. Portugal aims to become a key exporter of green hydrogen, leveraging its abundant solar and wind resources.

In 2024, Portugal held its first auction for green hydrogen and biomethane. The government offered up to 127 GWh per year of hydrogen with a maximum price of EUR127/MWh and up to 150 GWh per year of biomethane with a maximum price of EUR62/MWh.

Additionally, the European Hydrogen Bank conducted its inaugural auction in 2024, allocating EUR720 million to seven renewable hydrogen and ammonia projects across Europe. A project in the Portuguese town of Sines was among the successful bidders, securing EUR245 million in funding.

Regarding battery energy storage systems, the country has been actively promoting energy storage solutions to complement its renewable energy initiatives. In August 2024, Portugal’s Environmental Fund launched a call for interested parties to apply for public subsidies aimed at promoting energy storage projects. The initiative allocated approximately EUR100 million to support the installation of at least 500 MW of battery energy storage systems at both transmission and distribution levels. In January 2025, the Portuguese Ministry of Energy announced the selection of 43 projects from 79 applications to receive this funding. These projects aim to enhance grid flexibility and support the integration of renewable energy sources into the SEN.

Municipal contributions and local engagement have been an area of concern. Recent legislation has clarified the financial contributions that renewable energy developers must make to local municipalities, ensuring a fair distribution of economic benefits while avoiding excessive financial burdens on investors.

Challenges and Potential Hurdles

While Portugal offers a promising environment for renewable energy development, several challenges remain. Despite recent reforms, investors and developers often face delays due to lengthy permitting processes and evolving regulatory requirements. A more streamlined and predictable licensing framework would enhance investor confidence.

The rapid expansion of renewable energy capacity has placed pressure on Portugal’s electricity grid. Ensuring sufficient transmission and distribution capacity, as well as accelerating interconnection projects with neighbouring countries, is crucial for long-term stability.

While Portugal is committed to its renewable energy targets, balancing environmental objectives with economic feasibility continues to be a challenge. Ensuring fair remuneration mechanisms for renewable energy producers and maintaining competitive electricity prices for consumers is critical.

Opportunities and Strategic Considerations

To navigate the evolving legal and economic landscape, companies operating in the Portuguese energy sector should consider a proactive regulatory compliance approach. Staying ahead of legislative changes and engaging with regulatory authorities can help companies mitigate compliance risks and streamline project approvals. Investment in innovation and storage solutions (battery storage and green hydrogen technologies) will play a pivotal role in stabilising energy supply and enhancing grid flexibility in the future.