Distributed energy resources in Portugal: challenges, opportunities, and the way forward

Tiago Corrêa do Amaral
Abreu Advogados, Lisbon
tiago.c.amaral@abreuadvogados.com

Margarida de Oliveira Pedro
Abreu Advogados, Lisbon
margarida.o.pedro@abreuadvogados.com

The traditional, centralised energy model is increasingly outdated in the face of evolving energy needs and advances in technology. Recognising this, the Portuguese legislator has made significant strides to transform the National Electricity System by embracing a decentralised approach. This shift is designed to encourage local energy production, self-consumption, and active consumer participation in the energy markets.

Under Decree-Law No 15/2022, of 14 January 2022, consumers have the opportunity to become active participants in the energy system. They can produce electricity for self-consumption, sell surplus energy back to the grid, install storage solutions, offer flexibility services, and even aggregate production. To this effect, the legislative framework outlines four distinct models: individual self-consumption, collective self-consumption, renewable energy communities, and citizen energy communities. The latter two represent more advanced cooperative models, requiring the formation of legal entities for internal governance, acting as quasi vertically integrated utilities.

While this legal framework holds great promise for promoting a decentralised energy model, it also presents significant challenges. Consumers, particularly those interested in larger-scale self-consumption projects (with capacities equal to or exceeding 1 MW), face a complex web of rules. Project implementation is often complicated by lengthy licensing procedures, both in terms of electrical and urban planning requirements. Moreover, public authorities frequently lack the necessary human and technical resources, leading to extended response times, which can deter potential stakeholders from pursuing these projects.

Financial barriers also remain a significant obstacle, especially for families wishing to invest in self-consumption solutions. Accessing financing from credit institutions can be difficult, as these institutions have yet to adapt fully to the emerging energy landscape that includes the end consumer as a critical player. Lack of revenue streams to capture for repayment also plays a relevant role in the lack of investor appetite.

Another noteworthy challenge is the potential strain on the existing distribution network. A substantial increase in decentralised energy solutions, particularly self-consumption installations, could exacerbate the network’s existing limitations in terms of capacity and lack of long-term investments for integrating flexible, smart grid management systems.

To address these issues, complementary legislation and public policies have been introduced to support both individual consumers and companies interested in self-consumption projects.

In March 2024, Decree-Law No 30-A/2022 of 18 April 2022, which was initially set to expire in April 2024, has been extended to remain in force until 13 December 2024. This Decree-Law exempts projects with an installed capacity of 1 MW or less from prior urban planning control, such as licensing or prior notification to the municipality. For projects with higher capacities, a more streamlined procedure has been introduced: if the municipality does not explicitly reject the project within 30 days of preliminary validation, the applicant is authorised to proceed with the works.

Furthermore, in certain cases, the operation of self-consumption units may start without the prior issuing of an operating licence or certificate from the Directorate-General of Energy and Geology.

From an environmental law perspective, some of the headaches for promoters have also been alleviated. Generally speaking, when installed in structures or buildings, or in existing or future artificial areas (such as shopping complexes, large commercial areas, industrial parks or allotments, logistics platforms, camping sites and car parks), self-consumption plants that use a primary solar source are exempt from the need to conduct an environmental impact assessment.

Given that the legislative amendment made to this Decree-Law in March 2024 recognised the importance of ensuring the continued implementation of the measures contained in it, ‘until the new government considers the definitive validity of these measures, thus ensuring that there are instruments that adequately contribute to accelerating a territorially fair and ecologically responsible energy transition’, it is not inconceivable that these measures will be maintained in future, contributing to a regulatory landscape which is both more attractive and certain.

Public policy has also introduced financial incentives aimed at promoting self-consumption. These include programmes to finance the installation of photovoltaic (PV) systems or other renewable energy sources, both for individual self-consumption and for collective projects, including renewable energy communities. These initiatives are part of the broader Recovery and Resilience Plan.

Additionally, the publication of legislative guides has been instrumental in simplifying the licensing process for renewable energy projects. These guides provide clear and concise information, making it easier for the public to navigate the complicated regulatory landscape. A dedicated guide for self-consumption and energy communities was published in 2022.^[1]

Significant investments in the national grid are planned under the revised National Energy and Climate Plan 2030, currently under public consultation. This revision introduces specific measures to enhance the grid’s capacity, particularly in areas with high demand. The plan envisages not only reinforcing and expanding infrastructure but also implementing dynamic, intelligent management models to optimise the integration of energy production, consumption, and storage. Local congestion charges and/or ancillary services at LV and MV may also serve to both boost revenue streams and provide additional mechanisms for DSOs to manage their grids.

Given Portugal’s exceptional potential for distributed energy solutions – thanks in large part to its abundant solar resources – and the ambitious national targets for increasing renewable energy capacity, it is crucial that the government and relevant public authorities prioritise the efficient implementation of these initiatives. Only with focused and sustained efforts can Portugal fully realise the benefits of the decentralised model envisaged in Decree-Law No 15/2022, of 14 January 2022.