IEA cautiously backs Portugal’s efforts to build a financially sustainable energy system by 2020

Portugal must maintain its efforts to deliver a financially sustainable energy system, the International Energy Agency (IEA) said today as it also urged the Portuguese government to build stronger energy links between the Iberian Peninsula and France.

Speaking at the launch of an IEA review of Portuguese energy policies, IEA Executive Director Fatih Birol encouraged Portugal to maintain efforts to resolve the so-called tariff deficit, or defice tarifario, caused by past imbalances between the electricity system’s regulated costs and revenues from regulated tariffs. He spoke after meeting with Prime Minister António Costa (on right in the photo below) to discuss a number of energy priorities including interconnections, renewables and gas security.

“Portugal has made some difficult choices,” Dr. Birol commented at the launch, “but to maintain investor confidence, Portugal must also closely follow the principles of transparency, predictability and certainty if the country wishes to continue to remain attractive to further investment in the energy sector.” Eliminating the tariff debt by 2020 is a significant challenge, the IEA report adds, but Portugal must remain on the path towards a financially sustainable energy system.

The new IEA report, Energy Policies of IEA Countries: Portugal 2016 Review, acknowledged that Portugal has weathered difficult economic times since the previous review was published in 2010. The IEA Executive Director praised the government for increasing renewable energy deployment, notably wind power, which alone provided almost one-quarter of electricity generated in 2015. The IEA also welcomed Portugal’s updated energy strategy, which places greater emphasis on renewable energy and energy efficiency activities but also focuses on efforts to lower investment costs and strengthen national competitiveness.

The IEA also urged Portugal, with its regional partners Spain and France and alongside the European Commission, to reinforce interconnections with transnational European electricity and natural gas networks. The first new interconnection between the Iberian Peninsula and France in almost three decades was inaugurated just over a year ago, and more capacity is being planned. “After decades of limited results, the IEA is pleased to see movement in the right direction, but these are only first steps,” said Dr. Birol. “More interconnection capacity is needed for such efforts to show their full value to Portugal.”

Portugal has continued to liberalise its energy markets but there have been some setbacks such as the decision to delay the elimination of regulated tariffs until 2017. Tackling energy poverty should be a priority, but the government must allocate assistance directly so as to ensure that it is effectively targeted at those who need it most.

The IEA report welcomed Portugal’s progress in energy efficiency and the adoption of ambitious energy savings targets but highlighted that task-sharing and co-ordination between government bodies must be clear to ensure full and effective monitoring of energy efficiency results. The report highlighted the need for greater flexibility in energy policy to deal with uncertainty and also called for closer monitoring of policy implementation. 

Energy Policies of IEA Countries: Portugal 2016 Review is available for free download here

The following resources also are available for download:

About the IEA

Founded in 1974, the International Energy Agency was initially designed to help countries co-ordinate a collective response to major disruptions in the supply of oil. While this remains a key aspect of its work, the IEA has evolved and expanded. It is at the heart of global dialogue on energy, providing authoritative statistics and analysis. The IEA examines the full spectrum of energy issues and advocates policies that will enhance the reliability, affordability and sustainability of energy in its 29 member countries and beyond.