Hydric and Thermal Generation

Energy sector

Energy sector in Portugal

EDP is Portugal's main investor and one of the driving forces of the country's economy and development

The production of energy in Portugal takes place through eolic generation (through the company EDP Renewables) and hydric and thermal generation.

The generation of hydric and thermal electricity is carried out in two ways: ordinary and special regime.

Generation ordinary regime

The generation ordinary regimen applies to electricity generation based in traditional and non-renewable sources and in large hydro-plants.

The ordinary regime has been operating on a competition basis since 2007, after the implementation of MIBEL (Iberian Electricity Market). Since then, generation activities were liberalized and plants began to offer their energy on a common, integrated Iberian energy platform.

The plants' remuneration has also undergone some changes, and Power Purchase Agreements (PPA) gave way to Contractual Balance Maintenance Costs (CBMC). As for the plants' operation decision, it ceased to be centrally operated by REN and was transferred to a decentralized order scheme managed by the different operators.

Before the implementation of MIBEL, plant remuneration was based on Power Purchase Agreements (PPA) and the plants' operation decision was centrally operated by REN. With MIBEL there was a transition to a decentralized order system managed by the operators themselves, as well as the early termination of all PPAs, which gave way to Contractual Balance Maintenance Costs (CBMC) for EDP Group plants - instruments that provided profitability rates in line with previous PPAs. Additionally, with the growing importance of production from renewable sources in the electricity system, the availability and investment in backup technologies have been encouraged by the Power Guarantee mechanism. This mechanism is now suspended until the conducting of an auction that will determine its assignment.

The markets comprised in MIBEL are managed by the Iberian Energy Market Operator. The Portuguese Center (OMIP) is responsible for managing the forward market.
 

Special regime generation

Special regime generation is the generation activity subject to special legal schemes, such as electricity production through cogeneration and endogenous resources, renewable and non-renewable sources, microproduction, miniproduction, and production with no network power injection.

In Portugal, special regime generation includes electricity generation operations through mini hydro plants, cogeneration and biomass. Special regime generation has been encouraged by EU policies, with the definition of the technical conditions for distribution network connections and purchase guarantees for all energy transferred into the network, in compliance with the remuneration processes set out in various legal documents.

The regime includes:

  • Electricity generation from renewable energy sources and industrial or municipal waste;
  • Generation of electricity in cogeneration (heat and electricity);
  • Microproducers (applicable in BT);
  • Miniproducers (applicable in MT and BT);
  • Small Generation Unit (SPU) (applicable in MT and BT);
  • Private Consumption Generation Unit (PCPU) (applicable in AT, MT and BT);

This activity has a specific legal framework, particularly with regards to the commercialization of generated electricity and the remuneration of its operators, with the aim of fostering the development of renewable energy. In Portugal, special scheme electricity enjoys priority dispatching privileges.

The Last Resort Supplier (LRS) has the legal obligation to purchase all special scheme production from producers who wish to do so, at regulated, administratively fixed prices for each technology (feed-in-tariffs) - subsidized scheme -, which does not hinder the possibility of special scheme producers selling their energy to other electricity suppliers operating in the market.

Basic industry laws were recently amended to allow the renumeration of SSP under the market scheme, which means that producers sell their energy directly on the market under similar conditions to the PRO, with the possibility of using the services of an aggregation agent.

It can be expected that, as SSP technologies mature and increase their competitiveness, special scheme producers will also be able to sell their energy on the market, under similar conditions to those that apply to normal scheme producers.

Data on the Iberian Energy Market

Iberian Data 2017